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Measuring what matters

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This column has often discussed the benefits of a board and appropriate governance structures to assist organisations achieve their outcomes. Having a board of skilled directors can provide the strategic guidance to help steer organisations in the right direction and ensure that appropriate risk controls are in place.

In the for profit environment, the outcomes being sought can be measured by ratios such as return on investment. The measurement of this, while not without its challenges, is often reasonably straight forward as is the benchmarking of performance against similar organisations.

However in the not for profit (NFP) and public sectors, the measurement of outcomes can be much more difficult.

As we enter the new financial year, many organisations will be considering the past year and looking at what the new year may bring. Unfortunately many will have reported on what they have always reported on rather than considering the real value of their reports.

The release of the NFP Governance Principles and Guidance publication in 2013, dedicated one of the ten principles to Organisational Performance. The Principle noted that it can be difficult to measure the degree to which an organisation is delivering on its purpose, however a board can assist by discussing the types of indicators that may be useful.

For example a membership based organisation may be able to use membership growth, acquisition and retention as indicators. A community service organisation may use number of clients helped as an indicator. Whatever the final decision, it is critically important to ensure that the indicators are readily understood by all concerned including, board, staff and external stakeholders.

Another key element is to ensure that the indicators are not too costly or complicated to report on. For smaller, less complex organisations it is vital that you don’t over burden them with reporting requirements that take away from the key activities. Similarly, you should strive to have consistent indicators so that you are not constantly changing reports that are going to the board.

As with much of corporate governance, there are no rights or wrongs in performance measurement. Choose measures that suit your organisation, be prepared to adjust over time but resist the temptation to take on each new idea that pops up at a meeting.

Phil Butler is Manager – NFP, Public Sector & ACT at the Australian Institute of Company Directors. Level 3 54 Marcus Clarke Street Canberra T: 02 6132 3200 |www.companydirectors.com.au
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