Measuring the Success of Nonprofit Organizations | Knowing When to Restructure to Meet GoalsDecember 14, 2015
Knowing how to measure the success of nonprofit organizations can be tricky. There are many factors that contribute to a nonprofit organization’s success, and it is important that all of them be acknowledged. Measures of success for most nonprofits are statistics related to it programs, but this data is difficult to get and understand, especially to outsiders.
Nonprofits receive a variety of donations including supplies, donations, materials and volunteer time. Taking all of these things into consideration, measuring a nonprofit’s true success is best approached with an input strategy. According to the Nonprofit Quarterly, inputs describe how much in the way of resources, both financial and non-financial, was used to conduct an activity. This data is used widely to evaluate charities and how an organization spends its resources.
Accounting standards require nonprofits to report their expenses in three categories; program, management, and fundraising. The typical reaction by users of financial statements is to consider program expenses as good, but management and fundraising expenses as bad. The data is then expressed as ratios, each category of expenses to total expenses, to equal 100 percent.
How this information is evaluated varies by organization, but it is important to set goals ahead of time to measure your success later on. As a nonprofit organization, expenditure for events and fundraisers are necessary so that they are able to operate, but should not exceed 15-30% of the total expenses. Many criticize program expense ratios that exceed this number, but it does not serve any real value or indicator of the organizational success, and is an indicative attempt to mislead the public about how a charity uses their contributions.
Knowing When to Restructure a Nonprofit Organization
If an organization’s overhead exceeds this range, it may be time to take action. What the nonprofit is receiving in donations and what it needs to manage the organization should meet, if not exceed its goals. If this isn’t happening for a nonprofit organization, do not fret, there are many solutions and ways to turn things around.
Some of Qorval’s services and solutions ranging from treasury/cash management and optimization, performance improvement, and operational due diligence. After our diagnostic assessment and situational analysis, we will be able to determine the nature of the problems and formulate solutions for your nonprofit organization.