Performance Measurement Is Finally Getting the Attention
It Deserves 
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Performance measurement is not new. In fact, the
not-for-profit community has always undertaken some activity to
measure success or failure. Sometimes the process utilized is
informal, the measures are limited, or the elements required to
make performance measurement really work are not in place. Today,
limited resources coupled with the demand for greater accountability,
along with improvements in information technology have resulted
in more attention being paid to performance measurement. There
are, however, a variety of other factors that are contributing
to this positive trend.
Changing Environment
Employees and volunteers are becoming more knowledgeable about
not-for-profit leadership and management. They are constantly
developing new competencies, and as a result, individuals are
increasingly more prepared to support activities that lead to
improved decision-making. There is greater recognition that measures
set priorities and that what gets measured actually gets done.
Of course this is not always the case, but when this transformation
occurs, organizations seem to go through a spirit of renewal.
I enjoy facilitating a strategic thinking or planning session
and watching the lights go on as innovative ideas come forward.
Groups then spend more time on what they want to achieve and how
they will measure success. This shift from “more of the
same” or “process” to a “results focus”
sets the stage for other integrative activities. In fact, performance
measurement becomes part of a broader performance management initiative.
Members and key stakeholders can play key roles in performance
measurement. They want value for money and they are demanding
accountability. Understanding needs and wants is important as
expectations are constantly changing – tolerance levels
are limited. In most not-for-profits, members can walk away at
any time. There are no doubt competitors who would love to look
after your members’ and stakeholders’ money. All this
suggests it’s time to change our attitudes about how our
members and stakeholders are understood and served. We need to
define our desired results and measure our progress.
This change in attitude has resulted in not-for-profits embracing
the concept of continuous improvement by asking themselves, “How
can we do better?” These organizations want to become high
performance organizations. One of the key characteristics of a
high performance organization is a strong emphasis on performance
measurement using key performance indicators. High performance
organizations have been described as results focused and performance
measurement happy.
Leadership is a key element necessary to entrench performance
measurement activity. Part of leadership involves using a governance
model that ensures Board and staff roles are clear with the Board
primarily focused on the future and desired results as well as
targeted performance indicators.
Leadership needs to understand the importance of strategic thinking
and adopt and apply a strategic management model that provides
for strategy formulation, strategy implementation and strategy
evaluation. In this scenario, the Board could spend one third
of their time evaluating current strategy to performance indicators,
another third looking at future issues, and the balance of their
time developing policies to support strategy and monitoring the
business/operational plan implementing the strategy.
Performance Measurement
Performance measurement is an assessment of progress to planned
results. The value of performance measurement lies in its usefulness
in decision-making and providing accountability. Performance measurement
can improve:
- decision-making
- strategic thinking and planning
- accountability
- priority-setting and resource allocation
- management of programs and services
- employee performance evaluation
- communications
- benchmarking
- change initiatives
What is involved in performance measurement?
Performance measurement goes beyond the establishment of performance
indicators. It is important to have a system that addresses development,
monitoring, and reporting. The following system components should
be in place to ensure an efficient and effective performance management
system:
- Organizational strategic intent (vision, mission, goals)
and targeted outcomes/results
- Performance indicator targets are developed to monitor and
measure progress
- A commitment and supportive policies and resources to operate
the system
- A clear understanding of applicability and links to other
organizational activities, i.e. Strategic Plan, Business Plan,
Advocacy Plan, Communications and Marketing Plan, Employee Evaluations
- Clear participant expectations and assigned roles and responsibilities
- Information gathering processes in place to support data
collection
- Analysis and reporting activities occur regularly and are
consistent with policy and processes
- Regularly scheduled reviews and updates to performance indicators
to reflect organizational activity and needs.
Performance Indicators
Performance indicators are measures used in the process of establishing,
implementing and evaluating strategic direction. Indicators measure
results and can often be categorized as output measures, efficiency
measures, input measures and productivity measures. Indicators
can be established for revenue, cost, membership growth, stakeholder
satisfaction, professional standards, legislative activity, service
levels and many other areas.
Performance indicators can be categorized based on the organization's
business activity or strategic priorities. Some organizations
use the four-quadrant model in the balanced scorecard model -
the quadrants are customer, internal business, financial perspective,
learning and growth. Yet another approach uses the concept of
core competencies. Each organization needs to develop categories
and indicators based on individual needs. Some characteristics
of performance indicators include:
- They are critical indicators of success from a stakeholder
point of view
- They can be measured without the need to establish complex
and costly measuring systems
- They speak to the value-added contribution of the organization
- They are reliable ways of measuring something
- The measurement is recognized as valid by others in the same
business
Performance indicators should not be developed without input
from key stakeholders who understand what has to be measured based
on the desired results. Performance indicators are ideal benchmarking
measurements. Benchmarking performance indicators against those
of high performance organizations may identify a performance gap
and an opportunity for improvement.
Some key questions to answer in developing performance indicators
are:
- What is the name of the performance indicator? Provide any
additional explanation of the performance indicator that is
necessary to provide clarity.
- Who will use the information?
- What performance question are you answering? Are there any
terms that require definition? Is so, provide definitions.
- What are the components and data sources of the performance
indicator?
- Who will collect the performance indicator information and
how often will it be collected?
- Are there any issues relating to performance data collection?
- Who will analyse and report the data?
- What will the method of analysis be – historical, to
target, etc.?
- How often will the data be reported?
- Who will receive the performance reports?
- Who will act on the performance results?
Avoid the use of too many indicators and ensure what is being
measured is valued by those affected by the performance indicators.
Sample performance indicators are:
- Cost of fundraising
- Non-dues income percentage
- Accumulated surplus to operating expenditure
- Employee/Volunteer morale
- Volunteers used
- Number of public policy positions
- Legislative influence situations
- Product/service delivery cycle time
- Development of guidelines/standards
- Member satisfaction
- Member participation in services
- Image and awareness rating
Indicators are monitored to identify opportunities for improvement
and relevance of strategy. One of the most important reports a
Board can receive is a listing of performance indicators that
identifies the target and actual status along with narratives
on significant variances.
Is this a Fad?
Performance measurement will be around for a long time. This
is no fad. Technology, accountability, critical decision-making,
risk management initiatives and member expectations will, if anything,
result in even more advances in performance measurement activity.
In fact, there are a number of different approaches being used
and within the next year or two all governments will have undertaken
major upgrades in performance measurement activities to improve
accountability and decision-making.
Not-for-profits who have the Federal Government as a key stakeholder
and funder have recently learned that the Treasury Board of Canada
has departments moving to results-based management and accountability
frameworks. Program logic models are being used as part of the
government’s results based approach. This activity means
not-for-profits hoping for contribution agreements will be expected
to have similar performance measurement capabilities in order
to meet submission and reporting needs. If you partner with government,
I suggest you look at making improvements in your planning and
performance measurement activities to ensure you are able to meet
the requirements. The Treasury Board of Canada website has available
a “Managing for Results Self-Assessment Tool” as well
as a guide, “Preparing and Using Results-Based Management
and Accountability Frameworks”. A word of caution: it is
possible to meet submission and reporting requirements without
adopting the same complex framework. Many associations use business
models that can generate the same information. In looking into
the various models I have found different approaches and terminology,
but each result in improvements to performance measurement.
Students in the second course of the CAE Program respond to a
class discussion item that asks them to describe and discuss the
process used to establish links between strategy, performance
standards and member satisfaction in their associations and evaluate
its effectiveness. Student discussion and questions suggest some
have never thought about making this link. Others are engaged
in some performance measurement activities, but there appears
to be no overall coordinated approach.
Performance measurement remains a weak area for not-for-profits.
Leaders and managers have an opportunity to make improvements
in performance measurement activities by improving or adopting
relevant policies and models that suit their organization’s
specific needs.
This column features innovation and practical solutions applied
to challenges, trends, issue and opportunities for the association
community. Column editor Jim Pealow, MBA, CMA, CAE is a consultant
and the Association Management Education Program Lead Instructor/Coach
for CSAE. He can be reached at jim@amces.com.
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