In this article I'll cover:
- KPIs and why they matter
- Different KPI metrics and how to define them
- The value of true accountability
- Transparency that builds trust
- Implementing your KPI action plan
- Putting it all into practice
Accountability. Legitimacy. Transparency. In many ways, Charities, NGOs, and NPOs have it significantly harder than traditional corporate businesses.
Whilst transparency to stakeholders should be a common thread across both sides of the for-profit line, the reality is that if commercial businesses are turning a profit for their shareholders, a deeper dive into their performance metrics is not always warranted (though reassuringly, this report by the UK Government shows that even corporate shareholders are becoming increasingly aware of the importance of non-financial reporting).
But what about the nonprofit sector?
When the output of an organisation is the benefit and help it has provided for its cause, rather than its bottom-line gain, then concepts of accountability, legitimacy and transparency become more complex. How these kinds of organisations track their performance is vital - both for their own internal strategic benefit, and for the practice of accountability and transparency to donors, recipients and wider stakeholders.
KPIs and why they matter
KPIs (Key Performance Indicators) constitute a considered set of metrics that can be used to track and demonstrate performance. They represent an effort to render the qualitative nature of organisational performance, giving an impression of the organisation’s efforts in a digestible, understandable form that can be monitored and visualised over time.
KPIs can cover financial components of an organisation, but they can also expand to cover so much more. It isn’t merely a case of finding any measurable value and tracking it: careful consideration of what accurately represents organisational activities and best captures performance trends needs to be undertaken so that the practice is deployed meaningfully, rather than as a mere gimmick.
Different KPI metrics and how to define them
There are two central reasons why nonprofit organisations should be implementing KPI measurement into the heart of their practices. The first is internal, and the second external.
From an internal perspective, KPI tracking has the ability to facilitate data-driven decision making and a more objective, strategic approach to management. The extant business literature is packed with articles explaining the benefit of objectivity in the management process; KPIs provide a fixed viewpoint from which to track performance trends over time and provide a concrete, unmalleable reference point to work from.
As with all things, balance is key, and maintaining a feel for the intangible nature of an organisation is vital; undertaking an exclusively ‘managing-by-numbers’ approach can sometimes fail to take into account the nuances and complexities of a business. But, it can be all-too-easy for managers to become afflicted with internal biases or skewed interpretations of the overall health of their business when they think only in terms of broad concepts and feelings, and don’t make reference to the numbers.
Objective data - such as that delivered through KPI tracking - provides a counterpoint to this: it is not intended to be a key driver of impersonal decision making, but instead constitutes but one tool in a holistic management toolkit.
Blackbaud ensures that fundraising managers understand their donor from the day of the first pledge, with data points that help to answer questions such as:
- What fundraising activities are generating the greatest revenue per donor?
- What types of donor and demographic represent the biggest segment of engagement?
- What kinds of communications, activities and outputs seem to motivate donor behaviour?
There is plenty of literature explaining how KPIs can be integrated into the strategic internal decision making process of an organisation - with Blackbaud being practical experts in the field, particularly in relation to the integration of analytics into nonprofit management activities.
But instead of only focusing on that here, let's also look at the external dimension of KPI tracking and presentation; not least because this has a very particular relevance with how nonprofit organisations present their impact to donors.
And it’s here that we return to our opening words: Accountability, Legitimacy, Transparency.
The value of true accountability
Nonprofits have a particular duty of accountability to their donors. It sits at the ethical heart of an organisation to do what it says it will do on behalf of those who give the funds to facilitate it.
But accountability is about more than ethical duty. It’s pragmatic. Being accountable and transparent to donors both encourages initial engagement and maintains repeated donation.
This is important now more than ever, in an environment where it is not only economic hardship that is putting a strain on the willingness of people to open their purse strings. Unfortunately, scepticism towards charitable giving is higher than ever.
As some of the larger charities have suffered from bloating in their administrative departments and difficult-to-justify salaries at C-suite level, people begin to wonder whether there is really enough value in them making a contribution. And even if there wasn’t this scepticism, donors still appreciate insight into the inner workings of a charity. The public don’t always have the knowledge, insight or even imagination to know exactly how a charity functions, or how their financial contribution translates to action. In effect, donors want to see what their return on investment is. What did they achieve with their contribution?
The ability to both track, and - more significantly - present tangible facts and metrics to donors through the display of KPIs is a fundamental tool in tackling the costs and challenges associated with securing donor retention.
Data and figures provide something very tangible and real for donors to grasp and understand, providing the kind of insight they need to affirm the validity of their choice to donate, and encourage them to keep going.
Transparency that builds trust
Returning to the scepticism that has befallen potential charitable giving, the problem is not only the fact that donors feel frustrated at the inefficient use of their funds - they also feel that active misdirection and falsehoods mean their trust has been compromised.
The sector has unfortunately been rocked with scandals relating to salaries, misappropriation, fraudulent reporting and any number of other malpractices. Donors are wary of being tricked.
Putting mechanisms in place that actively demonstrate the trustworthiness and transparency of an organisation is therefore absolutely key. KPIs are an important first step to this. But KPIs are, on their own, just numbers. And we all know how easy it can be to misrepresent, inflate or straight-up falsify data.
Donors want not only for a business to be transparent about what they are doing, but able to prove that the transparency being demonstrated is real and honest, and not simply smoke and mirrors. Blockchain is one of the most promising advancements in this field.
Don’t tell us all the reasons this might not work. Tell us all the ways it could work. - John Wood, Founder of Room to Read, a nonprofit promoting literacy in children
You may already know something of Blockchain. Whilst typically associated with cryptocurrencies, the reality is, it is applicable to so much more. It is a ledger of data where the records are cemented in place because they are ‘chained’ together with the records that precede and follow them; a record cannot be falsified or adjusted subsequently because then it would stand out like a sore thumb - it couldn’t achieve the validation that comes from the network of computers which power the blockchain as a whole.
At TASK we’ve integrated Blockchain into our systems because it facilitates an incredibly reliable, trustworthy audit trail. KPIs that are locked in through blockchain can be confirmed and validated externally.
We use established blockchain providers Stellar to power the record keeping our clients undertake; allowing them to demonstrate to their donors and stakeholders absolute trustworthiness, transparency and openness.
Implementing your KPI action plan
So we’ve established that tracking a range of carefully considered KPIs is key to making better internal decisions, and a great way to encourage, motivate, reassure and maintain donors and their ongoing support.
- What constitutes a ‘carefully considered’ KPI that best represents progress?
- What methods should be deployed to capture the necessary data for reporting
- How should you present results to donors - is it simply a case of publishing them in the quarterly stakeholder reports?
This is where TASK comes in
In relation to the first question, Task provides more than a technology for recording, monitoring and communicating performance - it provides the expertise that underpins this. We have worked for years with NGOs and charities, and understand very specifically where their needs align with and differ from corporate enterprises.
We understand what metrics are useful to track, how they can be tracked, and how they can be leveraged both internally and externally. And we relish the ability to be able to share this knowledge with our clients, consulting with them every step of the way. It’s our insight and our close working relationship with clients that differentiates us as much as the innovations inherent in our platform.
In relation to gathering that data, we make that easy too. Your team is generating the data that contributes to KPI measurement on a daily basis. If they have an easy, convenient and intuitive way to log that as they go, then there is no added expenditure of time or effort rounding up metrics post fact; the process becomes largely automatic.
There are also massive benefits to be reaped from engaging and encouraging team members in this process through gamification and rewards. This means that the team app generates all the KPI data you need without any additional effort.
And finally; communicating your progress. Publishing KPIs in a quarterly report might be common practice, but it really isn’t enough. The conceptual gap between a donation and a report three months later is often not enough to sustain that feeling of ‘making a difference’ which is key to encouraging and maintaining donor interest.
And no matter how far and wide business reports are shared, they never reach the levels of engagement that a socially-based, interactive, made-for-purpose and quick-to-access system can achieve.
Our donor-facing dashboards allow you to select the data you want to showcase publicly or to selected donors or stakeholders (and the data that you want to keep internal), and then provides engaging, intuitively understandable visual mechanisms to represent organisational performance and communicate progress at-a-glance.
All of this can also be supplemented with qualitative data; stories and case studies, visuals, quotes - anything which rounds out the qualitative nature of your reporting and supports concrete, measurable accountability with the human dimension that sits at the heart of your efforts.
Putting it all into practice
KPI communication can be implemented flexibly and in line with the specific needs and particulars of the organisation, the mission, the people, and the target donors. It's necessary and can be made simple with the right tools.
You can engage your team as part of the process, helping to boost their morale whilst allowing them to report back with what's happening out in the field. And, once you have the data, you can design dashboards to inform decision making - communicating the value and benefit of your activities in a meaningful way to the donor community.
But the real point here, and something that is top of mind with all of us focused on fundraising, is donor retention - today's donors expect more from the sector and with the right metrics you can craft a data driven story to reinforce the confidence required to turn one time donors into regular givers.
If you want to know more about how KPI data collection, monitoring and communication can help your NGO’s efforts, why not book a free consultation with someone at the Task?