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Tools You Can Use

Benchmarking 101 for Nonprofits

Resource
Benchmarking for Nonprofits: How to Measure, Manage, and Improve Performance

Contents
What is benchmarking anyway?
How can benchmarking help my organization?
How can you tell when "best practice" really is best practice?
What's the difference between benchmarking and evaluation?
FREE Tool: Common outcomes and performance measures
Benchmarking resources

 

From Vince Hyman, former Publishing Director, Fieldstone Alliance

I don't know about you, but I work hard every day (well, almost every day). I feel like I'm doing my best all the time. But am I following "best practice?" How can I tell?

Hopefully this issue of Tools You Can Use will shed some light on benchmarking. At the very least, you'll be able to nod knowingly when the topic comes up at the next cocktail party.

What is benchmarking anyway?
Benchmarking is the ongoing process of measuring your organization against leaders, then changing your practices and processes to pull the organization's performance up a notch.

Excellent practices can be found in all areas of organizational activity--from program delivery, to finance, to board governance, to purchasing, to facilities management. The beauty of benchmarking is that it can be used to generate small improvements that, over time, have the potential to add up to big gains in efficiency, performance, outcomes, and ultimately mission.

Here are some examples:

•  A local nonprofit membership gym wants to improve its board meetings, so it studies the board recruitment, compensation, and participation programs of similar organizations.

•  A homeless shelter wants to be less reliant on grantmakers, so it looks at earned-income strategies used by other human services providers.

•  The largest, multiprogram nonprofit service provider in a region wants to save money on printing, so it studies the purchasing procedures of similar sized organizations (all for-profits, since there are no similar regional nonprofits).

How can benchmarking help my organization?
The benefits of the process are many. It helps you set higher standards, sharpen your mission focus (as you figure out just what you need to benchmark to improve), raise more money (many funders seek demonstrable efficiency), identify strengths and weaknesses, consider new ways of solving old problems, and demonstrate to stakeholders that you are trying to eke out the most mission possible with the resources you've got.

How can you tell when "best practice" really is best practice?
The term best practice gets thrown around a lot these days. Everyone strives to make their programs "best practice." Books and websites compile "best practices." Funders ask that we seek out best practice and adapt our programs accordingly. The concept gets tossed about so much that most of us would just as soon toss it out completely. Much of the time, it seems more like someone else's impossible dream than a manageable, practical goal.

Cover of Benchmarking for NonprofitsJason Saul, in his new book, Benchmarking for Nonprofits: How to Measure, Manage, and Improve Performance, proposes this definition:

A best practice is the most successful and efficient means of achieving a particular outcome for an organization.

He continues to note that best practices are always relative. Lists of "best practices" are often less-than-useful, because these practices are divorced from the processes that created them. Without the knowledge of processes used to achieve an outcome, the actual best practice has little meaning. It is entirely possible that one organization's best practice may be the worst for another. For example, a board retreat may be a time-honored tradition that energizes board recruits for one organization. For another, board retreats may be time-wasting and counterproductive--not because the retreat itself is not a "best practice" but because the board has other effective ways of energizing recruits.

Saul lists six guiding principles for best practice:
  1. Is there a proven track record of success? (Obviously, without a track record, the success could be a fluke unrelated to the "best practice.")
  2. Are the results sustainable? (A practice that requires unsustainable inputs will eventually fail.)
  3. Can the idea be replicated? (A practice that is unique to a particular leader or set of circumstances has little chance of being adapted to fit another leader or situation.)
  4. Is it cost-effective? (As with sustainability, a practice that is too expensive for its results is not "best.")
  5. Does it help us achieve our mission? (Mission relationship is at the heart of any practice we adapt.)
  6. Does it fit the particular context? (Many practices are suitable only for certain situations and not for others.)

What's the difference between benchmarking and evaluation?
Many nonprofit organizations currently conduct some form of program evaluation, either as a funding requirement or as good practice. While benchmarking and evaluation are both concerned with outcomes, the two are very different.

Evaluation is often concerned with proving--proving accountability (the results wanted by the funder were accomplished by the grantee). Usually, evaluations are conducted to look at whether a program achieved the outcomes it set out to achieve (reduction in teen pregnancy, increase in civic participation, etc.) Rarely do evaluators look at whether the processes used to achieve the outcome were themselves the most effective. And very rarely does evaluation look at other equally critical organizational processes.

Benchmarking looks at improving existing processes within an organization by measuring performance and searching out best practices that, if implemented, would improve that performance. Benchmarking starts with the assumption that your organization already knows the results it wants, and focuses on improving the processes used to deliver those results.

You can see that both evaluation and benchmarking are important processes for an organization. One of the key intersections is in the measurement of outcomes. Which brings us to this newsletter's f-r-e-e tool...

Tool: Common outcomes and performance measures (Click here to view)
Included with Benchmarking for Nonprofits, this is a set of common indicators for various nonprofit attributes listed horizontally--that is, across program types--to help organizations figure out how to measure and compare performance even when programs are very different.

For more experienced nonprofit leaders and program managers--who intuitively "get" benchmarking and have been doing it informally their entire careers--this single appendix is a creative shot in the arm. It lists typical outcomes (eg., improve skills, change behavior, reduce incidence of an undesirable activity, create jobs, increase board engagement--in all there are 22 typical outcomes). It then suggests measurements related to them (eg. improve skills could be measured by graduation rate, people trained, dropout rate, placement rate, pre-post increase in test scores, etc.). Finally, the chart suggests the quantifiable form of measurement for that particular indicator.

I know, sounds complicated. We've reproduced three of the outcomes below to give an example:

Outcome Associated Impact Area Associated Measures Measure Type
Improve Access to Services Program Reported number of community agencies that witness an increase in new participants who came to their agency as a result of a call to the information and referral hotline number
Calls to hotline number
Increase in calls to hotline percent
Participants reporting services were affordable percent
Participants who could afford services who couldn’t before percent
Participants reporting services were useful percent
Successful completion of sessions percent
Improve Donor Sustainability Financial Foundation grants number
Multi-year grants (foundation) number
Multi-year grants (government) number
Multi-year contracts number
New foundation grants number
New donors number
Revenue per donor dollars
Donor retention percent
Revenue per retained donor dollars
Revenue per new donor dollars
Board members as donors percent
Frequency of reporting to donors/foundation (times per year) number
Quality of reporting 1–10 (board survey) number
Quality of reporting 1–10 (donor/foundation survey) number
Community Engagement Management Articles/Press coverage number
Site traffic (unique visitors) number
Site traffic (return visitors) number
Growth in site traffic
percent
Calls/Inquiries
number
Volunteers
number
Growth in calls/inquiries percent

© 2004 Jason Saul

You can see that with this chart, an arts organization could actually begin to compare itself in one of many indicators with a homeless shelter. For example, both might want to share their approaches to community engagement. Despite huge differences in their missions, these organizations could learn from each other by studying the processes that resulted in particular outcomes.

A few more benchmarking resources
There are some other great resources out there besides this book. I'd like to call your attention to two of them.

First, Jason Saul, the author of Benchmarking for Nonprofits, is boardchair and founder of The Center for What Works, which helps nonprofits understand benchmarking. He is also CEO of B2P, a business that supplies easy-to-use software applications that nonprofit organizations improve their impact and accountability. B2P's benchmarking software is now in use by several foundations.

Second, here are some associations devoted to benchmarking:

American Productivity and Quality Center (APQC). This organization offers offers access to studies, but you do have to pay a fee.

Benchmarking Centre offers guidance on running a successful benchmarking project, has a discussion forum on benchmarking and offers seminars and research services, and has an online bookstore. You have to register to participate, but registration is free.

Best regards,

Vince Hyman
Publishing Director
Fieldstone Alliance

April 26, 2005

 

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