Indicators of organizational performance are a performance management tool.
They help you to gather information about something that
- Is not measured or
- Cannot be measured directly.
The information can be used to
- Identify past and current performance problems
- Identify future performance issues
- Control a performance improvement program
- Verify whether a performance improvement program has been successful
- Inform stakeholders about current performance
- Support internal decision-making processes (e.g. deciding which organizational capacities have to improved)
- Support external decision-making processes (e.g. deciding whether to fund a grant proposal).
I distinguish between seven categories of performance indicators that focus on different aspects of performance.
Graphic 1: Focus points of performance indicators
Finding and selecting suitable performance indicators
Step 1: Choosing participants in the selection process
Among the participants could be
- Staff members who are directly responsible for performance (e.g. head of a department, project manager, IT manager).
- Senior management who use performance indicators to manage the organization.
- External stakeholders who use performance indicators for decision-making purposes (e.g. donors).
Step 2: Defining what the indicators should measure
- Process quality
- Management quality
Step 3: Generating ideas of possible indicators
Ideas of possible indicators could be found in
- Publications about Performance Management available online
- Assessment tools that focus on performance
- Assessment tools that analyze performance as part of an organizational capacity assessment.
Step 4: Selecting the most suitable indicators
Suitable performance indicators have to meet a number of requirements.
They should be
- Relevant specifically to what you want to measure or judge.
- Clearly defined.
- Accepted as being relevant.
- Based on reliable, unbiased and verifiable data.
- Based on data that can be collected at reasonable cost.
Suitable indicators will make it easier for you to convince others that a specific performance level has really been achieved or will be achieved in the future.
Examples of performance indicators
The performance indicators mentioned below are meant to give you ideas of indicators that you could follow.
Most small and mid-sized NGOs that use indicators will only follow a few indicators that are
- Based on reliable, unbiased and verifiable data
- Do not cause unreasonable costs
These will be indicators that measure what the organization and key external stakeholders consider as being essential to manage and judge performance.
Indicators of process quality
- The organization has developed a strategic plan which includes program goals as well as goals for administrative functions.
- The organization has defined performance indicators for key processes, products and services. The indicators are monitored and discussed regularly.
- A capacity development plan is in place which is regularly updated.
- A reward system for good performance is in place. Individual performance is judged based on agreed performance targets.
- The organization communicates frequently with donors, customers and beneficiaries. Their feedback is analyzed and used to improve internal processes.
Additional indicators can be found in assessment tools.
Indicators of management quality
- Management considers good performance a key issue.
- Managers monitor performance in their area of responsibility.
- Staff members have the necessary knowledge and skills to analyze underperformance and find solutions.
- Staff members are aware of goals and objectives on organizational level. They know how they can contribute to these goals and objectives
- Members of staff are open to change and innovation.
Indicators of supportive conditions
- The organization can recruit qualified staff according to its needs.
- The organization has access to free or affordable information that may help to improve performance (e.g. through the internet, public libraries).
- The political and social environment is stable. Sudden changes are an exception.
- Time lost due to supply problems (e.g. raw materials).
- Delivery delays due to infrastructure problems.
Input focused indicators
- Amount of energy consumed (e.g. by a production process)
- Costs per client served
- % of employees working for programs
- Number of hours needed to finish the monthly financial report
- Number of hours spent per month to update the organizational website
Output focused indicators
- Number of new homes built for the poor (e.g. in a suburb)
- Number of households connected to the electricity grid (e.g. in a rural community)
- Number of ecological toilets installed (e.g. in communities where an NGO works)
- Number of people that received advice through the helpline
- Number of students that learned basic computer skills.
Outcome focused indicators
- Number of jobs offered to attendees of training workshops run by a NGO.
- Number of families with access to clean water (e.g. in a village).
- % of people who report that their health has improved (e.g. in a village).
- % of smokers that stopped smoking.
- Change in employee turnover rate (after organizational changes were introduced)
Impact focused indicators
- Unemployment rate.
- Literacy rate.
- Infant mortality rate.
- Number of people dying due to smoking.
- Reputation of organization as an employer.
Sources / Guide to further reading (available online)
USAID, Selecting performance indicators (2nd edition), at: http://www.usaid.gov/policy/evalweb/documents/TIPS-SelectingPerformanceIndicators.pdf
- The publication offers practical advice how to select the best performance indicators for your organization.
J.Saul, Common Outcomes and Performance Measures, at: http://www.fieldstonealliance.org/client/book_excerpts/069431_perf_meas.cfm
- The short article provides a list of outcomes that organizations will strive for and numerous performance indicators that could be used.
The Urban Institute, What works, Building a Common Outcome Framework to Measure Nonprofit Performance, at: http://www.urban.org/publications/411404.html
- The report wants to help NGOs in developing their outcome measurement programs. It includes also a number of performance indicators related to outcomes.
F.J.Reh, Key Performance Indicators (KPI), at: http://management.about.com/cs/generalmanagement/a/keyperfindic.htm
- The webpage introduces the concept of key performance indicators
API, What is a Key Performance Indicator?, at: http://www.ap-institute.com/Key%20Performance%20Indicators.html
- The website of the Advanced Performance Institute offers articles, reports and white papers about topics linked to key performance indicators
P.Lichiello, B.J.Turnock, Guidebook for performance measurement, at: http://www.turningpointprogram.org/Pages/pdfs/perform_manage/pmc_guide.pdf
- The guidebook covers performance indicators as one of a number of aspects of a performance measurement process.