Benchmarking and Business Planning Tools
Setting performance standards and establishing benchmarking goals is essential for both public and private organizations. Public agencies are encouraged to adopt and implement benchmarking techniques from private entities in order to improve their efficiency and effectiveness. I examine the techniques and benefits of benchmarking for non-profit organizations.
Benchmarking and Outcome Measures
Implementing outcome measures is necessary for benchmarking. Governments and non-profit organizations can benefit by adopting best practices implemented by other similar organizations.
The United Way organization is seen as a pioneer in establishing outcome measures for non-profit organizations. What are outcome measures and benchmarking?
Outcomes can be defined as, “benefits or changes for program participants” (Hendricks, Plantz & Pritchard, 2008). While a benchmark is a defined “mark” or data point, outcomes are all measurable benefits and changes. Both are measurable yet a benchmark is a designated data point. How might a nonprofit organization implement benchmarking and know how they are doing?
According to Lee, Johnson and Joyce (2008) benchmarking is, “best practices in government or the private sector that are identified and used as a guide for revising how government operates” (p. 158). Non-profit organizations should meet regularly to share best practices. Moreover, Letts, Ryan and Grossman (1999) state that, “Benchmarking is more than discovering best practices. It includes comparative measurement, active goal setting and implementation” (p. 1).
Kelly & Rivenbark state that, “Benchmarking is a comparison between two data points, with one of the data points designated as the benchmark” (p. 133). With benchmarking, data points typically involve comparisons between years. For example, you might setup the number of clients served in year one as the benchmark. The organization would then seek to meet or exceed the number of clients served in year two.
Quantify Outcome Measures
Outcome measures are particularly useful for non-profit and government agencies where service is the "product" of the organization. Outcome measures, “capture the extent to which the service is meeting its objectives and service delivery goals” (Kelly & Rivenbark p. 37). In both cases, benchmarks and outcome measures are quantifiable.
Benchmarking and outcome measures indicate the level of performance of a given organization. According to Gelmon, Foucek & Waterbury (2005), “Performance monitoring can be very useful to reveal trends over time, to assess actual performance vs. targets, and to compare across units, different groups of clients or activities. Performance monitoring is also extremely valuable as the basis for external benchmarking of organizational performance” (p. 8). As we can see, the benchmarking process and measuring outcomes for performance are interrelated.
Techniques and Measures
Convio is a marketing company that is the provider of evaluation and program measures for nonprofit organizations. They created an online marketing benchmark index study for nonprofits. Their benchmarking technique compares a given nonprofit organization with similar peer groups. The focus of their index study involved online marketing. The techniques can be applied to help an organization answer questions like, “What online market metrics should I focus on? How is my organization doing? What targets should I set for my organization?”
According to the study, the fastest fundraising channels for nonprofits are (1) online presence and (2) web traffic. The following are also findings of the study:
- The median growth rate in online giving was 20 percent.
- Online giving is growing fastest for small organizations. An increase in gift count drove the fundraising gains.
- Median donation size increased from $83.44 in 2009 to $91.94 in 2010.
- Fundraising appeal effectiveness increased in 2010 (p. 5).
How should a nonprofit organization measure itself against these findings?
Define Your Mission
A nonprofit organization should have a defined mission. This will enable the organization to compare itself with others that have a similar mission. Organizations can compare their results with the industry benchmark. Organizations should be using electronic means of communication and fundraising including newsletters and online appeals as well as social networking. They will be able to compare their organization with other similar organizations to find out how well they are implementing these best practices and other means of technology.
Comparing Xerox, CARE and Boston Ballet
Letts, Ryan & Grossman studied and compared Xerox, CARE (Cooperative for Assistance and Relief Everywhere) and the Boston Ballet with other similar nonprofit organizations. While Xerox focused benchmarking on service orders, delivery and quality of products, CARE, a humanitarian organization providing disaster relief, focused on health objectives. The Boston Ballet focused on fundraising and their public image.
Each organization wanted to know how it measured up on a global level. CARE, a humanitarian disaster relief organization, implemented a water quality benchmark. Concerned with health indicators, they chose to use the incidence of diarrhea in year one as the benchmark and they compared it to the incidence of diarrhea in future years.
Xerox established the number of orders in a given year as their benchmark. They compared subsequent years to that data point.
The Boston Ballet had difficulty measuring outcomes and establishing benchmarks for “artistic performance.” Instead, they benchmarked their ability to raise funds and improve their public image. They established a committee, compiled a questionnaire and turned to the San Francisco Ballet for additional insights. In the end, they were able to improve their public image and helped trustees understand other issues beyond public image. They were invited to “pay homage to the past and appeal to new audiences” p. 8.
Evaluating Employee Satisfaction
Lopus (2003) also conducted a performance evaluation and benchmarking of employee satisfaction and retention in a number of nonprofit organizations with a Christian ministry focus. They asked employees to what degree they agreed with the statement: “my organization is well managed.” (p. 27). A total of 85 organizations were ranked. Since the missions were similar, this was a cross-comparison type of benchmark.
They found that employee satisfaction was linked to effective management. Effectiveness is based on” (1) trust, (2) enthusiasm, (3) ability to retain high quality employees, (4) a focus on accountability rather than a permissive environment, (5) ability for supervisor to solve work-related problems, listening to employee suggestions and then acting on them, (6) ability to communicate reasons behind decisions, (7) fairness, and finally (8) teamwork. These findings parallel those of the private and governmental sectors.
Observations and Generalizations
Some possible benchmarks for nonprofit organizations to consider are (1) The use of technology, (2) Effectiveness of online giving and (2) Quantifying effective management. Finding ways to measure outcomes that are difficult to quantify might require the nonprofit to examine other areas such as fundraising and public image. All of these can be measured and set as the benchmark for year one and determine the growth of each of these areas by measuring and recording the distinct data point in year two.
Nonprofit organizations might benefit from contacting other organizations with a similar mission. Gathering data and best practices from a number of similar organizations should prove to be beneficial. An organization might consider sharing best practices with more than three and at least five to ten organizations so that a fair “sample population” can be gathered in order to look for consistencies and trends and draw reasonable conclusions.
Nonprofit organizations should consider their operations to be similar to the private and governmental sector when it comes to identifying and measuring outcomes for performance evaluation and benchmarking. They should adopt the techniques developed and implemented in private and public sectors.
Since the aim for all three types of these organizations is to remain financially solvent, best fundraising practices should be shared, measured and benchmarked. Being effective and efficient with the dollars granted to the organization is just as important in nonprofit organizations as it is in the private and public sector. Management skills are necessary to administer funds properly, build trust, foster enthusiasm and promote fairness throughout the organization. Setting up designated data points for all of these measures and comparing them year to year and across organizations with a similar mission will allow the nonprofit manager to benchmark with success.
Bhagat, V. McCarthy, D. & Snyder, B. (2011). The convio online marketing nonprofit benchmark index™ study. Retrieved from:http://www.convio.com/files/2011- Benchmark-Report.pdf
Gelmon, S.B., Foucek, A. & Waterbury, A. (2005). Program Evaluation: Principles and Practices. 2nd ed. Portland: Northwest Health Foundation. Retrieved from: http://www.wcasa.org/file_open.php?id=923
Hendricks, M., Plantz, M. & Pritchard, K. (2008). Measuring Outcomes of United
Way–Funded Programs: Expectations and Reality. Wiley Periodicals, Inc. 119: 13-35. DOI: 10.1002/ev.266
Lee, R. D., Johnson, R.W., & Joyce, P. G., (2008) Public Budgeting Systems, 8th ed. Jones & Bartlett Publishers INC. Sudbury, Massachusetts.
Letts, Ryan & Grossman (1999). Benchmarking: How nonprofits are adapting a business planning tool for enhanced performance. John Wiley & Sons. Retrieved from: http://www.tgci.com/sites/default/files/pdf/Benchmarking_0.pdf
Lopus, A. (2003). Benchmarking Management Performance! Eight Ways to Accelerate Your Organization’s Effectiveness. Christian Management Report. 28-30. Retrieved from: http://www.bcwinstitute.com/Learningcenter/press/CMR%20Accelerate%20Org %20Effec.pdf