Measuring Performance: Linking Money To Mission


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In the mission-oriented nonprofit world, it can sometimes be difficult to get your team to focus on the relationship between money coming in and the organization’s ability to effectively deliver programs and services to its constituents. While top-line measures are exciting they can also be distracting and counterproductive if they are not properly accounted for and effectively presented. Peeling back the covers on your finance organization can help your team, executive director, staff and board members truly understand your financial situation and see how finances directly impact programs. Financial operations reviews deliver insight. Reviews help organizations move beyond budgets and expenses into staffing, policies and processes. You will learn…
• The 5 “must ask” questions
• The 3 reports you should study
• The secrets of financial management
• How to determine financial viability of new programs and link money with mission

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Measuring Performance: Linking Money To Mission

  1. 1. Measuring Performance: Linking Money to Mission Rebeka Mazzone, CPA Accounting Management Solutions, Inc. June 23, 2010 Use Twitter Hashtag #npweb Special Thanks To Our Sponsors
  2. 2. Helping ordinary people raise extraordinary amounts for nonprofits is all we do, and we love it. A Proud Sponsor of
  3. 3. Measuring Performance: Linking Money to Mission Rebeka Mazzone Accounting Management Solutions, Inc. June 30, 2010
  4. 4. About Us •  For more than a decade, Accounting Management Solutions, (AMS) has provided accounting support and financial management leadership at the consulting CFO, controller and accounting manager level to dynamic companies throughout the Northeast.
  5. 5. Objectives •  Discuss why scorecards are important •  Learn how scorecards are used as a form of measure •  Understand the differences between scorecards, KPIs, dashboards, benchmarks •  Getting started
  6. 6. Characteristics of Effective Financial Reporting •  No surprises for management – paralyzed by indecision •  Link to strategic plan •  Plan linked to budget •  Measures: Key Performance Indicators (KPI) based on strategy •  Easy to understand •  Meaningful information
  7. 7. What do reports tell us? •  Strategic plan – Where do we want to go? •  Budget – How do we plan to get there? •  Statement of Activity – How did we do? •  Statement of Position – Where are we now? •  Statement of Cash Flow – How did we use our money? •  Cash Flow Projection – Do we have enough to get us there?
  8. 8. Understanding the Financial Condition •  Reports should be designed for the audience. •  There are 4 levels of reporting: 1.  Transaction Detail – Finance Department/Department Managers 2.  Detailed Financial – Finance Department/Department Managers 3.  Management Financial Summary – Exec. Director/Finance Committee 4.  Board Financial Summary – Full Board Too much detail prevents users from focusing on the risks and opportunities.
  9. 9. Benefits of Scorecards •  Power to capture relationship between financial and non-financial data •  Ability to predict and manage future outcomes •  Effectively present financial data to non-financial people •  Drive strategic objectives throughout organization down to individuals •  Align business activities
  10. 10. Example: Revenue and Expense
  11. 11. Example: Revenue and Expense Per Student
  12. 12. Example: Revenue and Expense Per Student
  13. 13. Example: Revenue and Expense Per Student
  14. 14. EXAMPLE: Organizational Scorecard Key Performance Measures: Non Programs
  15. 15. Going to School on Performance •  Balanced Scorecards = Grade Point Average •  Dashboards = Report card •  KPIs = Class grade •  Benchmarks = Class rank
  16. 16. Inputs & Outcomes
  17. 17. Getting Started GETTING STARTED
  18. 18. Create a Cross-functional Team •  Project Champion •  Clear leadership to drive vision •  Core Leadership Group •  Assess core processes and programs •  Limit team size •  Team orientation •  Requires long term commitment
  19. 19. Understand Your Audience •  Who will be using the scorecards? •  What impact do scorecards have on resource allocation and program decisions? •  What is the key information they need to understand to make strategic decisions? Achieving strategic goals is the priority
  20. 20. Create Buy-in and Ownership •  Top leadership support •  Cross functional / representative teams •  Keep an open dialogue during planning stage •  Keep the process transparent
  21. 21. Enterprise Performance Management System (EPMS) VISION / Board & Executive MISSION Director Organizational Scorecard Executive Director & Departments Departmental Scorecards Departments & Individuals 360 Review
  22. 22. Starting Point 1.  Examine mission and strategic plan 2.  Set goals tied to your mission •  Short-term •  Long-term 3.  Remember: Change takes time
  23. 23. What is the Goal? •  Organization-wide scorecard •  Used to drive strategic plan objectives •  Departmental scorecards •  Informed by Organization-wide scorecard •  Is generally division-specific (e.g. responsibilities and measures are unique to each department) •  Individual Performance Reviews •  Align individual performance to organizational goals “Measures start with a top down approach, but ultimately some will rise up from individual plans”
  24. 24. Strategic Goals & Objectives
  25. 25. Deciding What to Measure •  Mission and program effectiveness •  Anticipated growth •  Benchmarking / peer comparison •  Major financial statement line items and ratios •  Consider the relationship between money and people
  26. 26. Deciding What to Measure: External Drivers •  Legal & compliance •  Facilities •  Public perception •  Remaining life •  Going green/sustainability •  Capacity •  Safety •  Square foot per student •  IT •  Consumer satisfaction •  Competition •  Cost per square foot (maintenance, utilities)
  27. 27. Deciding What to Measure: Four Pillars •  Financial measures – create •  Operational Capacity value •  % time building / •  Profitability by program classrooms occupied •  Ability to meet obligations •  Consumer satisfaction •  Budget success (Individuals/donors/ •  Human Capital grantors) •  Staff/Consumer Ratio •  Retention •  Staff cost per individual •  Completion Rates served •  Cost of success rates (link •  Quality of programs/ $ to outcomes) education •  Diversity ratios
  28. 28. List and Prioritize – Critical HIGH Value to Institution & Mission No Value to Mission or Customers LOW Value to HIGH Customers
  29. 29. Strategic Objectives: Example Mission: To assist low-income adults in realizing their full potential through literacy, employment, advocacy and community involvement. Strategic Objectives: •  Enhance the delivery of services by building on the diversity of student strengths. •  Expand the scope and array of our educational services. •  Expand the base of our advocacy in the state and community for adult basic education.
  30. 30. Strategic Drivers: Example •  Increase service area by 10% over the next 3 years •  Enhance the Organization's admissions and marketing efforts •  Expand the “family service” continuum to better support parents. •  Establish operating reserves •  Determine the effectiveness of our programs and services through evaluations and outcomes studies.
  31. 31. Organizational Scorecard Key Performance Measures: Programs Individual Programs Quantity Quality
  32. 32. Organizational Scorecard Goals: linked to Four budget Pillars Key Performance Measures: Non Programs Change in Revenue per Student Change in Expense per Student Operating Income (loss) by department Avg. # Students per FTE
  33. 33. 360 Performance Review 360 Leadership Assessment
  34. 34. What should measures look like?
  35. 35. Key Performance Indicators (KPIs)
  36. 36. Scorecard Example Exceed Goal Moderate Goal Risk
  37. 37. Key Performance Indicators •  KPIs can be both quantitative and qualitative •  Cannot simply be the money •  Programmatic outcomes are the mission •  Finance is the backbone •  Need to trend over time
  38. 38. Key Performance Indicators (cont’d) •  KPI Review Cycle •  Annual scorecard •  Quarterly scorecard •  K.I.S.S. •  Simple to operate •  Simple to understand •  Simple call to action
  39. 39. Review Data For… •  Reliability •  Accessibility / availability •  Accuracy •  Timeliness – past is used to set future goals •  Communicability – Does your audience understand it?
  40. 40. Challenges •  Year One: •  Benchmark year •  Lots of information not available •  Goal – prioritize and focus •  Year Two: •  Measurement tools in place •  Review measures •  Ongoing: Reassessment Some measures might not be available each year
  41. 41. Keys to Success •  A strategic plan and leadership support •  Clearly defined goals & organizational priorities •  Transparency across the organization
  42. 42. Benefits Do You See Any Benefits? •  Easier to understand – 1 hour Board meeting •  People outside of finance can now understand •  Ties money to outcomes to measure effectiveness •  Ability to monitor outcomes over time •  Monitor opportunities for improvement •  Better ability to communicate value
  43. 43. Cautions! •  Visions must be aligned •  Independent of any one department •  Sustained effort •  Start small •  Project manager vs. project champion •  Consistent measures/valid data
  44. 44. Next Steps •  Measure key executive performance •  Each department/division to implement •  Share this with staff; help drive goals and measures •  Data warehouse – move from Excel to database
  45. 45. For More Information •  Rebeka J. Mazzone CPA, Director Rhode Island Region Accounting Management Solutions, Inc. To keep current on this and other topics, register for our free newsletter at:
  46. 46. Find the listings for our current season of webinars and register at Chris Dumas 707-812-1234 Special Thanks To Our Sponsors