Benchmarks: don’t settle for mediocrity
In parts 1, 2, and 3, I presented simple ways to future-proof your organization and create an early warning system by creating simple but powerful processes to help you monitor internal and external changes.
Telling your organization’s story with emotion AND data is powerful. Connecting with the heads and the hearts of your donors transforms the way they understand your work. Not only can they feel good about giving, they know their giving is changing lives.
This post will focus on the final step- using the data to tell the story of your work through benchmarks.
What is a benchmark? How do organizational leaders select and use them? Most importantly, why use them at all?
Why use them? To hold ourselves accountable to our donors, our clients, and our community. Too often, nonprofit leaders settle for mediocre outcomes and financial performance because they do not have a culture of looking outside of their organization for clues about how we are doing. Benchmarking is a way to discover what your organization does well and highlight processes, trends, and approaches that need attention.
Accountability is foundational to authentic stewardship. Without the commitment to accountability, handwaving and happy talk will replace results. Thomas Tierney and Joel Fleishman call this ‘fuzzy headedness’. Emotions and wishful-ness overwhelm logic and analysis. Leaders can miss opportunities for change, underinvest in programs, or waste resources on processes that aren’t effective.
In Give Smart, they state, “measurement serves three quite different purposes: accountability (what did our donors get for their money?); continuous improvement (given these results, and what we now know, how can we get better?); and proof of impact (can the results we’re seeing really be tied to the work the organization did?).”
Each of these purposes create powerful evidence of your organization’s success and impact, evidence you can offer to your funders, donors, and community.
Most non-profits look only at their mission statement to evaluate their operations. For many boards, the only question is whether the organization is ‘on mission’ or ‘off mission’. Quality, efficient use of resources, and financial solvency are kept in the background.
The drive to rise above mediocrity is self-imposed. Few nonprofits are visited by third party evaluators. Most funders evaluate results in the context of what the organization promised to deliver, not in the context of external comparisons.
Choosing indicators, tracking them over time, and benchmarking the results is consumes time and resources. However, the practice of collecting data over time and benchmarking it is key to learning, improving, and delivering on your mission and vision.
Picking the right benchmark
A carefully selected benchmark can unlock myriad insights. There are several approaches to choosing a benchmark. First, consider your plan to use the comparison.
Do you want to see how your compare to competitors? For example, you might want to look at staff/client ratios, the number of dedicated fundraisers on staff, gross and net figures for events, and so on.
Are you interested in overall comparisons to your industry? Salary and benefits surveys are a source of timely, trackable data.
Do you want insight into the ‘best in class’? If your organization is grounded in logistics- a food pantry or paratransit- looking at logistics, warehouse, or transit data outside of the nonprofit sphere can yield a wealth of ideas.
Is there an organization that is a role model for your industry? Often national organizations recognize top performers. What data are they tracking? How do your data and trends compare?
Mind the gaps
Four situations will appear in your analysis: Dominant, On Track, Impending Danger, and Danger Warning*.
When you create a simple chart of your data against your benchmark, your results will fall into one of these categories.
In the first case, you are performing better than your benchmark and improving at a faster rate. You are dominating your comparator. However, there is a danger: don’t become arrogant and stop measuring and comparing. Your performance may begin to lag, or your comparison may make changes and begin to improve its processes and results.
In the second case, your results are converging. Your results are behind the comparison but catching up fast. Your organization is on track. This situation is easy to maintain, and you and your team can see the impact of improvements or changes in your processes.
Imminent danger is evident in the situation below. Your organization is performing better than your benchmark comparison today, but the tide is shifting. Now is the time to question your processes, look for possible improvements, and aggressively monitor results.
Danger: The trends are dangerous, and they are getting worse. These situations can grow into crises- unaddressed negative trends in financial results or program results can quickly close off options for change, undermine client and funder support and crush fundraising.
Getting started
Get started by deciding what is important to your organization internal financial information, program data, demographic information.
Identify one or two indicators that mirror this information. Collect quarterly data from last year and mark your calendar to collect the data at the end of Q1 one or two indicators.
Create a simple chart and share it with your leadership or your board. Are you dominating, on track, or slipping into danger?
Think about opportunities to change the trend- your approach, your processes, your assumptions.
Experiment. Try something different for 6 months. Track the baseline, and the subsequent two data points and see if the trendline has changed. Compare it to your benchmarks. What new insights can you gather?
Use the data with your team, your leadership, and your donors. Let it take the stage and illustrate the real impact your organization is making in the world.
*adapted from John Vinyard, Baldrige Users Guide 2019