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PA 545 Spring 2008

THE SUCCESSFUL NONPROFIT

ORGANIZATION .

Evaluation and Assessment.

http://www.parkonline.org

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Readings

This week we reflect on the organization

as a whole, focusing our lens on why it

exists, what it does, how well it does it,

and how well it is received and supported

by stakeholders in the marketplace in

which it operates.

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Readings

The main reading related to our theme is"Evaluating the Effectiveness ofNonprofitOrganizations"by Vic Murray, chapter 14, inHerman. This, as you will note in the reading, is

an extensive rewrite of the chapter in the previousedition. It begins with a review of basic issuesrelated to trying to determine organizationaleffectiveness (dubbed "OrganizationalEffectiveness Evaluation", OEE). The essay goes

over practical reasons to carry out evaluationsand, importantly, the inevitable political nature ofthat process.

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Readings

Important new sections describe current

studies (pp 353-57) that have been going on

the past decade and specific approaches that

are gaining widespread practice in the U.S.,Canada and the U.K. (pp 357-62). You

should become aware of some of the principal

authors and resources cited in the text and

bibliography (pp 368-70).

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Reading

We have already introduced ourselves to the

"logic model" approach being advocated by

United Way and many other funders for

"outcomes" and "outcomes measurement". This week we have added the "balanced

scorecard" approach. You may note that

it shares a number of simularities to models

proposed at the beginning of this class. (A web

resource is listed below.)

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Reading

In the Murray article, and in the web resourcebelow, you see the 12 characteristics proposed byCCAF-FCVI. (CCAf-FCVI is the acronym for anearlier "Canadian Comprehensive Auditing

Foundation", or in its bilingual version, "La fondationcanadienne pour la verification integree.")

You might observe that they could easily beregrouped around the balanced scorecardframework (p 360). I would note that they can just

as well be regrouped around the successfulnonprofit model proposed in this class.

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Reading

"Benchmarking", for all of the lip service it

receives--including the faulty use of the term to

mean almost any kind of use of processes used

by some nonprofits that seem to be well run--hasnot turned out to be very practical (360-61).

Charity rating services are important to know

about, especially if you are involved in

fundraising (361-62; see web references below).

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Reading

A similar but slightly differently focus for "framing" anorganizational analysis is described in the article on"Executive Leadership" by Robert Herman and DickHeimovics, chapter 7 in Herman, pp 154-56, 163-67.

That analysis follow the "framing" methodology ofBolman and Deal, looking at the organization from theangles of (a) "structure", (b) "human resources", (c)"politics", and (d) the articulation of shared meaning inthe organization through "symbols". (The text, Modern

Approaches to Understanding and ManagingOrganizations, 1984 and later editions, by Lee Bolmanand Terrence Deal, is used in some Park HSPAclasses.)

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Reading

Additional background on some of the

issues connected with conducting program

evaluations can be seen in the article on

"Outcome Assessment and Program

Evaluation" by John Clayton Thomas,

chapter 16, in Herman.

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The Balanced Scorecard

"Many companies already have performancemeasurement systems that incorporatefinancial and non-financial measures. Whatis new about a call for a 'balanced set of

measures?

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The Balanced Scorecard

"The Balanced Scorecard emphasizes that financialand non-financial measures must be part of theinformation system for employees at all levels of theorganization. Front-line employees must understand

the financial consequences of their decisions andactions; senior executives must understand thedrivers of long-term financial success. Theobjectives and the measures for the BalancedScorecard are more than just a somewhat ad hoc

collection and financial and non-financialperformance measures; they are derived from a top-down process driven by the mission and strategy ofthe business unit.

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The Balanced Scorecard

The Balanced Scorecard should translate a

business unit's mission and strategy into

tangible objectives and measures. The

measures represent a balance betweenexternal measures for shareholders and

customers, and internal measures of critical

business processes, innovation, and

learning and growth.

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The Balanced Scorecard

"The measures are balanced between the outcomemeasures--the results from past efforts--and themeasures that drive future performance. And thescorecard is balanced between objective, easily

quantified outcome measures and subjective,somewhat judgmental, performance drivers of theoutcome measures." Quoted from The BalancedScorecard: Translating Strategy into Action byRobert S. Kaplan and David P. Norton (Boston, MA:

Harvard Business School Press, 1996), pp. 8, 10.(Emphasis added.)

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THE NONPROFIT ORGANIZATION AS AN ORGANIC

WHOLE FUNCTIONING WITH MULTIPLE SUB-

SYSTEMS Let's start with an analogy. The human person is an

organic whole, functioning with multiple sub-systems:e.g. nervous, circulatory, sensitory, locomotive withskeletal and muscular, respiratory, digestive, endocrinal,

urogenital and reproductive. The human person interactswith its environment. Each human being developsdynamically and has his or her own story. A humanperson starts with conception and birth, and may livewhat is considered a long time, e.g. a 100 years, or may

die at any time. In either case, human life has a definiteend.

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The nonprofit organization

The nonprofit organization is a legal,

economic and social entity, functioning

with multiple sub-systems: e.g.,

governance, planning, marketing, servicedelivery, resource development,

management of people, information and

finances, and relationships with otherorganizations.

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The nonprofit organization

The nonprofit organization interacts with its

environment. The organization develops

dynamically, in discernible patterns or

stages. Each organization has its ownstory. A corporation starts with an idea and

then legal incorporation. It may cease at

any time but also may last several decadesor centuries.

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Nonprofit Management System

Model

In the "Nonprofit Management System

Model," based roughly on the Malcolm

Baldridge Awards model of a high quality

organization, leaders (board, CEO andsenior mangers) are the drivers. But they

are in a feedback loop; they must be

listening attentively to the customers andcommunity the organization serves.

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Nonprofit Management System

Model

The system needs reources orinputs: the

human capital of people with energy and

skills; technical know-how; capital materials

of supplies, equipment and facilities; andfinancial resources. The management

system processes transform inputs into

outputs and outcomes.

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The outputs and outcomes

The outputs and outcomes are:

(a) the services the organization offers, measured

by quantity and quality;

(b) the satisfaction of its customers, measured forconsumers, contributors and constituents; and

(c) changes made in the lives of persons in the

community of service and the community itself

(measured by outcome indicators).

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The organization is a whole

The organization is a whole. It operates

as whole, though it is made up on many

parts. Each part (with varying amounts of

input and capital resources, and withvarying efficiencies of the transforming

processes) contributes to the whole. The

whole depends on each of the contributingparts for its healthy or successful

functioning.

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strategic planning process

A good strategic planning processattends to each of these elements, andfactors in a continuous evaluation of the

organization's interaction with itsenvironment and with its markets. Thephases in strategic planning are usuallylabeled environmental scan,

organizational scan (internal capacity) andmarket research, with identification of themost critical issues.

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strategic planning process

The resulting collaborative planning bystakeholder and constituents produces mission,vision and values, overall goals and strategiesto meet the critical issues, and then goals andobjectives, with a solid budget based onadequate resources. It is one important way thatthe organization as a whole functions as awhole, assessing and directing its many parts.

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is it impossible to evaluate nonprofit

organizations?

Some critics of nonprofits have argued

that it is impossible to evaluate nonprofit

organizations because nonprofit

organizations have no bottom line, whichthese critics believe is the main measure

of the success, health or value of a for-

profit organization.

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is it impossible to evaluate nonprofit

organizations?

This is a faulty assumption based on the

fact that nonprofits do not exist primarily to

produce a profit for shareholders or

trustees, not to mention that bottom lineprofits are not the only measure of

success, health or value of the for-profit

either. We suggest that nonprofits areable to be evaluated.

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FOUR MAJOR DIMENSIONS

We propose that a person can know if anonprofit organization is healthy oroperating successfully by examining it

from four different angles in order tomeasure four dimensionsor critical variables in its functioning. Thefour dimensions described before, we

propose, match or are similar toother analyses, although others expressthem in somewhat different terms.

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assessment of the organization's basic purpose

and clarity of direction

A clear definition of purpose and mission;

An articulation of its vision and the values

it will not compromise;

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the delivery of services that make a difference in the

lives of people in a community

(2) The overall reason all nonprofits exist

is to provide some service, needed by a

community, which will bring a higher

quality of life to that community.Remember our basic definition: a nonprofit

is a voluntary association, an incorporated

organization, doing business in the publicinterest for the common good.

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the delivery of services that make a difference

in the lives of people in a community

So a second very critical dimension of the

success and health of a nonprofit

organization is the delivery of services

that make a difference in the lives ofpeople in a community.

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These services can be evaluated and measured in at least

three ways.

One is in the outputs, the volume (quantity) and conformityto established standards (quality) of the service asperformed with the service recipients.

Another is the satisfaction of the customers benefiting

from the the service. The nonprofit has a triplecustomer: the consumerof the service who is the direct beneficiary;

the contributorof financial and other resources who is thesecond beneficiary of the services; and

the constituents, the other stakeholders who are indirectbeneficiaries of the changes and better quality of life nowavailable in the community.

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These services can be evaluated and measured in

at least three ways.

Another is the outcomes, the difference that the

service makes in the lives of the recipients. That

might be a change in knowledge, skills, values,

or in the condition or status of the recipient.Many times the outcomes with individuals

coalesce to have an impact on the community.

This is the output, outcome, impact,

achievement dimension of the organization. Itis the "customer perspective" of the balanced

scorecard.

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reliable, sustainable basis

(3) While nonprofits do not exist primarily

to make a profit that enriches the owners

or stockholders, nonprofits cannot provide

the services that make a difference in thelife of the community on a reliable,

sustainable basis, unless they

consistently have an excess of revenueover expenses, indeed a financial bottom

line.

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reliable, sustainable basis

Also important to a nonprofit's success or healthare the size of the fund balance and the reserveor endowment funds. Without anoperating surplus and reserve, the nonprofitcannot keep up to date with resource renewal,cannot make investments in new or enhancedservices, cannot withstand regular downturns inthe economy, or stand firm through any kind of

program, personnel or financial crisis.

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diverse mix of funding sources

To be sustainable and not overly reliant on

any single source of funding, nonprofits

are expected to have a diverse mix of

funding sources.

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diverse mix of funding sources

Because they are in part sustained by

funding from "public sources" (considered

by the IRS to include individual

contributions, corporate and foundationgrants, government contracts), there is a

very high expectancy fortransparency

and accountability in the activity of thenonprofit organization.

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diverse mix of funding sources

Taken together, measures in these areas

represent the accountability, financial

andresource development, efficiency,

means acquisition dimension of theorganization. It is the "financial,

accountability perspective" of the

balanced scorecard.

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The human dimension is

paramount (4) The nonprofit organization consists mostly ofpeople.

The human dimension is paramount. One of the mostimportant measures of the strength of the organization isthe quality of its personnel.

The "constituency" of the nonprofit exists at variouslevels: the board of directors, the executive and seniorstaff, employees, volunteers, contributors, vendors,influential persons who support the organization, andothers who may benefit indirectly from the organization's

work without being an immediate recipient of services.

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human resource, constituent, capacity

building and politicaldimension

Together, they represent the political strength

of the organization. They are the carriers of its

reputation and image to the general public.

Any evaluation needs to take into considerationthe strength, or weakness, of this human

resource, constituent, capacity building

and politicaldimension of the organization. It

is the "learning and growth perspective" of thebalanced scorecard approach.

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CONCLUSION

In this approach to determining the relative

"success" or "health" of a nonprofit

organization, we are taking the

position that a helpful, relativelyaccurate, practical evaluation can be

done. It cannot be done by examining or

invoking a single measure or feature.

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CONCLUSION

It can be done, for practical and realistic

purposes, by examining a balanced set of

measures and features. We

have proposed these four dimensions. Itis also important that these be viewed not

only at a single moment, but as trends

over a period of time.

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CONCLUSION

In summary, this approach to evaluation of thesuccess, health or values of a nonprofitorganization includes assessing and gathering aset of measures that encompass:

the purpose and plans of the organization and thedegree to which they have been carried out andachieved;

the resources and means that are needed andthe degree to which they have been acquired andaccounted for;

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CONCLUSION

the organization's capacity for future activity,measured by the quantity and quality of bothits internal human resources and its external

supporters; and the quantity and quality of services deliveredthat have not only satisfied customers buthave changed lives and made a difference

in the community the organization serves.

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CONCLUSION

By using this balance of organizationaldimensions, it can be shown that theorganization is effective--it does the right things.

It is efficient--it does things the right way.

It is ethical--its standards of behavior have beendetermined and internalized by organizationmembers.

It is accountable and seeks to be beyond

reproach in the service of the public interest.

h d f f k i h

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the need for a framework with

multiple dimensions

So, you have become aware of multiple

approaches to evaluating the healthy or

successful nonprofit organization. No single

method is adequate to the task alone. This isnot a reason to give up.

Let's take one more look at the lack of one

single criterion that adequately defines the

successful operation of a nonprofit and the needfor a framework withmultiple dimensions.

th d f f k ith

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the need for a framework with

multiple dimensions

(a) Some models have approached

organizational evaluation from the basis of

answering the question: "has the

organization set its goals and achievedthem?" There is value in that, but it is not

enough.

th d f f k ith

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the need for a framework with

multiple dimensions

(b) Another approach has been to evaluate

the resources and means used to achieve

the organization's goals, focusing more on

its internal capacity for continuedachievements in the future. Capacity is

critical, but only part of the picture.

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th d f f k ith

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the need for a framework with

multiple dimensions

(d) Still others cite the the political

dimension of the organization. These

various stakeholder hold different views

and values. There is a politicalpower factor in the way limited resources

are allocated and external challenges met.

th d f f k ith

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the need for a framework with

multiple dimensions

My take and contribution to this discussion hasbeen to incorporate all four of these dimensionsinto the models proposed for this course. Thetwo models shared in the first week of this

course on the Management of NonprofitOrganizations were the two graphics, titled"Nonprofit Management System Model" and"The Successful Nonprofit: More than the

'Bottom Line'."

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Discussions:Topic #2

Topic #2 - The importances of perspective(s)You havebeen dealing with a number of different approaches toevaluating nonprofit organizations, each based oncertain assumptions, and usually expressed in terms of aprocess model. You have seen logic models, socialconstructionist models, program evaluation, balancecscorecard, critical attributes and charity rating servicesmodels and standards. Select and give a critique ofanythree approches. As always, feel free to question

and comment on the postings of others, to benefit fromdiscussion and dialogue.

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Discussions:Topic #1

Topic #1 - Determining the value ofevaluationYou can see from the readings andresources that the matter of evaluating nonprofitorganizations is a hotly contested topic. If there

is agreement on no single measure defining thesuccess of the nonprofit, there is not agreementon how many measures are necessary todeclare success. Nor is there academic

agreement on the rational validity of the process,given the inevitable political aspect of theprocess.

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Discussions:Topic #1

So is evaluation useful? Is it completelysubjective, what any organization considers it tobe? Or can it be relatively objective, so thatboard, staff, funders and supporters might agree

that the organization is functioning well, ishealthy, or not? How necessary, or how howuseful is it, in either case? What do you think?

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WEB SITES

The idea of the "balanced scorecard" grew with the

"Continuous Quality Improvement" (aka "Total

Quality", etc) of the 80s and 90s. The idea and

practice got a big boost from a Harvard Business

Reviewseries of articles (92, 93, 96) by RobertKaplan and David Norton. In 1996 they published

The Balanced Scorecard: Translating Strategy

into Action (Boston, MA: Harvard Business School

Press) which was pick up on widely.

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WEB SITES

The website noted in Murray's article, http://

www.balancedscorecard.org is a venture ofThe

Balanced Scorecard Institute, and is not

connected to Kaplan and Norton. They draw oncommon concepts and develops them into a

consulting practice, aimed at public

organizations, government and nonprofits. It is

well worth your time to read "What is BSC?","Basic Concepts", "FAQs" and "Background

Information" at that site.

http://www.balancedscorecard.org/http://www.balancedscorecard.org/http://www.balancedscorecard.org/http://www.balancedscorecard.org/

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WEB SITES

As mentioned above, if you are in fundraising, youshould be aware of the charity rating services:

Especially, the Better Business Bureau's program, "WiseGiving Alliance" which resulted from a merger with

another long standing rating service, The NationalCharities Information Bureau, established in 1918. Thatsite is now: www.give.org

The American Institute for Philanthropy, with its CharityRating Guide, is a small, self created and sponsored

activity, viewed negative by some (e.g organizationsbeing rated). It is at: www.charitywatch.org.

http://www.give.org/http://www.charitywatch.org/http://www.charitywatch.org/http://www.give.org/

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WEB SITES

Not in the text, but valuable in this regard, are

the "Standards of Excellence" which were

created collaboratively by members of the

Maryland Association of Nonprofits, and are nowbeing shared, or marketed, to many other state

associations and their members. See:

www.marylandnonprofits.org, or the Standards

directly, at:www.marylandnonprofits.org/html/standards/index.a

http://www.marylandnonprofits.org/http://www.marylandnonprofits.org/html/standards/index.asphttp://www.marylandnonprofits.org/html/standards/index.asphttp://www.marylandnonprofits.org/