Not for Profit organizations must understand how they are performing and there are plenty of financial metrics that describe how the organization is operating currently and how it has done in the past. However, it’s necessary to go beyond the numbers to ensure an organization’s fiscal sustainability (its ability to remain viable and relevant over the long term). This article will provide several non-financial metrics that can serve as leading indicators of future performance. These metrics can help shape strategy and tactics aimed at fulfilling an organization’s mission, now and in the future.
Five Non-Financial Metrics
NFP organizations need to have multiple sources of revenue, however, most organizations only look at revenue as a financial number, a lagging indicator. If you look at revenue strategically, you will recognize that programs or funders go away over time. If you do not actively work to expand your funding or program sources, revenue will decrease.
Metrics associated with revenue diversity;
- Number of new sources
- Percent of total revenue from new sources
- Percent of total revenue from top ten sources (a warning flag of revenue concentration)
- Revenue growth from sources newer or older than three years
For more information, see this article on Revenue Diversity
Donor Conversion and Development
At the end of the year, many NFP organizations look at how their donor base has grown over the past year. This is an important lagging metric, but has only limited future value.
Some leading indicators can measure results from the steps we take during the year to drive end of year results, such as;
- Visitor conversion to donor – the percent of people that visit your organization, such as a museum, who become members.
- Donor development – success rate of increasing year over year donations or special event donations
- Awareness – as measured by website traffic
These are strategic in nature and can help focus efforts to drive future results. If you believe there is a relationship between awareness and membership, you can take actions to increase awareness and see if the increase in membership matches your expectations.
Some organizations work on grants or have funding that requires some type of matched effort. In these situations, you can drive increased revenue by maximizing effort on that project.
Optimization metrics include;
- Percent of effort expected over total available funded effort
- Percent of matched effort expected over total match available
- Amount of current year funding rolled into next year (for multi-year grants)
For these, the challenge is driving increased utilization. If your organization typically ends a grant having expended 85% of the available funding, is there a way to increase that to 95%? If so, you can project the future impact of working to increase utilization.
Most organizations look at turnover metrics on a regular basis. They usually compare to some industry benchmark and, in most cases, don’t provide more than a few directives as a result. Since staff is the lifeblood of most NFP organizations, a deeper dive on staff metrics is needed.
Development metrics include;
- Percentage of staff involved in training or development program
- Number of employees who have move to a new position within the last two years
- Ratio of positions filled by promotion versus outside hire within the last two years
Consider the factors that lead to turnover and construct metrics that measure the factors. Improve those factors and you may favorably impact your turnover metrics.
Needs change and for NFP organizations transitioning to provide new or different services can be a challenge. Therefore, NFPs need to identify emerging trends and changes in their service community as quickly as possible. An early warning will allow the NFP to plan accordingly.
Responsiveness warning metrics include;
- Decreases in program funding
- Slowing growth in program funding
- Change in number of programs available for funding
- Increase or decrease in number of organizations providing similar services
- Demographic changes in client community
- Decline in client satisfaction levels
NFP executives and Boards have access to many financial metrics that can provide a clear view of how the organization is performing. That is only part of the picture. Non-financial metrics, especially leading indicators can provide decision-makers with actionable information with a view toward the future.
Long term fiscal sustainability requires leaders to look beyond the financial statements. To remain viable and relevant organizations need a deeper understanding of performance drivers. In this article, five drivers were identified and discussed. Apply these or find your own metrics and use them to look for warning signs or track interim progress of initiatives. Strive to build multiple revenue sources and deepen your donor or funder relationships. Maximize value in your grants and develop your employees. Above all, ensure that you remain aligned to the needs of your client community.
What non-financial metrics do you use in your organization? Please share in the comments section below. If you have questions about implementing non-financial metrics for your organization contact me at firstname.lastname@example.org or connect on LinkedIn.