Why Your KPIs Could Lead Your Nonprofit Down the Wrong Path
On November 4 and 5, NonProfit PRO is hosting its annual peer-to-peer fundraising conference: Peer to Peer Advanced. Taking place in the heart of Philadelphia, attendees will gain a wealth of knowledge on advanced and innovative peer-to-peer tactics and learn how to strategize for future peer-to-peer programs, learning how to create sustainable programs that will not only engage fundraisers, but retain them, too.
On day one of Peer to Peer Advanced, Katrina VanHuss, CEO of Turnkey, will lead a panel discussion about how KPI success can mean a nonprofit’s failure. Panelists will include Sandra Hijikata, CDO and SVP of U.S. development at JDRF International, and Bob Merrill, managing director of Paceline, LLC.
NonProfit PRO had the exclusive opportunity to interview Katrina, Sandra and Bob and give a sneak peek into what to expect during the interactive keynote session.
What are the pros and cons of KPIs?
KV: The pro of KPIs is that they create a common language, which departments and individuals can use to communicate and understand each other’s success. The “con” is that meeting a KPI does not equate to success. It is like winning a battle, but losing the war sometimes. If winning the battle means you lose half your fighters and all your ammo, you met your KPI, but will likely lose what is really important.
SH: KPIs can be good predictive indicators when aligned to measurable business process and, if an organization is confident, the correlation between KPI and results is an accurate reflection of the true state of affairs. Since most KPIs are quantitative rather than qualitative, data quality is a critical factor. If there are concerns about data quality categorized by accuracy, timeliness or relevance, insights gleaned will not be actionable. KPIs are an important indicator, not the end all and be all. They need to be the correct measures and not just something that can be tracked and measured.
BM: The pros are they can provide insights on the performance of the business processes that are driving toward a particular outcome. They allow the organization to learn, make adjustments, assess performance and can identify emerging issues and opportunities to create value. The major con is when management uses a KPI as the outcome versus an indicator and hitting it is looked as success, or missing it is a failure without any evaluation of why.
Setting KPIs is a great idea for nonprofits, but KPIs can sometimes fail due to oversight. What can nonprofits do to ensure that they’re on the right track to success?
BM: Understand the role of KPIs in the business process, especially the core ones that drive the desired outcome, and evaluate and learn. For example, let’s say the organization hit its revenue and margin outcomes. Reviewing the KPIs for participants, retention, leads, etc. can all give insights as to how the resources were used, the opportunities for improvement and risks to the sustainability of the outcome. Red flags in organizations are when managers create stories that avoid the opportunity to change or learn by using a successful outcome to justify a poor performance indicator, or an unsuccessful outcome is justified because they “hit the KPI,” so it was another group’s fault.
The most important thing leaders can do is to understand what value they are trying to create and assess their core process from end-to-end. The intention of any metric is to improve the probability of success and the mitigation of risks in creating value in the organization. If the organization is struggling to define performance indicators, it assumes a particular range is unachievable or it is a challenge to measure, BUT they believe the process is critical to the creation of a valuable outcome for their customers, then they have the answer right in front of them. Put resources toward solving this problem. This exercise can be a good way of breaking down silos, finding innovative and new ways to engage customers, and create a culture of transparency and collaboration, especially at the interfaces of the process.
KV: Nonprofit management can trust their subordinates to use judgement and to trust their judgement when they use it. Nonprofit management can also help by helping people and whole departments understand where they fit in the organization and understand the impact they have on other departments and people. If everyone is making decisions with the overarching mission in mind, they will be using judgement in ways that the best KPI in the world can’t replicate.
SH: It is important that organizations evaluate the effectiveness of their KPIs on at least an annual or by campaign timeframe basis. Assessing how accurate the KPI performance predicts actual revenue outcomes allows for any necessary recalibration and a resetting of expectations.
What steps can nonprofits take to make sure that they are setting the right KPIs for their organization?
KV: Constant evaluation of the KPIs being measured, and a healthy distrust that any set of KPIs is the whole truth and guides the way.
If you’re interested in learning more about KPIs (and engage in more next-level peer-to-peer thinking), secure your spot at Peer to Peer Advanced. Click here to learn more.