Summit 2016: Measuring NFP Performance

Boards rely on the CEO to commit to measuring outcomes.

The theme of the Australian Governance Summit was directing for performance – but, in the not-for-profit (NFP) sector, performance can be difficult to define.

At the session entitled NFP: Performance Measures and Metrics, Diana Taylor GAICD, executive director of CT Management Group and a director of Geelong Football Club, said there were no easy fixes.

“Directors can find it challenging when they’re dealing with volunteers and people who are of a different mindset. But you need to hang on to the fact that people are there for the right reasons and be patient.”

Directors also need to understand the statistics. There are more than 54,000 registered charitable organisations in Australia so they are operating in an extremely competitive environment with very little to spend on attracting funders.

“If you don’t have data, metrics and a well-established business case your communication will mean absolutely nothing,” Taylor said.

She discussed the importance of both financial and non-financial performance measures. Her list of non-financial measures included customer or client satisfaction, the quality of stakeholder engagement and the contribution of both staff and workforce. Many financial performance measures are common to for-profit organisations but those she identified as unique to NFPs included the success of grant applications and measuring fundraising targets against key performance indicators.

Simplicity

Taylor believes that the essence of success is simplicity of both purpose and message. She also stressed the importance of moderating the message for different audiences. For example, governments and individual philanthropic funders want to be associated with organisations that are committed to the long term. She encourages those she’s involved with to strengthen their business case by considering a 10-year horizon, even if that is simply stating that a system will be established and then populated over a certain period.

However, she recommends against hammering home the financials to staff and volunteers.

“Scraping for every dollar is not great for culture or motivation,” she said.

In the subsequent panel discussion, Paul Murnane FAICD, chairman of MS Research Australia, said that building a capacity to measure and manage performance can be a stumbling block for NFPs. “It really needs leadership commitment. The board can set a broad framework but if the CEO is not committed to performance measurements they won’t happen.”

Anthony Smith MAICD, deputy CEO of St John Ambulance Western Australia, used his own experience to demonstrate the importance of measuring the right things.

St John Ambulance is dedicated to serving humanity, a mission which is expressed differently in about 40 organisations around the world. In Western Australia, one clear goal is to make first aid part of everyone’s life.

Until recently, success was measured in terms of training – and the results were impressive. Over the past 10 years the percentage of people receiving training has risen from about 2 per cent to about 25 per cent. However, independent research showed that, while 80 per cent of Western Australians had completed a St John course, only 26 per cent were willing to respond when the need arose.

“We thought more deeply about our impact and realised that what we really want to achieve is for anyone who suffers a first aid incident to receive the best possible care from a bystander until an ambulance arrives,” said Smith. “We now have a new measure in place to help us assess the confidence of the community to step up and apply the skills they have learned.”

Justine Järvinen GAICD, chairman of the Day of Difference Foundation, worked for some time as a charity analyst in the UK where she helped to analyse the impact of thousands of charities. She believes that, when it comes to measuring what matters, outcomes and impacts are more important than inputs and outputs.

She gave the example of a charity committed to improving children’s literacy that provided breakfast for children who might not otherwise have anything to eat.

“The input would be how much money was raised, the output how many children ate breakfast,” she said.

“The outcome might be that children attended school because they got breakfast and then their concentration levels were higher. But the ultimate impact could be improved literacy and more young people finishing year 12 then finding employment where they otherwise would not have done.”