Understanding the benefits of using KPIs to Improve the Performance of Non-Profit Organizations

It goes without saying that Non-Profit Organizations work as a voluntary group, leaving aside the monetary or commercial motives. The entities can be either designated as 'Charitable' or 'Non-Charitable' organizations. Because these organizations give non-financial aims a priority over financial ones, KPIs (Key Performance Indicators) make an obvious entry as the preferred indicators owing to the failure of traditional financial metrics in guiding such organizations.

Often fund donors are interested in knowing how the group is faring and KPIs makes it possible for them to ascertain the performance of such organizations.

In Non-Profit Organizations, KPIs can be broadly categorised under four perspectives- financial, customers, processes and learning and growth. Financial perspective is obtained via % decrease in cost per service offered and % increase in contributions made. Customers can be taken care of by following KPIs like collection rates, average collection time, % decrease in customer complaints and % increase in number of clients serviced per hour. Processes are yet another aspect to look after. This is possible with measures- % increase in productivity, % decrease in delivery delays and % decrease in average time to process application for grants. Lastly, Learning can be done by relying on number of training sessions held and % decrease in absenteeism rate.

Gathering funds is one of the toughest challenges that a 'Non- Profit organization' normally experiences. Because a major chunk of the financial support is from external sources like direct donations, charitable foundation grants and government funds, one never knows when and how much will the flow of funds last. This uncertainty gets reflected in acts like hiring, sustaining facilities and procurement etc. Most of the staff members of these groups work voluntarily. Apart from the conscience to contribute to the society, there is hardly anything which compels people to opt for these places. However, with time the low pay may disturb them more. Consequently, high labour turnover is another issue that these organizations at times have to confront.

The objective for the existence of these organizations is to provide services that are in public interest and not to make money and distribute portion of it as dividends among the share-holders. So, a set of parameters that offers a transparent view into the operations of the organization and measuring its performance will be a great assistance to the staff. This is what is done by putting down the qualitative ways of working into quantitative measures. The comparison of current values with the target values can be done to reveal the deviations and steps taken to correct them. They help in making it clear to their employees clear; what is considered important by the management and what is not in their scheme of things.

Though, the advantage that KPIs brings with them in this domain cannot be denied; however one must note that designing the BSC can be a real headache if one ventures into this field without deciding on the priorities. So, the indicators should be such that they relate to the strategic goals and understood by everybody in the organization. In addition a balance in the external and internal environment has to be struck. This can be done with a detailed Swot analysis along with a undertaking related research. A well developed scorecard can go a long way in increasing the delivery capacity of a non profit organization and thus increase the benefits for the society.