Measuring Value and Performance: What’s the Point and How to Do It
As an entrepreneur or leader of a NFP, there’s pressure from stakeholders to prove your value and yet, how do you show that you’re moving the needle forward? While it sounds like a simple question, it is not always clear because there are so many levers at play – revenue, funding (restricted and unrestricted), operational costs, employees, margins etc. If it’s so complicated, why even bother?
It’s worth it because taking the time to develop performance management and measurements helps organizations to:
- Turn strategy into action
- Link performance to strategy
- Maximize effectiveness of operations
- Enable attainment of strategic outcomes
- Promote an environment of continuous improvement, enhanced creativity and innovation
- Provide proof of value to stakeholders and funders
So, how do you build your performance management structure?
You can start with…
1. A solid strategic plan
The first task is a solid strategic plan that outlines the organization’s objectives for the next several years. A strategic plan defines where an organization is going, aligns members of the organization behind a strategic vision and helps you reach your goals and objectives. It answers the questions: Where do we want to be? Where are we now? How do we get there? Who is going to do what? How will we monitor our progress?
Example strategic objective:
- To be the leader in providing Electrical Contracting Services to businesses in the Ottawa region.
2. Solid Key Performance Indicators
Once you’ve established your strategic objectives, you can begin to form Key Performance Indicators (KPIs) that will let you and your stakeholders know how you’ll measure your progress. KPIs are:
- Controllable and accountable
- Qualitative and quantitative
- Long term and short term
Although you have most likely included your entire management team in the strategic planning process, it is very important to include them in developing KPIs. Your COO, CFO etc. will have the information and knowledge to help develop KPIs that are linked directly to strategic objectives and identify organizational successes or failure.
- The number of clients using our services each year
- The number of referrals for services each year
3. Link KPIs to your operational plan and specific targets
This is where rubber hits the road. Strategic objectives are only attainable if those who are doing the work understand and agree with how to reach them. A strong operational plan provides the actions to take in reaching the strategic objectives, and the specific, measurable, attainable, realistic, and timebound targets (S.M.A.R.T) that link directly to the KPIs.
- A 20% increase in the number of clients using our services
- A 15% increase in referrals for services
Example Actions to help reach targets:
- Develop baseline numbers for client engagements and referrals in order to track increase
- Track client engagement and referrals
- Engage in business development activities
- Recruit new electricians
4. Commitment to tracking, reporting and reviewing KPIs
For consistent tracking and reporting many organizations choose to use a dashboard or scorecard to view progress on their KPIs. No matter the tool you use, what’s important is that you are tracking, reviewing and reporting on them regularly. In committing to regularly tracking and reporting on your KPIs, you are able to share good news or bad news with stakeholders easily and regularly. It also provides the opportunity to reflect on the choice of KPIs and make changes as needed.
Example of a simple dashboard:
Bad Habits in Performance Management
- Judging people with measures. Performance measures are for improving processes, they are not about improving people.
- Using unclear language for goals. Write so a fifth grader can understand
- Not involving people in the creation of measures. Enable contribution without wasting their time
- Rushing to dashboards and reports. Focus on defining the right performance measures in enough detail before deciding what tools and/ or reports will be used to track them.
- Cluttered and bloated performance reports. Put time into a report that is simple and answers only what is asked
- Treat symptoms not causes with quick money or resources. Focus on measures that fix root causes, not Band-Aid measure.
Performance management is a continual and iterative process that can have everlasting impacts on an organization and their ability to plan, develop and execute. Taking the time for effective performance management can help you tell your story to future investors, donors, clients and funders.
About the Author
Katherine Clarke-Nolan specializes in facilitation, strategic planning, governance and change management services that focus on helping organizations strategically transition and transform, resulting in more engaged and innovative workforces.