Although nonprofit organizations differ from businesses in several significant ways, they share a common objective—the desire to be successful. Whether an organization is operating for profit or for the public good, it needs to meet its goals and demonstrate success.
For businesses, this typically means achieving sustained profitability. But if you’re a nonprofit, measuring success is not quite so simple.
While nonprofits must operate within their budget and bring in revenue, true success in the nonprofit sector is much less straightforward. After all, most nonprofits technically operate at a loss, as they typically depend on donations and endowments to support their work. So, how should nonprofits measure success? The answer is to use key performance indicators (KPIs) that take into account your organization’s specific mission, goals, and projects.
Measuring Impact Rather Than Output
The first thing to understand when gauging your nonprofit’s success is that its impact is ultimately more important than its output. It might sound impressive to state that your homeless shelter provided beds to 1,287 people last year—and certainly, it’s necessary to measure these numbers and communicate them. However, it’s also crucial to go beyond simple counts to show how your work impacts communities and changes lives. After all, your ultimate goal is to improve life for people—and as impressive as basic counts might sound, stakeholders and donors also want to know how you’re changing lives.
Of course, it can be difficult to quantify how many lives you’ve changed and in exactly what ways. But you can still gauge how you’re doing in these regards. For example, instead of only noting that 1,287 people got a bed at your homeless shelter last year, you can also assess how this output affected homelessness in the community. Exploring your impact beyond number of people served undoubtedly requires more work—for example, you might have to follow up with the people who visited your shelter to see how their lives improved (or didn’t) afterwards. This is less of a KPI and more of a qualitative assessment, but it can help you measure success.
The Best KPIs for Nonprofit Organizations
A number of KPIs can provide a broad overview of your nonprofit organization’s success. The following types of metrics help measure different factors, including community impact, financial viability, donor activity, and volunteer activity.
Mission Effectiveness—Use your mission as a guide to assess your effectiveness. Each year, you should evaluate how successful you have been at fulfilling it. How does each project align with your mission, and do they contribute to your organization’s overarching goals? If so, then your organization is likely on the right track. If the answer is no, then it may be time to pivot and look for new strategies.
Beneficiary Satisfaction Rate—One easy to way to tell if your projects are successful: Ask the people you serve. After all, they should be your ultimate focus, and their opinions matter most. Calculating this KPI requires distributing surveys or questionnaires and getting people to respond to them.
Pre and Post Scores—These KPIs provide a way to quantify the impact of a program, although they are not always useful for every type of program. Pre and post-scores measure your beneficiaries’ skills, abilities, knowledge, and behaviors before and after participating in your program. For example, if you’re providing free parenting classes, you can test participants’ knowledge about parenting techniques before and after the class, and see what they’ve learned.
Fundraising Return on Investment (ROI)—How successful are your fundraising efforts? You’ve got to spend money on fundraising campaigns to bring in revenue, but are you spending too much, relative to the dollars you’re pulling in? Calculating your fundraising ROI can help you answer these questions. To do so, add up the total revenue raised during a campaign, then subtract the campaign’s costs from that figure. This is your net revenue; divide it by the total costs for the ROI. To express this ratio as a percentage, multiply by 100. A higher percentage shows that you’re generating more revenue per dollar spent. You can calculate this ROI for your fundraising as a whole and for specific campaigns to make better decisions about where to spend your resources.
Donor Retention—One important way to measure a nonprofit’s impact and overall success is by examining donor retention. Obviously, this will have an impact on your organization’s budget and financial viability, but it is also an indicator of how stakeholders view your work and how committed they are to supporting your cause. People are more likely to donate to an organization (particularly on an ongoing basis) if they believe in its mission—and, more importantly, if they believe it is fulfilling that mission. While a number of factors can affect donor retention, a solid base of long-term donors can certainly be an indicator that your organization is doing something right.
Volunteer Retention and Satisfaction—Like long-term donors, dedicated volunteers can be a good indicator that your nonprofit is successfully fulfilling its stated mission. Volunteers are most motivated when they believe in what an organization is doing—and that includes trusting that your nonprofit is effectively accomplishing its goals. If your organization is having trouble keeping volunteers happy and engaged, it may be because they have lost faith in your ability to effectively serve the community.
Notes on Measuring Success
These are just a few KPIs and metrics to help your nonprofit—there are hundreds more. It’s also important to note that you should choose the metrics that are right for your organization, its mission, and its scope. Put careful thought into this, because the way you measure success will affect how you understand your own success. And of course, numbers aren’t everything. Talking to the people you serve, your donors, volunteers, staff, and other stakeholders will yield the details and specifics that paint a fuller picture of your success.