Five Ways to Measure the Effectiveness of a Nonprofit Organization
A non-profit organization exists to serve some need or group of people. It is good for an organization to have ways to measure its health and effectiveness to improve on its stated purpose and mission.
The step that precedes measurement is the mission statement. This is the standard against which measurements can be taken. Without a clearly stated goal or mission, it is almost impossible to answer the question “how are we doing?”
The first measure, then, is to see how well the organization is communicating its goal or mission. There are two places to look to find out how well the communication is working. The first is within the organization itself. How well do people within the organization understand the purpose they are serving? This is especially important when dealing with people whose tasks are not directly involved with fulfilling that mission. For example, how well does the receptionist understand the purpose of the organization? If everyone at all levels understands the mission, there is a greater chance that the message will be communicated to those outside the organization.
The second measure is how well an organization’s goal or mission is communicated outside the organization. Publications, outreach activities, and media events are examples of the types of activities an organization should undertake to communicate its purpose. Measuring outreach effectiveness can be done directly, through surveys, and indirectly through informal interviews and questioning of people who come into contact with the organization.
The third measure of health is the financial condition of the organization. Is income coming in to cover expenses? Are revenues increasing? Are there adequate internal controls to ensure that the financial position is accurately reported? These are important considerations, because a great deal of good work can be disrupted if money issues are not handled properly. There may be a greater disconnect between time served and money income, because the job is not necessarily linked to direct increase in income, as is the case with a for-profit organization.
The fourth measure is efficiency. Can the organization improve its production while spending less money? Overall revenue may increase, but efficiency must also increase so that each incremental dollar produces more output than before. If no efficiency measures are taken, the likely scenario is that more money will result in less production until the organization collapses under its own administrative weight.
The fifth measure of health in a nonprofit organization is growth itself. Are new members coming to the organization? Is revenue coming into the organization increasing? Are more people or needs being served? Top-line growth is an important indicator of an organization’s health and growth. When an organization stops growing, it begins to die, like any other living and changing thing.
