KPI’s Revisited: Part 3 KBI’s in not-for-profit environments

Photo at blog from Hans van Nes - 22/12/2010 - 12:56

It is a myth that using Key Performance Indicators does not work for not-for-profit operations. But it is remarkable how few not-for-profit operations use metrics to judge and manage their own performance, let alone sensible ones. Especially when we apply the rationale behind Key Business Indicators, it is clear that for every organization these controls can serve a purpose in making sure that your organizations outputs meets what your “customers" want.

KBI's for not-for-profit organizations (NPO's) are  much alike of those for commercial organizations. In commercial organizations KBI's  are based upon business process performance.  In Not-for-profit organizations KBI's  should focus on the things the NPO wants to achieve without making/maximizing profit. But the  the charter off NPO's can be so different that he needs categorize them first a bit more. We should distinct between two relevant NPO categories:

  • Private institutions (communities, aid-groups, foundations, etc.)
  • Public institutions (cities, boroughs, provinces, departments, etc.)

KBI’s for Private institutions

For private institutions , the Mission and Vision statement are normally well defined and thus form an easy and logical foundation for the KBI's.  Some examples for various areas:

  • Contribution to Purpose
    -percentage of net received money actually applied to the chosen activity (Aim: to manage the overhead and spillage of money involved with admin, non/productive staff)
  • Return on Community
    -percentage of analphabetism in the target community
    -percentage of operational support (food) vs. structural support (a tractor)
  • Richness of Diversity
    -percentage of change in variety of species in an area as a result of conservation activities

KBI’s for Public institutions

Public institutions have often disguised missions. The charter for creating the institution the first place (legislation, politics) is often quite old and the vision and mission rather blurred or even not questioned.  Ever wondered yourselves about what the vision is for the town or city you live in? There are some curious elements with public institutions.  They often have a legal obligation to measure their performance. But measuring on behalf of whom? The institution or the customer? Also  their mission and vision are often not periodically review O or communicated. As a result institutions are managed on internal metrics rather than on services quality. the KBI for public institutions should be modeled using three main  driving elements: Purpose, Community and Legislation.  Again some  examples:

  • Contribution to Purpose
    -percentage net received/withhold money, after costs of system, labor and overhead, that is actually applied for a services to the citizens
  • Return on Community
    -percentage of community that is using the given service
    -percentage of children that complete an offered education
    -satisfaction by citizens for speed and quality of contacts with organization
  • Return on Legislation
    -net return of a tax-measure in relation to the planned theoretical revenue or social effect (after involved systems cost of marketing, cost of public acceptance like tax evasion measures, cost of negative side effects, etc.)

I’m sure that the last example will de-masque a lots of politicians. But my general point is clear: if you think about the reason why an institution exists, it is rather easy to define suitable KBI's for NPO’s.
In the next and last part  of  this series we address the best way to manage  and communicate KBI on a performance actionable dashboards.

As always: comments welcomed.

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