There is a non-profit organization to serve some need or group of people. It is good for an organization to have ways to measure its health and effectiveness in order to improve its stated purpose and mission.
The step that comes from measurement is the mission statement. This is the standard by which measurements can be taken. Without a clearly stated goal or mission, it is almost impossible to answer the question, “How are we doing?”
The first measure, then, is to see how well the organization is communicating its objective or mission. There are two places to look to find out how well communication is working. The first is within the organization itself. How well do people within the organization understand the purpose they are serving? This is especially important when it comes to people whose tasks are not directly related to fulfilling that mission. For example, how well does the receptionist understand the purpose of the organization? If everyone, at all levels, understands the mission, there is a greater chance that the message will be communicated to those outside the organization.
The second measure is how well an organization’s goal or mission is communicated outside of the organization. Publications, outreach activities, and media events are examples of the kinds of activities that an organization must undertake to communicate its purpose. Measuring the effectiveness of outreach can be done directly, through surveys, and indirectly through informal interviews and interrogations of people who come into contact with the organization.
The third measure of health is the financial condition of the organization. Is the income coming in to cover the expenses? Are income increasing? Are there adequate internal controls to ensure that the financial situation is accurately reported? These are important considerations, because a lot of good work can be interrupted if money problems are not handled properly. There may be a greater disconnect between time served and money coming in, because labor is not necessarily tied to direct increase in income, as is the case with a for-profit organization.
The fourth measure is efficiency. Can the organization improve its production spending less money? Overall revenue may increase, but efficiency must also increase so that each incremental dollar produces more output than before. If efficiency measures are not taken, the likely scenario is that more money will result in less production until the organization collapses under its own administrative weight.
The fifth measure of health in a nonprofit organization is growth itself. Are new members entering the organization? Is the revenue coming into the organization increasing? Are more people or needs served? Gross revenue growth is an important indicator of the health and growth of an organization. When an organization stops growing, it begins to die, similar to anything else living and changing.