Making KPIs Work for Your Nonprofit

by Kyle Evans, CPA

Once you’ve selected your nonprofit’s Key Performance Indicators (KPIs), such as the average program expense ratio, it’s time to put them into practice and make them useful over time.

Create a KPI process

You can use these three strategies to implement your KPIs effectively:

• Benchmarking: Compare with peer organizations or use third-party evaluators like GuideStar or Charity Navigator to assess the reasonableness of your targets.
• Seek buy-in: Educate board members and leadership on the value of KPIs. Demonstrate how KPIs support their roles and the organization’s mission.
• Make tracking simple: Use a spreadsheet to track progress. You can easily convert it into a PDF for board reports and team updates.

With your KPIs in place, put them to work for the organization:

• Create a reporting strategy (Who, When, What, How): Decide “who” needs to know the KPIs —management, board, staff — and “when,” scheduling timely discussions based on your nonprofit’s yearly calendar and those metrics that demand regular review and discussion about targets and adjustments, such as operating reserves, working capital, assets and liabilities, and program expenses.

The “what” incorporates your organization’s status, goals, and what it takes to reach them. Finally, the “how” could be spreadsheets, verbal reports, dashboards, and materials disseminated to donors and the public sharing your good news. Remember that some things reported on Form 990 are reconciled differently, so build trust among data consumers by explaining the differences in advance.

• Evaluate program performance and allocate resources: KPIs can help with the constant challenge of allocating scarce resources by showing which efforts, in time or money, deliver the strongest return on investment. Maybe you’ll see more bang for the buck by shifting funds from scholarships to after-school programs.
• Review, monitor, and adjust: Make changes as you recognize what works and what doesn’t.

Make KPIs useful over time

Your starting point with each KPI is not static. Watch for the impact of time on your KPIs by:

• Reevaluating: Whether yearly, every three years, or ongoing, have a plan for assessing whether each KPI remains useful. The timing depends on how the organization is doing and what you want to measure with your KPIs.
• Prepare for pivots: The decision to adopt or drop a KPI might emerge from reevaluation or be imposed by leadership. In any case, a pivoting process that accounts for each KPI’s place within the strategic and financial plans should be planned, and it should ensure that all stakeholders have a say in this new direction.

When chosen and applied thoughtfully, KPIs can transform a nonprofit’s ability to plan, perform, and tell its story. Your data is already in hand—KPIs are simply the tools to unlock its full potential.

About the Author

Kyle Evans, CPA, is a director at Boyer & Ritter LLC and a member of the firm’s Nonprofit Practice Group. He provides audit and financial reporting insights to help nonprofits strengthen cash flow, budgeting, and long-term planning. Contact Kyle at 717-761-7210 or kevans@cpabr.com.