PA 545 – Spring 2008

THE SUCCESSFUL NONPROFIT

ORGANIZATION .
Evaluation and Assessment.
http://www.parkonline.org
 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.
 Readings
• The main reading related to our theme is
"Evaluating the Effectiveness of Nonprofit
Organizations" by Vic Murray, chapter 14, in
Herman. This, as you will note in the reading, is
an extensive rewrite of the chapter in the previous
edition. It begins with a review of basic issues
related to trying to determine organizational
effectiveness (dubbed "Organizational
Effectiveness Evaluation", OEE). The essay goes
over practical reasons to carry out evaluations
and, importantly, the inevitable political nature of
that process.
 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).
 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.)
 Reading
• In the Murray article, and in the web resource
below, you see the 12 characteristics proposed by
CCAF-FCVI. (CCAf-FCVI is the acronym for an
earlier "Canadian Comprehensive Auditing
Foundation", or in its bilingual version, "La fondation
canadienne pour la verification integree.")
• You might observe that they could easily be
regrouped around the balanced scorecard
framework (p 360). I would note that they can just
as well be regrouped around the successful
nonprofit model proposed in this class.
 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--has
not 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).
 Reading
• A similar but slightly differently focus for "framing" an
organizational analysis is described in the article on
"Executive Leadership" by Robert Herman and Dick
Heimovics, chapter 7 in Herman, pp 154-56, 163-67.
That analysis follow the "framing" methodology of
Bolman and Deal, looking at the organization from the
angles of (a) "structure", (b) "human resources", (c)
"politics", and (d) the articulation of shared meaning in
the organization through "symbols". (The text, Modern
Approaches to Understanding and Managing
Organizations, 1984 and later editions, by Lee Bolman
and Terrence Deal, is used in some Park HSPA
classes.)
 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.
 The Balanced Scorecard
• "Many companies already have performance
measurement systems that incorporate
financial and non-financial measures. What
is new about a call for a 'balanced set of
measures?
 The Balanced Scorecard
• "The Balanced Scorecard emphasizes that financial
and non-financial measures must be part of the
information system for employees at all levels of the
organization. Front-line employees must understand
the financial consequences of their decisions and
actions; senior executives must understand the
drivers of long-term financial success. The
objectives and the measures for the Balanced
Scorecard are more than just a somewhat ad hoc
collection and financial and non-financial
performance measures; they are derived from a top-
down process driven by the mission and strategy of
the business unit.
 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 between
external measures for shareholders and
customers, and internal measures of critical
business processes, innovation, and
learning and growth.
 The Balanced Scorecard
• "The measures are balanced between the outcome
measures--the results from past efforts--and the
measures that drive future performance. And the
scorecard is balanced between objective, easily
quantified outcome measures and subjective,
somewhat judgmental, performance drivers of the
outcome measures." Quoted from The Balanced
Scorecard: Translating Strategy into Action by
Robert S. Kaplan and David P. Norton (Boston, MA:
Harvard Business School Press, 1996), pp. 8, 10.
(Emphasis added.)
 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 with
skeletal and muscular, respiratory, digestive, endocrinal,
urogenital and reproductive. The human person interacts
with its environment. Each human being develops
dynamically and has his or her own story. A human
person starts with conception and birth, and may live
what is considered a long time, e.g. a 100 years, or may
die at any time. In either case, human life has a definite
end.
 THE NONPROFIT ORGANIZATION AS AN ORGANIC
WHOLE FUNCTIONING WITH MULTIPLE SUB-
SYSTEMS

• The human person interacts with its

environment. Each human being develops
dynamically and has his or her own story.
A human person starts with conception and
birth, and may live what is considered a
long time, e.g. a 100 years, or may die at
any time. In either case, human life has a
definite end.
 The nonprofit organization
• The nonprofit organization is a legal,
economic and social entity, functioning
with multiple sub-systems: e.g.,
governance, planning, marketing, service
delivery, resource development,
management of people, information and
finances, and relationships with other
organizations.
 The nonprofit organization
• The nonprofit organization interacts with its
environment. The organization develops
dynamically, in discernible patterns or
stages. Each organization has its own
story. A corporation starts with an idea and
then legal incorporation. It may cease at
any time but also may last several decades
or centuries.
 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 and
senior mangers) are the drivers. But they
are in a feedback loop; they must be
listening attentively to the customers and
community the organization serves.
 Nonprofit Management System
Model
• The system needs reources or inputs: the
human capital of people with energy and
skills; technical know-how; capital materials
of supplies, equipment and facilities; and
financial resources. The management
system processes transform inputs into
outputs and outcomes.
 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 for
consumers, 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).
 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 with
varying efficiencies of the transforming
processes) contributes to the whole. The
whole depends on each of the contributing
parts for its healthy or successful
functioning.
 strategic planning process
• A good strategic planning process
attends to each of these elements, and
factors in a continuous evaluation of the
organization's interaction with its
environment and with its markets. The
phases in strategic planning are usually
labeled environmental scan,
organizational scan (internal capacity) and
market research, with identification of the
most critical issues.
 strategic planning process
• The resulting collaborative planning by
stakeholder and constituents produces mission,
vision and values, overall goals and strategies
to meet the critical issues, and then goals and
objectives, with a solid budget based on
adequate resources. It is one important way that
the organization as a whole functions as a
whole, assessing and directing its many parts.
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, which
these critics believe is the main measure
of the success, health or value of a for-
profit organization.
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 line
profits are not the only measure of
success, health or value of the for-profit
either. We suggest that nonprofits are
able to be evaluated.
is it impossible to evaluate nonprofit
organizations?
• However, we also hold that evaluations of
success, health or values involve more
measures than the "bottom line." They
also are not static, a picture at a single
moment, but describe activity and
trends over a period of time.
 FOUR MAJOR DIMENSIONS

• We propose that a person can know if a

nonprofit organization is healthy or
operating successfully by examining it
from four different angles in order to
measure four dimensions
or critical variables in its functioning. The
four dimensions described before, we
propose, match or are similar to
other analyses, although others express
them in somewhat different terms.
 assessment of the organization's basic purpose and
clarity of direction

• (1) Almost everyone, for-profit and nonprofit, would

agree that having goals and the ability to reach
them is one key element in evaluation. Because
the goals can be off the mark or weak, this is not a
sufficient measure in itself. Our suggestion is to
start with an assessment of the organization's basic
purpose and clarity of direction. An organization
should able to provide evidence and measures of its
reason for being and of the organization's direction,
in documents like the following:
 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;
 assessment of the organization's basic purpose
and clarity of direction

• Spelled out in goals and objectives for the

manageable future; with
• A description of its special position among its
competitors and collaborators, that is, its "market
niche".
• This is the self-directed, intentional, visioning,
rational problem solving dimension of the
organization. It is the "business process
perspective " of the balanced scorecard
approach.
 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 public
interest for the common good.
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 of
people in a community.
These services can be evaluated and measured in at least
three ways.

One is in the outputs, the volume (quantity) and conformity

to established standards (quality) of the service as
performed with the service recipients.
• Another is the satisfaction of the customers benefiting
from the the service. The nonprofit has a triple
customer:
– the consumer of the service who is the direct beneficiary;
– the contributor of financial and other resources who is the
second beneficiary of the services; and
– the constituents, the other stakeholders who are indirect
beneficiaries of the changes and better quality of life now
available in the community.
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. It
is the "customer perspective" of the balanced
scorecard.
 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 the
life of the community on a reliable,
sustainable basis, unless they
consistently have an excess of revenue
over expenses, indeed a financial bottom
line.
 reliable, sustainable basis
• Also important to a nonprofit's success or health
are the size of the fund balance and the reserve
or endowment funds. Without an
operating surplus and reserve, the nonprofit
cannot keep up to date with resource renewal,
cannot make investments in new or enhanced
services, cannot withstand regular downturns in
the economy, or stand firm through any kind of
program, personnel or financial crisis.
 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.
 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 foundation
grants, government contracts), there is a
very high expectancy for transparency
and accountability in the activity of the
nonprofit organization.
 diverse mix of funding sources
• Taken together, measures in these areas
represent the accountability, financial
and resource development, efficiency,
means acquisition dimension of the
organization. It is the "financial,
accountability perspective" of the
balanced scorecard.
 The human dimension is
paramount
• (4) The nonprofit organization consists mostly of people.
The human dimension is paramount. One of the most
important measures of the strength of the organization is
the quality of its personnel.
• The "constituency" of the nonprofit exists at various
levels: the board of directors, the executive and senior
staff, employees, volunteers, contributors, vendors,
influential persons who support the organization, and
others who may benefit indirectly from the organization's
work without being an immediate recipient of services.
 human resource, constituent, capacity
building and political dimension
• 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 consideration
the strength, or weakness, of this human
resource, constituent, capacity building
and political dimension of the organization. It
is the "learning and growth perspective" of the
balanced scorecard approach.
 CONCLUSION

• In this approach to determining the relative

"success" or "health" of a nonprofit
organization, we are taking the
position that a helpful, relatively
accurate, practical evaluation can be
done. It cannot be done by examining or
invoking a single measure or feature.
 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. It
is also important that these be viewed not
only at a single moment, but as trends
over a period of time.
 CONCLUSION

• In summary, this approach to evaluation of the

success, health or values of a nonprofit
organization includes assessing and gathering a
set of measures that encompass:
• the purpose and plans of the organization and the
degree to which they have been carried out and
achieved;
• the resources and means that are needed and
the degree to which they have been acquired and
accounted for;
 CONCLUSION

• the organization's capacity for future activity,

measured by the quantity and quality of both
its internal human resources and its external
supporters; and
• the quantity and quality of services delivered
that have not only satisfied customers but
have changed lives and made a difference
in the community the organization serves.
 CONCLUSION

• By using this balance of organizational

dimensions, it can be shown that the
organization is effective--it does the right things.
• It is efficient--it does things the right way.
• It is ethical--its standards of behavior have been
determined and internalized by organization
members.
• It is accountable and seeks to be beyond
reproach in the service of the public interest.
•
 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 is
not 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 need
for a framework with multiple dimensions.
 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 achieved
them?" There is value in that, but it is not
enough.
 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 continued
achievements in the future. Capacity is
critical, but only part of the picture.
 the need for a framework with
multiple dimensions
• (c) Still another approach has focused on
the people, the culture and
performance capacity of the
organization. People and organizational
culture are not inert material resources;
they are dynamic, social realities. They
are a real aspect of the organization.
 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 political
power factor in the way limited resources
are allocated and external challenges met.
 the need for a framework with
multiple dimensions
• My take and contribution to this discussion has
been to incorporate all four of these dimensions
into the models proposed for this course. The
two models shared in the first week of this
course on the Management of Nonprofit
Organizations were the two graphics, titled
"Nonprofit Management System Model" and
"The Successful Nonprofit: More than the
'Bottom Line'."
 Discussions:Topic #2
• Topic #2 - The importances of perspective(s)You have
been dealing with a number of different approaches to
evaluating nonprofit organizations, each based on
certain assumptions, and usually expressed in terms of a
process model. You have seen logic models, social
constructionist models, program evaluation, balancec
scorecard, critical attributes and charity rating services
models and standards. Select and give a critique of
any three approches. As always, feel free to question
and comment on the postings of others, to benefit from
discussion and dialogue.
 Discussions:Topic #1
• Topic #1 - Determining the value of
evaluationYou can see from the readings and
resources that the matter of evaluating nonprofit
organizations is a hotly contested topic. If there
is agreement on no single measure defining the
success of the nonprofit, there is not agreement
on how many measures are necessary to
declare success. Nor is there academic
agreement on the rational validity of the process,
given the inevitable political aspect of the
process.
 Discussions:Topic #1
• So is evaluation useful? Is it completely
subjective, what any organization considers it to
be? Or can it be relatively objective, so that
board, staff, funders and supporters might agree
that the organization is functioning well, is
healthy, or not? How necessary, or how how
useful is it, in either case? What do you think?
 WEB SITES
• At the beginning of the course, we shared
a list of web sites on nonprofit
management (still available in the
Document Sharing area). We should add
to it the Canadian resource, mentioned
above, CCAF-FCVI and its website:
http://www.ccaf-fcvi.com/ Choose your
language, English, French, or Spanish.
 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
Review series of articles (92, 93, 96) by Robert
Kaplan 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.
 WEB SITES
• The website noted in Murray's article, http://
www.balancedscorecard.org is a venture of The
Balanced Scorecard Institute, and is not
connected to Kaplan and Norton. They draw on
common 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.
 WEB SITES
• As mentioned above, if you are in fundraising, you
should be aware of the charity rating services:
• Especially, the Better Business Bureau's program, "Wise
Giving Alliance" which resulted from a merger with
another long standing rating service, The National
Charities Information Bureau, established in 1918. That
site is now: www.give.org
• The American Institute for Philanthropy, with its Charity
Rating Guide, is a small, self created and sponsored
activity, viewed negative by some (e.g organizations
being rated). It is at: www.charitywatch.org.
 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 now
being 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.as