Regardless of whether an organisation is “for profit” or “not-for-profit”, an important consideration for boards is the degree to which the organisation’s available resources are being utilised in an efficient and effective manner to achieve stated outcomes. Is the organisation getting maximum desired impact from and avoiding wastage of precious resources?

Organisations should identify the resources (human, financial, physical and intellectual/intangible) they need to deliver on their purpose and plan how those resources will be made available to and best managed by the organisation.

Once an organisation has decided on its purpose and related strategies (see Principle 3), it is common practice as part of a strategic planning process to choose measures or indicators that enable the board to track progress i.e. the key performance indicators (KPIs) to measure the organisation’s performance on execution of its strategy and achievement of its purpose. In this regard, boards need to consider, with regard to the purpose of the NFP, which performance indicators are most appropriate in the organisation’s circumstances (e.g. activities undertaken, grantor requirements, etc), and which indicators should be chosen for measurement purposes. Obviously, it is very important for boards to ensure the metrics adopted are capable of being measured and understood.

There is a wide range of performance indicators used across the NFP sector. Often a board will choose a combination of financial and non-financial metrics.

Financial performance indicators

Table 5.1 provides some examples of financial performance categories and indicators. Of particular note, the threat of insolvency is a very real risk for many NFPs, especially when they are heavily dependent on funding from a limited number of sources. The board will need on a regular basis to satisfy itself as to the financial soundness of the organisation, and obtain information and indicators from management that allow these assessments to be made.

Financial Performance Category

Possible Performance Indicators

Administrative efficiency

Ratio of administrative expenses to revenues
Ratio of administrative expenses to total expenses

Program efficiency

Ratio of program expenses to program commitment
Ratio of program expenses to total expenses

Fundraising efficiency

Ratio of fundraising expenses to funds obtained as a result
Ratio of fundraising to total expenses

Grant efficiency

Ratio of grant submissions to grants obtained
Ratio of grants to total expenses

General financial performance

Revenue growth
Working capital ratio

Table 5.1: Examples of Financial Performance Categories and Indicators

Non-financial performance indicators

The nature of many NFPs means that various key performance categories chosen are likely to be non-financial in nature.

There often will be significant qualitative outcomes that go to the heart of whether an NFP is delivering on achieving its purpose and making a difference, for example, has there been a measurable relative reduction in the incidence a particular disease compared with earlier year(s) and do the relevant carers of those suffering feel more supported? Are the children in the school healthier as result of fresh food menu changes in the canteen?

Achieving these outcomes requires rigorous oversight of whether resources are being directed to where they are best applied, so these non-financial performance indicators usually focus on a combination of efficiency (input versus output) and effectiveness (impact) measures.

Efficiency measures can help give a sense of how an organisation is performing and provide a benchmark relative to its peers.

Effectiveness measures might be used, for example, to try gauge the effectiveness of a program[1] or more generally the extent to which an organisation is delivering on its purpose. They can be a lot harder to determine than efficiency measures, are not as readily quantifiable, and involve more subjective judgement.



Input focused

Number of staff hours on a program
Number of volunteer hours donated (e.g. carer hours at premises)
Number of full-time employees

Output focused

Number of meals served (soup kitchen)
Number of clients seen
Number of plays staged (community based theatre)
Number of individuals attending course (educational body)
Increase in membership numbers (member-based organisation)

Efficiency focused

Cost per meal produced (nursing home)
Cost of recruiting per member (member-based organisation)
Cost of running course per attendee (educational body)

Effectiveness focused

Number of clients who have received meals
Member satisfaction
Quality of patient care (clinical improvement)

Table 5.2: Examples of Non-Financial Performance Categories and Indicators

The choice of indicators is likely to vary depending on the purpose and activities of an organisation. For example, a membership-based NFP, might have as one of the metrics relating to outputs, growth in membership numbers, while an organisation that delivers community services, may have as one of its metrics relating to effectiveness, the number of individuals who have received the service.

Some non-financial performance indicators may be necessary for accreditation requirements (e.g. health sector).

Much has been written on the desirable characteristics of measures.

In general, measures should be:

  • Meaningful to the organisation
  • Capable of being measured and acted upon
  • Timely
  • Cost effective to produce
  • Capable of allowing comparisons (e.g. over different time frames, between projects, with external benchmarks)
  • Relatively simple (where possible)

Questions for consideration

Is there a clear and agreed view among board members and key stakeholders as to “what success looks like” for the NFP (qualitative and quantitative outcomes)?

  • Does management, under the oversight of the board, manage the organisation’s resources to ensure their availability for the organisation’s needs?
  • Does the organisation keep records on its inputs (e.g. volunteer hours) and its outputs (e.g. number of clients serviced)?
  • What financial and non-financial objectives have been set by the board? How are these measured and reported?
  • Does the NFP have directors capable of assessing both financial and non-financial performance?
  • Does management regularly report progress to the board on resource planning and management for the organisation? 

[1] For example, what is commonly known as the Logic Model.

Download the full Good Governance Principals and Guidelines for Not-for-Profit Organisations as a PDF.