Jackie Cefola Consulting

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Back in 2014, I had the pleasure of working with the Nonprofit Centers Network to complete a feasibility assessment to assist the Association of Community Services of Howard County in considering the potential to develop a human services center. Information was collected through a detailed survey, focus groups, individual interviews, and analysis of the local market for real estate. Recommendations were drafted for the proposed center’s mission and goals, potential tenant organizations, and operating models. Presentations were made during a public “Town Hall” and several  Advisory Committee meetings. Recently, I was pleased to read that the Association succeeded and will open the doors to a new center serving the local community. Read more about the project here.

In early 2017, I had the pleasure of working with the Nonprofit Centers Network and the Inter County Community Council (ICCC) of Thief River Falls, MN to create a pre-development strategy exploring the potential for a nonprofit center. As part of the planning process, we facilitated a Town Hall meeting to engage stakeholders from area nonprofit organizations, public agencies, and small businesses. After the meeting, several participants voiced strong appreciation for the opportunity to convene, learn more about local services, and share ideas about the needs of the local community and service providers. I very much look forward to staying in touch with the ICCC as plans continue to develop.

Increasing access to shared strategies for operational support

Effective nonprofits require effective operations – the accounting, human resources, information technology, and other back-office support services that create the foundation for organizational health, compliance, and resiliency. 

The prevailing expectation is for nonprofit leaders to independently bootstrap together just enough operational supports to get by, but we think this is beginning to change. More high-quality operational capacity is being accessed through shared back-office services, including:

  • Management support organizations offering operational services, including accounting, and database management, in support of many nonprofit clients 
  • Comprehensive fiscal sponsors allowing mission-aligned organizations to engage in financial, human resource, and other established services and systems 
  • Contracting structured for multiple organizations to access the time and expertise of the same external service providers or a staff member with capacity (for example, a part-time employee who becomes a full-time employee with time shared between 2 organizations)

While we’re excited by this trend, we notice that these shared service strategies are not accessible for all organizations because they require nonprofit leadership to have:

  • Insight about their organization’s operational needs and capacities
  • Money to explore and define these new relationships and pay for services received
  • Connections with advisors, service providers, and potential partner organizations, who also must have money, insight about operations, and connections

and most importantly,

  • The power to be able to honestly name operational needs and to experiment with new ways of doing things.

Money, insight, connection, and power are not held by all nonprofit leaders and we recognize that this is especially true for BIPOC, immigrant, low-wage executive directors and board members who are systemically excluded and oppressed by dominant nonprofit and economic structures. This leads us to wonder, what can be done to increase access to operational capacity for all organizations?  

We see a new role for philanthropy, one where…

  • Funders take it as a sign of strength, not ineffectiveness, when a nonprofit leader admits that they can’t do it all and that their organization is better served through external operational support
  • Funders recognize that nonprofit innovation, including operational innovation, requires seed funding, and 
  • Funders increase their investment in organizational capacity building through funding operations

In the private sector when an entrepreneur seeks funding from investors, the deal often includes the provision of advice and guidance, relationships and connections with service providers and distribution partners, and sometimes an entire management team – in addition to money. Investors recognize that they have a stake in the organization’s success and solid operations are integral to that success.

Nonprofit funders could provide similar supports including connections to service providers and centralized turnkey operational systems. This would look like: 

  • Foundations offering comprehensive fiscal sponsorship and/or options for grantees to engage in centralized management support services 
  • Funders offering connections to trusted service providers to rapidly move organizations through start up and growth while ensuring compliance
  • Guidance, advice, and supports that increase all nonprofit leaders’ knowledge of operations and expand their power to explore alternative strategies to build capacity

In these ways, funders have potential to address the inequities that limit access to shared service strategies, while increasing operating capacity for all. 

This article is part of a series, based on conversations between Jackie Cefola and Debra Box about nonprofit shared services and related topics. 

Jackie Cefola, principal of Jackie Cefola Consulting, is a trusted advisor to nonprofit leaders who are starting up new collaborations, often related to shared services. Debra Box, principal of In the Box Consulting and former President and CEO of Support KC, where she helped nonprofit organizations to focus on their missions by providing integrated expertise in financial management and support services.

Using Key Performance Indicators to Communicate the Complete Story 

Keeping strategic plans alive and vibrant requires that planning be an on-going process and not just a static document that gets dusty on a shelf. Strategy, including operational strategy, needs to percolate throughout the agency’s culture, policy, and expectations.  

Expectations are expressed by creating meaningful measures of success. Meeting and exceeding expectations validate the measure, while consistently falling short of measures indicates a need to re-evaluate targets and make future course adjustments.

These measures of success, Key performance indicators (KPI’s), are needed to monitor programs and operational capacity. Program KPI’s are specific to the agency’s mission and programs and measure what’s unique and effective about the organization’s purpose and community impact. Operational KPI’s are expressed more generally and can sometimes be shared across agencies. They become the backbone measures of capacity, ability to scale, and resiliency.

Below are some examples of operational KPI’s. Please keep in mind that not all these measures will be meaningful to every agency and that the targets for these measures will vary depending on an organization’s financial model, budget size, organizational structure, and the agency lifecycle. For example, nonprofits that have a high reliance on earned revenues (generated by providing goods or services), may target a lower number of months of cash reserves than nonprofits that have a heavy reliance on foundation revenues because they may have more control over the timing of their earned revenue streams.

Governance/Strategy KPI’s:

  • Board membership skills, board diversity and recruitment targets; year over year changes
  • Strategic Plan – Date of last update
  • Annual summary review of Agency KPI’s (reported for board oversight)
  • CEO/Executive Director Evaluation – Most recent review date
  • Board Evaluation – Most recent review date
  • Board Development Plan – Most recent update (driven by board feedback and evaluation results)
  • Board giving
  • Board meeting attendance

Financial Performance Indicators:

  • Budget performance (income and expense actual vs. budgeted)
  • Months of cash reserves (money that is available to spend)
  • Cash allocation (funds available with or without donor restrictions)
  • Current ratio (liquidity – assets over liabilities)
  • Debt ratio (total liabilities over unrestricted net assets)
  • Reliance ratios (based on the different areas of funding; earned, government, foundation, individuals, special events, other)
  • Accounts receivable aging
  • Accounts payable aging
  • Costs to deliver one hour of programming or services
  • For organizations that earn income, self-sufficiency ratio (earned income/expenses)

Human Resources Performance Indicators:

  • Turnover rate (staff retention)
  • Absenteeism
  • Employee satisfaction
  • Productivity – position specific expectations
  • Percent of personnel costs (personnel portion of all expenses)
  • Benefits cost ratio (percent of personnel costs allocated to benefits)

Fund Development Performance Indicators:

  • Total donors
  • New donors
  • Donor retention rate
  • Average gift
  • Pledge fulfillment percentage
  • New grants secured
  • Cost per dollar raised
  • Online gift percentage

Social Media/Information/Data Management Performance Indicators:

  • Website traffic
  • Click-through rates
  • Email success rates
  • Social media impression and engagement rates
  • Number of records (individual, corporate, foundation)
  • Demographic data (address, profession, gender, age)

After completing an operations self-assessment and gaining feedback from external stakeholders, engage your board and staff in determining which KPI’s matter most.

Ask strategic questions to create an action plan to move forward, including:

  • What KPI’s should be adopted?
  • How will we collect the data? Who will we collect data from? How will we ask the people we serve for their input?
  • Who will collect the data?
  • What will be the frequency of review? (We suggest an annual review of KPI’s)
  • What’s the best presentation format to report on findings?
  • Who needs to see the findings? Which metrics need to be reported to which people?

Keep in mind that “less is more” when it comes to developing meaningful metrics. Also understand that some measures will be related to your organization’s lifecycle and may stop being meaningful over time.

Also consider consulting with experts who focus on racial equity in the design and development of evaluation and measures. Answer the question: are we strengthening racial equity and building justice through the ways that we measure, collect, and report our impact? 

What gets measured gets managed – and maybe what gets measured gets communicated?  

We believe that agencies that adopt meaningful operational capacity measures will tell the complete story, not only about programs and services, but also about the processes and systems that make the programs and services possible. Organizations with meaningful operational KPI’s have the data needed to pivot and adapt to support programming changes and make better-informed decisions about how to allocate resources for mission impact.  Board and staff have key information to gain insight into the roles they fulfill and how they contribute to agency success. External stakeholders and funders better understand how their investment is creating impact and why their support is needed for both operations and programs.

Helpful resources and guides for developing measures:

This article is part of a series, based on conversations between Jackie Cefola and Debra Box about nonprofit shared services and related topics. 

Jackie Cefola, principal of Jackie Cefola Consulting, is a trusted advisor to nonprofit leaders who are starting up new collaborations, often related to shared services. Debra Box, principal of In the Box Consulting and former President and CEO of Support KC, where she helped nonprofit organizations to focus on their missions by providing integrated expertise in financial management and support services.

Impactful nonprofit organizations require strong accounting, human resources, information technology, database management, and operational services to ensure that resources are deployed effectively, potential risks are reduced, and legal compliance is achieved. Effective operations also support organizations to be responsive and resilient in the face of unexpected challenges.

In previous articles, we discussed why operational planning should be included in strategic planning and the importance of self-assessment. To further understand operational strengths and weaknesses, feedback can also be gathered from stakeholders who are external to the organization, including clients, board members, funders, and partner organizations. 

In practice we see organizations gain feedback from these external stakeholders through service feedback forms, program evaluations, and annual surveys. However, typically, the feedback only addresses programs, services, and other offerings and not the operations, the back-office processes that make the offerings possible. 

This is a missed opportunity. 

Clients, community members, and end users can provide feedback from the customer’s point of view about 

  • Human resources – Are staff retained, accessible, trained, and supported to offer high quality programs, services, and administration? 
  • Communications – How do online, print, and social media communications promote activities and engage audiences?
  • Accounting, billing, and payment procedures – Do these procedures increase access to services? Or create barriers?
  • Customer/client relationship systems – Do staff have the information needed to for effective intake, registration, and referrals? 

Board members can discuss how operational systems impact governance and strategic decision-making, including

  • Compliance systems – Are management and reporting systems sufficient for ensuring compliance?
  • Accounting and financial systems – Do accounting and financial procedures allow for accuracy and timeliness with investments, transactions, and reporting? 
  • Human resources – Are compensation, benefits, training, and other personnel policies reducing turnover and supporting high quality staffing and leadership?

Funders and donors can provide their perspective about:

  • Grant writing and reporting/donation requests – Are proposals and requests written clearly and succinctly? Are reporting requirements fulfilled?
  • Funding/donor management systems – Are grants and donations received and acknowledged in a timely way?

Partner organizations can discuss how information sharing and referrals are working from their point of view, including:

  • Customer/client relationship systems – Are staff accessing the data required to make appropriate referrals and requests for services?
  • Accounting, billing, and payment procedures – If partners are contracting together, are these procedures reliable and consistent?

This feedback encourages stakeholders to recognize the nonprofit for not only the public-facing offerings, but also for the back-office processes that make the programs and services possible. This elevates everyone’s understanding of capacity.  

This feedback also allows nonprofit organizations to have a different perspective about what operational services are working well and where there are needs for improvement, the basis for developing more effective strategic goals and key performance indicators. 

This article is part of a series, based on conversations between Jackie Cefola and Debra Box about nonprofit shared services and related topics. 

Jackie Cefola, principal of Jackie Cefola Consulting, is a trusted advisor to nonprofit leaders who are starting up new collaborations, often related to shared services. Debra Box, principal of In the Box Consulting and former President and CEO of Support KC, where she helped nonprofit organizations to focus on their missions by providing integrated expertise in financial management and support services.

A nonprofit’s operations are built into every aspect of what it does and how it does it. Strong back-office operations, including accounting, bookkeeping, information technology, human resources, and compliance, strengthen nonprofit organizations, enabling mission impact. Decisions about operations directly impact the scale, scope, and delivery of programs and services. 

In previous articles, we discussed why minimizing overhead is not an effective strategy and the need for strategic planning to include operational planning

But what can nonprofit organizations do to increase their focus on operations? As a first step, we suggest starting with an operations self-assessment.

Why an operations self-assessment?

Most nonprofit organizations compile and disclose information annually to federal and state governmental agencies, the public, the Board of Directors, and to other stakeholders through:

  • An annual financial audit
  • The IRS 990 Form
  • An annual report, and more.

This documentation reports a nonprofit’s compliance, financial stability, tax exemption, employment, and other practices, ensuring that the organization is fulfilling its agreements to be mission-based, not maximize profit, and create a public benefit. 

Some estimates for a nonprofit’s operations and personnel expenses are reported in these filings (i.e. the administrative category in the “allocation of functional expenses” on the Form 990”). But that’s it. There is no annual operational audit of processes or reporting, equivalent to a financial audit. There also is no annual operational report of activities or impact, equivalent to an annual report. 

We believe that this lack of attention to operations contributes to:

  • Operational processes not being proactively managed or invested in
  • Operations not being resilient or adaptive in the face of emergency or changing circumstances
  • Operational problems not getting addressed until systems are seriously broken or the organization is out of compliance with regulators or funders
  • Operational practices increasing an organization’s risk of not being effective or capable of fulfilling its mission

There is great potential for organizations to be more proactive in managing their operational strategy. But there needs to be a baseline to understand how things currently work. 

Self-Assessing Operations

Step 1. Start by identifying the back-office functions that are necessary and completed on a regular basis. The division of labor, tools, and strategies for back-office tasks will be unique to every nonprofit organization. Operational systems evolve over time to suit the people involved, the resources available, and the mission being supported. There is no one-size-fits-all approach.

Key areas to assess can include:

  • Accounting and bookkeeping
  • Compliance and risk management
  • Human resources
  • Information technology
  • Database management 
  • Fund development, 
  • Governance
  • Communications
  • Administrative functions (reception, clerical, purchasing, storage) 

This is an opportunity to also recognize if there are essential operational functions that are not being completed regularly. For example, we frequently see organizations lacking human resource services, even while employing staff or managing volunteers. 

Step 2. Figure out who is involved in each operational area, including leadership, staff, board members, volunteers, and contracted service providers. Oftentimes these functions are shared among leaders and staff or completed as a side task by someone who primarily focuses on programmatic work, for example, the executive director who also is responsible for accounting or website management. Sometimes operational processes are completed but not formally assigned – it isn’t completely clear who’s doing the work or how, for example, the database that is used by all, though it’s unclear who is responsible for updates and maintenance.

Step 3. Ask questions to better understand the current state of each service area. We suggest starting with…

Who is involved and what supports are available?

  • Is this operational service your primary job function? 
  • Is there more than one person who knows how to complete this job function?
  • Are processes and policies documented and accessible to others? 
  • Do you and the other people completing these tasks regularly participate in training or professional development related to this service?

Goals and feedback?

  • Are goals for this service area documented and understood? 
  • Do you receive regular and useful feedback that helps you to improve this service area? 

Current strategies and potential areas for improvement?

  • What are key systems and processes are used to complete routine tasks?
  • What are the strengths or weaknesses of current procedures?
  • How often are systems and processes evaluated and updated?  
  • If budget was not an issue, what improvements would you suggest?

Alignment of operations with the big picture

  • How do current practices support our organizational mission? 
  • Do the people, strategies, and systems involved reflect our organizational values? 
  • How does this service support the organization’s strategic plan? How is this service area involved in strategic goals and activities?
  • Does this service area strengthen our relationships with partner organizations, community members, funders, and other key stakeholders?

Step 4. Understand the time required to complete operational tasks and the associated financial costs. The largest operational expense will most likely be related to personnel – the hours required to complete tasks and the wages paid in compensation. If operational services are contracted, this will be easily estimated by reviewing contractor invoices. 

However, most nonprofit organizations do not contract and many do not have detailed time management practices in place for staff who complete operational tasks. Most organizations also have staff who work across multiple back-office functions. Understanding these challenges, ask the people involved to estimate the hours that are typically required for different operational tasks or alternatively, the percent of time they spend on operational responsibilities. Once hours are calculated, estimate the associated financial expense – the wages and benefits paid for the time allocated to operations.

In gathering this data, it will be important to communicate that these estimates are not intended to reduce hours or employment – but rather to understand how much time is being spent, potentially to increase dedicated hours or staffing in service areas that require more capacity. It’s also a great time to capture ideas about improving processes from those performing the services.

With this new understanding of the operational tasks being completed, the personnel involved, the processes and systems required, and the time and associated expenses, organizations have many of the inputs needed to develop a clearer understanding, a baseline, for how things are working. Yet it is important to remember that this self-assessment is limited to the information known from within the organization, one frame of reference. 

In the next article we’ll talk about how to also gather information about operations from your customers to generate a second frame of reference. We suggest that customers might include clients, board members, volunteers, partner organizations, and others who are impacted by but not directly involved in operations. 

In taking this more holistic view of operations, one that includes self-assessment and customer feedback, organizations will be prepared to develop strategic goals and indicators – the foundation for strategic planning.

This article is part of a series, based on conversations between Jackie Cefola and Debra Box about nonprofit shared services and related topics. 

Jackie Cefola, principal of Jackie Cefola Consulting, is a trusted advisor to nonprofit leaders who are starting up new collaborations, often related to shared services. Debra Box, principal of In the Box Consulting and former President and CEO of Support KC, where she helped nonprofit organizations to focus on their missions by providing integrated expertise in financial management and support services.

Nonprofit strategic planning starts with the mission as the launchpad for aligning an organization’s programming with purpose. The strategic plan also creates an opportunity to take an authentic look at how the work impacts the communities served. Staff and leadership, with the board, develop strategies to fulfill goals and move the mission closer to reality.

All strategies require alignment with an organization’s operational capacity and systems, including the bookkeeping, database management, human resources, information technology, and other back-office functions. However, operations are not usually factored into strategic planning in a meaningful way. 

For example, an existing data management strategy, or access to a multi-lingual translation service, or a new warehousing space, are seldom drivers for strategic goals. Furthermore, the operational needs created by new strategic goals, for example, a new point of sale system, or an increase in human resource services, or new insurance policies, are not always included in a strategic plan. We’ve seen too many instances when excellent strategic goals are not achieved because of limited operational capacity.

This separation between strategic planning and operational planning suggests that operations are reactionary and ancillary, not a driving force for change. Yet we know that high-quality operations are required for nonprofit organizations to actually be strategic and 

  • Ensure effective and compliant programs and services, now and in the future
  • Support a knowledgeable, innovative, team of staff, board, and volunteers
  • Invest in research for future growth opportunities.

Nonprofit organizations need to be strategic about operations – in the same way they are strategic about program and service activities. 

A strategic plan that holistically includes operations identifies opportunities for enhancing mission-based activities and the back office. In doing so, the plan supports not only the programmatic impact – but organizational impact. 

A strategic plan that includes operations can also strengthen funding requests by providing a detailed explanation about which operational services need financial support and how that support will generate positive impact. There is an urgent need for both nonprofit organizations and funders to communicate more effectively about the needs for and impacts of operational funding. 

More broadly, we see potential for operational strategic planning to challenge current norms and encourage the nonprofit sector to stop treating operations as something to be minimized. Proactive investment in back-office services is connected to organizational health and resiliency – the foundation for programmatic impact. Let’s begin to recognize that, plan accordingly, and communicate the impacts that result. 

This article is part of a series, based on conversations between Jackie Cefola and Debra Box about nonprofit shared services and related topics. 

Jackie Cefola, principal of Jackie Cefola Consulting, is a trusted advisor to nonprofit leaders who are starting up new collaborations, often related to shared services. Debra Box, principal of In the Box Consulting and former President and CEO of Support KC, where she helped nonprofit organizations to focus on their missions by providing integrated expertise in financial management and support services.