Key Performance Indicators (KPIs) are used to track progress towards long and short-term business goals. While they are often associated with for-profit businesses, they can be used just as effectively to ensure the success of nonprofit organizations, charities and foundations with a few tweaks.
In this guide, we’ll review the basics of KPIs, how to set them and our favorite KPIs to track for nonprofits.
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What is a KPI?
A Key Performance Indicator is a data point that has been determined to be relevant to the overall goals of the foundation or charity. More specifically, they are data points that are indicative of how the organization is performing and can be used to evaluate the organizations’ progress in achieving its goals.
There are high-level KPIs that focus on the organization’s progress and performance as a whole, and low-level KPIs that focus more on day-to-day tasks performed by specific people or departments. Low-level KPIs help keep specific departments or people on track towards the overall goal of the company, and high-level KPIs let you evaluate the company’s performance as a whole.
How to set KPIs for your nonprofit
To use KPIs effectively in your organization, you need them to be actionable. This means that your KPIs must be relevant to your nonprofit organization, able to be tracked, and have an impact on your goals as a company. You should also make sure your KPIs are realistic. Setting a KPI target or goal that is unachievable and unrealistic is a good way to ruin your team’s motivation before they begin.
Setting KPIs that are not relevant to the overall performance of your group will not help you move in a successful direction. If your goal is to increase donations each year, measuring and tracking the time your team spends at lunch each day will not help you move closer to your goal whereas measuring average donation amounts and the number of donations per month, will.
To set successful KPIs for your nonprofit, you should:
- Review your objectives and mission: Your nonprofit’s objectives are the main focus in setting up KPIs. By using KPIs, you are aiming to improve upon your primary objectives.
- Measure your current performance: By stopping to measure your current performance towards your nonprofit objectives, you gain a sense of where you are, and where you need to go. Knowing this makes all of the difference when setting KPIs.
- Determine what your goal is: After getting a sense of where your nonprofit currently stands in its progress towards its primary nonprofit objectives, you should determine what the goals are that you’re hoping to hit.
- Set short and long-term KPIs that are designed to move you towards your new goal: Once you figure out where you are currently, and where you need to go, you can determine what KPIs you will be tracking to ensure you get there.
- Review KPIs with your team and explain them to them: Once KPIs are set, you review them with your team so that they know what is expected of them and can focus on achieving the results you want.
- Review progress after the first KPI period and evaluate KPI relevance: After your designated KPI review period is over, examine your KPIs to see how your team is doing. You should also review your KPIs to ensure they are actually useful and giving you information relevant to your goals. If they are not, you can simply get rid of them and add new ones as necessary.
How often to review KPIs
The frequency with which you review your KPIs is a personal choice and should be based on your goals and how much monitoring you feel your nonprofit organization needs to achieve them. Typically, KPIs are reviewed either monthly or quarterly. Reviewing every 1 to 3 months gives enough time for data to accumulate in a meaningful way.
Reviewing your KPIs too often or too early may not give you the complete picture and lead to mistakes in assumptions on how you are performing.
When you first set up KPIs, it can be useful to review them each month until you are certain that you are tracking the correct data for measuring the success of your nonprofit, charity or foundation. Monthly reviews allow you to have enough data to examine to ensure your nonprofit is moving in the correct direction and that your measurements are relevant to your goals.
Once you are happy with the relevance and design of your KPIs, you can move to review them quarterly as you will not be making many changes to them. Managers can review progress towards KPIs as often as they’d like, but a formal review with employees should be less frequent once they are solidified.
How is KPI data measured, tracked, and used?
Organizations generate data points with every action an individual at the company takes. The tricky part of using KPIs to your advantage is being able to measure this data and track it effectively in a way that is relevant to your nonprofit.
All KPIs should be specific, measurable, and relevant. Once you’ve created your KPIs for your nonprofit, you can determine where the data is being recorded. If you’ve determined that a data point is relevant enough to your overall company’s goals to be made into a KPI, it is likely a piece of data your company is already measuring in some form.
Wherever your data is located, you simply need to make a record and pull this information for your reports. The data for all of your KPIs may be located across different systems, so recording where to find the data and how to pull it for evaluation is how you will measure your data.
Tracking your data can be done manually and pulled into Excel, or done with one of several Business Analytics (BA) software programs usually referred to as KPI dashboards. Depending on the scale of your nonprofit operation and how often you’re reviewing your KPIs, purchasing a KPI dashboard can save you many hours of busywork each week.
Most popular KPI dashboards
Each of these tools offers ways to interface with other software and create beautiful, visually appealing dashboards for you to track your progress with. While they may take some time to set up and get running properly (automatically) the initial time investment will be repaid many times over.
Once you have your KPI data in front of you, you can evaluate your team’s performance on the data points you are tracking. You will see where you may be falling short in achieving your goals and can determine what steps need to be taken to rectify this. Insights drawn from KPI measurement help ground you in reality, and let you approach your goals from a data-driven point of view.
Top 10 KPIs for nonprofits, foundations, and charities
Most KPIs tracked for for-profit businesses are focused on sales and revenue. This is similar for nonprofits, but with a slightly different language as nonprofits and charities often rely heavily on donations from their supporters.
The following is a list of the top 10 most commonly tracked KPIs for any nonprofit or charity.
- Donor and donation growth: Keeping track of the number of donors participating in your nonprofit, as well as the overall monetary amount of donations allows you to see where your money is coming from. You can determine if you are increasing or decreasing your number of overall donors which tells you if your outreach and fundraising programs are working.
- Donor retention rate: Donors who have given more than once are likely invested in your cause. By tracking how many donors you retain each year, you can modify your donor outreach strategies accordingly.
- Donation conversion rate across avenues: Knowing where your donations are coming from allows you to focus on improving any areas you are lacking in. If a nonprofit or charity in your space typically gets 50% of their donations online, and you are seeing 25% of your donation coming from online, it would indicate that there is more you can be doing with your online presence to attract donors.
- Donor lifetime value: This metric lets you understand how much money you can expect, on average, from a committed donor who is interested in your cause. It also allows you to project donation amounts when combined with your number of donors and their average donation numbers.
- Fundraising ROI: With each fundraiser you host, it is important to determine whether you’ve made money by hosting it, and how much. Keeping track of individual events and their net profits or losses can help you to make future decisions about the types of events that you will continue to host, or cancel.
- Email subscribers: The number of email subscribers you have is important for outreach and donation requests. If this number is falling month over month, it would indicate that your email campaigns need revision.
- Email open rate: Knowing how many people are looking at your emails is another key performance indicator related to your email campaigns. If your email open rate is lagging, you can work to improve this.
- Email conversion rate: Opening an email is only the first step. You also want to track how many of your subscribers are clicking through your email and making an actual donation. Compare these numbers with your email open rates to determine where you went wrong if you have trouble with email conversion rates.
- Cost per dollar raised (CDPR): Determining how much you spent to get a donation allows you to compare with industry averages and adjust as necessary. It can also point out what portions of your fundraising efforts may not be worth continuing.
- Landing page conversion rate: If people are going on your website, are interested in what you’re doing, but not donating, there is a problem somewhere within your website content or layout. Your landing page conversion rate will help you understand whether any modification is needed.