Mission-Based/Non-Financial Performance Metrics for Nonprofit Organizations: Policy and Practice: An Abstract

Abstract

The Internal Revenue Service (IRS) is the tax regulatory and enforcement agency of the US federal government that grants, reviews, and revokes tax exempt status. In the initial NPO application, the IRS scrutinizes each nonprofit organization’s (NPO) application to determine worthiness for the coveted status. Recently, the service came under pressure for politically biased treatment of certain organizations’ applications, with some applications being delayed for years.

This ideological conflict between the public and voluntary sector confounds the already challenging task facing the NPO manager, i.e., balancing the double bottom line of mission and money. Furthermore, within the voluntary sector, there is concern that some organizations may be abusing the tax exempt status which could have a deleterious impact on the entire sector (Checco 2014; Lederman 2016; Molk 2012).

What we propose is that NPOs not only place an emphasis on their mission but that they also incorporate that mission into their strategy and operations. Furthermore, we propose that those organizations that do this and develop metrics for measuring how well the organization performs toward achieving the goals of the mission will perform better in other more traditional metrics.

Using a survey of 265 NPO managers, we found that those organizations that focused on their missions and used the missions in management and planning and measured and reported their organization’s performance relative to the mission tended to perform better in a number of other traditional performance measures. These included fundraising, employee retention, financial health, and number of services provided.

While each NPO must develop its own mission-based metrics, this study indicates that it may be worth the effort. Used in concert with existing accounting measures, these metrics will provide a more accurate representation of the organization’s performance that can be helpful for managers, donors, foundations, and boards.

Perhaps if NPOs were to report mission-based metrics along with the traditional accounting measures required on the IRS form 990, the IRS would be able to judge how well each organization is living up to its intended purpose, reducing the potential for political behavior on the front end.

References Available Upon Request.