- Are you doing the right good? (Are you moving the needle toward your mission?)
- Are you doing the most good possible with the resources used?
- Is the good you are doing sustainable? (Are you making a difference that will last?)
Are we there yet? Lagging Indicators
But how do you know? What does an organization measure to determine if you are meeting these criteria? Drucker once again: “You can’t control what you can’t measure.” Measurement is essential to effective performance but evaluating effectiveness can be tricky for nonprofits because they often are tackling complex, intractable problems that may take years, even generations, to solve.It is possible to measure how many of today’s first graders in a school district graduate from high school – but that measurement is 12 years down the road. And it is a “lagging indicator”, i.e., it represents what has already happened. At that point, the success rate for that cohort of students cannot be changed. Effectiveness, like quality, can’t be added in after the fact; it grows out of what you do on the daily journey toward your ultimate impact. Therefore, a critical component of nonprofit effectiveness is identifying and tracking “leading indicators” to serve as mile markers to tell you if you are headed in the right direction.
Predicting the Future: Leading Indicators
Leading indicators are key inputs with high correlation to your long term outcome(s). They measure the “right things” in the Drucker quote that begins this post; they are the things we do that lead us to achieving our mission. We use leading indicators in every part of our lives, e.g., at home, oven temperature or the time we set the microwave for is a key input for how our dinner turns out. For a nonprofit seeking to increase the number of entering first graders who graduate from high school, a leading indicator might be tracking absenteeism rates against benchmarks.In order for leading indicators to drive effectiveness, nonprofits must be (1) intentional in setting objectives for each key input, (2) disciplined in evaluating whether those objectives are being met, and (3) rigorous in implementing mid-course corrections when they are not.Different types of nonprofits will have content specific leading indicators. For foundational key inputs that apply to all mission-driven organizations, see Tara Levy’s recent blog post on our effectiveness framework tool.
Beyond Organizational Effectiveness
Lastly, I will leave you with a thought from a paper called “Nonprofit Effectiveness: Practical Implications of Research on an Elusive Topic”. In it authors Robert Herman and David Renz observe, “Nonprofit organizations increasingly operate as part of networks of service delivery. Therefore, network effectiveness is becoming as important to study as organizational effectiveness.” This is part of one of the great shifts of our time as the focus of effectiveness moves from the silo to the system.