Key performance indicator (KPI) is defined as “a quantifiable measure used to evaluate the success of an organization, employee, etc. in meeting objectives for performance.”
My personal quick definition for nonprofits is “Anything that directly affects mission impact.”
How does any organization know what is the best data to measure?
5 known best nonprofit data factors for KPIs
Research within our sector has identified five data factors that organizations should monitor on a regular basis. Ensuring that these factors are comparable to your peers’ and moving in the proper direction will improve your nonprofit’s chance of success.
In fact, it pretty much guarantees it!
Let’s explore each of the five so that you, your board, and your team can grasp them fully.
1. Retention (volunteer, governance, & donor)
It is no surprise that we begin with “Retention,” since it is relatively easy to measure and track. Much more important, it has tremendous impact in three key subsets of constituents. Let’s dig into all three of them.
The first type of retention to draw your attention to is volunteer retention. Simply, what percentage of your volunteers from the previous year come back and volunteer in the next 12 months?. Obviously, a high volunteer retention rate bodes well for the volunteer experience and indicates volunteers’ loyalty to your mission. Retaining volunteers is also the first step before recruiting them to become donors.
The second type of retention pertains to governance. Like volunteer retention, governance retention is the percentage of board members who continue on your board and committees over time. If you’re seeing constant turnover not related to term limits on your board and its committees, something is amiss. This group should also be a constant supply of major gift and legacy donors for the long-term support of your mission.
The last type of retention is probably the one you hear about most, donor retention. Donor retention is the foundation of, if not the magic formula for, fundraising success and financial security for your nonprofit. Compare your rate to both the national average and your peer group by size and mission. Bloomerang’s fundraising effectiveness report further discusses the must-know metrics your organization should strive for (or beat!).
If you can average 10-20 percentage points above those averages, then financial success in funding your mission is yours!
Level of engagement is the strongest indicator of future retention for all three groups mentioned above. We all intuitively measure engagement in just about every facet of day-to-day life. Whether we’re talking about a significant other, friends, or co-workers, we evaluate various aspects of involvement, such as body language, feedback, and eye contact, to see if they’re engaged with us.
Now think of the types of involvement a nonprofit’s constituents could have with the organization. Some of the most common are:
- Opening emails
- Giving—look at giving levels and frequency
- Attending and Ssponsoring events
- Opting to receive your newsletter
- Participating on the board or a committee
- Introducing new people to your organization
- Responding to surveys
- Visiting your website
- Mentioning your organization in social media, or sharing your organization’s content
The best scenario is for your database/CRM6 to track and compile these factors, weighing each one according to timing and frequency. Make sure no matter how you track engagement that you can use it to create filters and reports for segmentation purposes.
3. Lifetime value
This measurement is invaluable when building and maintaining a strong fundraising/mission-funding engine for your nonprofit.
Simply put, it is the total amount of dollars raised over a donor’s lifetime with your organization. To figure the average lifetime value of your donors, you multiply the average annual gift by the average number of years and months of giving.
For example, if your average gift amount is $145.75 and your average donor lifespan is 2.5 years, then your average lifetime value per donor is $364.37.
Lifetime value can be used to track your progress—up or down—over time. Plus, you can use it to measure the effectiveness of your communications and fundraising efforts. Just as important, you can determine how much you are willing to spend in acquisition costs to recruit new donors. (Commercial businesses such as Amazon or Netflix know, based upon lifetime value, that they can spend much more than the value of one year’s spending by a new customer to acquire them!)
4. Funding pyramid
At Bloomerang, we will use a three-level funding pyramid , but it is possible to have more or fewer levels. The measurement tracks the percentage of your donors you have in each level, as shown below:
Your organization can establish the parameters for small, mid-level, and major levels of annual giving. For example, small could be annual giving up to $200, mid-level could be above $200 up to $1,500, and major could be annual giving above $1,500. The mix and movement of the percentages for any one year and over time provide a solid glimpse into the health of your organization’s funding engine.
5. Mission impact (single strongest factor)
Our fifth and final factor should be a key communication point for your nonprofit. It allows you to illustrate to your valued stakeholders and the world the actual impact you are having by fulfilling your mission.
This factor will often evolve over time, especially if your mission also evolves. It will probably be completely different for various types of missions.
The best mission impact measurement factors are expressed by a single data point that is then compared to previous and expected results or against national or regional averages. Strive to settle on a single measurement by having your management and/or board meet and consider all available options. Which options best illustrates your mission impact results and will be the easiest to communicate? (There is usually a clear winner.)
For example, if your charity runs an adult learning program, it might be the graduation rate or the average academic test score or job placement rate of program participants.
There should be one number that everyone working for or volunteering for or supporting your organization is aware of. They should also know if it is improving or not.
Every nonprofit needs key performance indicators of some nature in order to successfully fulfill its mission. The best nonprofits use these factors to ensure steady improvement and proper funding levels. Best of all, when properly measured and used, KPIs attract involvement by people outside the organization and keep the focus of those inside the organization on overall success.