Performance metrics are an interesting science. In seemingly all work, there are a few select metrics that industries cater to, with the full knowledge that they don’t adequately address what they seek to measure (think of teacher ratings based on students’ learning). I came across this article the other day and was legitimately surprised that airlines still take pride in their on-time arrival rate. I guess I shouldn’t have been. As a frequent flyer I’ve come to expect something even better than on-time arrivals – early arrivals. Yes, airlines are so efficient and effective that they are arriving better than on-time now…they arrive early!
Unfortunately, early arrival is a facade. Airlines have done what you and I would do if our on-time arrival performance metric was scrutinized to the level that it is in their industry: you’d pad the flight time. By so doing, airlines have more on-time arrivals and therefore better performance relative to the metrics. The irony in all of this is that the metric does not return the intended value. The industry has just found a way to cater to the metric, but the arrival time for you and I is exactly the same!
The same thing happens in the non-profit world as it relates to the percentage of organizational expenses used for program and non-program expenditures. If you haven’t seen this ted video on the issue, take 15 minutes to do so. Dan takes his first hand experience of managing expectations that donors and the industry as a whole have with the ‘program expense pie’ to a very painful and personal experience that ultimately caused his non-profit to go out of business. The reality is that a non-profit organization could have tremendous financial metrics (90%+ of the money goes to programs, for example) but have little or no impact to show for it. This happens a lot. Expenditure does not equate to impact, just like on-time arrival does not equate to customer satisfaction.
The intent of performance metrics in business and in the non-profit world are the same: to ensure accountability for the customer/donor. It is too bad the system just isn’t working like it should. For the airlines, the article appropriately highlights that the customer service metric is far more revealing than the on-time performance metric. We now need to figure out how to incorporate such a system into the work traditionally thought of as ‘charity’.
I’m hopeful that we’re close to better communicating impact-oriented metrics that become more commonly accepted in the donor vernacular. It is receiving a lot more focus, and is something I will be talking about a lot in the future. But, in the meantime, if you are a donor that is interested in accountability, go ahead and ask about the nonprofit about measuring impact before you ask about expenditure; it will help remind us to keep moving in the right direction. In the long-run, we’ll all be better served.
Thanks to Lifewater CEO, Justin Narducci, for allowing us to share his post.