Monitoring and benchmarking performance to improve impact
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Successful organizations are results oriented. They exist to accomplish something. We started the list of the “Components of Extraordinary Governance” with “mission focused actions and impacts.” Great organizations identify their desired end results and then focus all efforts on achieving those results. The board is where this process starts.
Being mission focused sounds good on paper, but how do we know whether we are accomplishing that mission, whether we are really having the desired positive impact on our community? We have to monitor, in some way, what is being accomplished. This component speaks to that need. We call it “performance benchmarking and monitoring for both impacts and finances.
As this component suggests, we have to monitor, or track, both impacts and finances. Organizations need to define the expected impacts in ways that allow them to determine what progress is being made toward making those impacts reality. Both qualitative and quantitative monitoring are important and will generally have varying levels of importance based on the particular impact.
Monitoring finances is, of course, much more quantitative. Good records and tracking systems are important. For example, having the ability to track personnel costs by project enables better impact and management decisions. If we know that personnel costs for a particular project are higher than most other projects, we can then analyze whether the desired outcome does or does not justify the higher cost. Likewise, we can compare costs between various desired impacts to determine whether dollars will be better spent on another effort.
Another important part of monitoring finances is for the board and management to understand how finances typically vary during different seasons of the year and seasons of the organization’s life. These seasonal trends will vary by type of organization as well.
Boards and management need to work together to determine how precise these measurements need to be. Achieving higher precision generally requires a larger investment which may or may not be warranted for the size and scope of a particular project or organization.
Benchmarking is a process of comparing our own organization’s operations and processes with those of other organizations in similar businesses. This helps us to analyze the efficiency and effectiveness of our efforts. While there are occasions where the higher cost of our way of doing things may be justified, we will never understand how we stack up until we do the comparison. Benchmarking will often begin the process of identifying methods of operation that are more effective and/or more cost-efficient. Boards and management alike must keep in mind that the purpose of benchmarking isn’t just to know how we compare, but ultimately to assist the organization to accomplish more and/or better results for the time and money invested.
Read more about the Components of Extraordinary Governance in this recent article, and this one from 2014, on the Michigan State University Extension news website.
