questions? contact info@measuring-success.cominfo@measuring-success.com using data to drive your...

Questions? Contact info@measuring-success.com

Using Data to Drive Your Organization’s Success

The Finance and Administration Roundtable

Sacha Litman Managing Director

Measuring Success, LLC

Agenda

45 minutes Presentation 15 minutes Q&A

Goals for Today

See the potential in our CFO/CPA roles to go beyond budget and audit data

Leverage our data competency into other data organization has to help achieve mission

Help your organization identify and track new data to measure impact

Today: 3 Examplesfrom data you have to data you can

obtainA. Activity-based accountingB. Fundraising dataC. Measurement systems

Client: chapter-based community centers

Experiencing some with member drops, financial insolvency.

Challenge to business model & brand consistency.

Association HQ

Local Affiliates or Regions(N=150)

Individual Members / Users(N=1000 to 10,000 per affiliate)

A. Managerial Accounting using Activity Based Costing

Organization runs 13 different program areas (early childhood, after school, tutoring, sports, fitness, adult education, etc)

Assumed were running surpluses in high-fee programs like early childhood and fitness based on direct budget analysis (fees & direct costs)

Indirect costs & revenues allocated using: Administrative staff time (time sheets) Square feet in facility Foot traffic (participant hours) Member priorities (survey)

1. On average, 73% of expenses were in “black box”!

2. Organization did not understand how resource intensive some program

areas were

Early ChildhoodElem SchoolMiddle SchoolTeenAdult EdCounselingReligious ServicesCommunity EventsWeekend EventsSocial Action

3. Early Childhood example: 14% of administrative staff time 46% of indoor square footage 35% of foot traffic Yet only 2% of membership ‘allocation’

4. Early childhood was, once incorporated indirect items, running a

massive deficit!

Early ChildhoodElem SchoolMiddle SchoolTeenAdult EdCounselingReligious ServicesCommunity EventsWeekend EventsSocial Action

5. Changes as a result of analysis New goal for early childhood: cost neutral.

Achieved in 2 years by raising fees and diverting some overhead resources to other programs.

Changed budgeting process to activity-based accounting.

Cost-neutrality of all programs: eliminated cross-subsidization of programs unless board could justify it strategically

Senior management team and board does better job prioritizing now understand the financial costs associated with their time (“time is money”)

B. Fundraising Client heavily dependent on annual fundraising In good years, fundraising flat or marginally up.

In bad years, suffered 10-15% drops in fundraising

Wanted to reverse the trend Fundraising staff overwhelmed: 10,000

priorities on desk, did not know where to focus – Events? Relationship building? Education?

Sitting on treasure trove of fundraising data that was untapped

Aligned Charitable

Values

PerceivedOperating Efficiency

DonorContact &

Recognition

DonorPersonal

Relationships with Org

PerceivedImpact

DonorInvolvement

in Org

Increased Unrestricted

1. Seek to understand why some donors increased gift by 100%, while others barely increased, others stayed flat or dropped?

Leveraged database and donor survey

Database held giving, events, solicitor, etc

Hypothesized drivers: tested 50 actionable activities

Tested across 26 affiliates in various cities

2. Focused on what statistical analysis revealed as top issues

Organization educates me about charitable giving values

3. Dismissed other long-held assumptions

‘Missions’: same effect on gift increase as sending person to a conference (which is much cheaper)

Placement on board: no effect on giving Criticism of operating efficiency drives

down giving: no evidence, in fact ignorance is the problem.

4. Used Dashboards to Motivate Action

Question Rank (of 15)

% Str Agr

Priority

Strategy

Aggregate charitable values

Improved alignment over 3 years

Education on charitable values

14 16%

High C

5. Results

One local affiliate: Restructured staffing in its development

department to focus on donor education, involvement, and personal relationships

Eliminated missions program More transparent about educating

donors on operating costs and why

C. New Data Measurement System Experiencing some with member drops, financial

insolvency. Challenge to business model & brand consistency.

Association HQ

Local Affiliates or Regions(N=150)

Individual Members / Users(N=1000 to 10,000 per affiliate)

1. Association sought “early warning system” & understanding of what led

to successful outcomes

2. Build measurement and dashboard system as pilot experiment

Engaged 6 willing chapters Built:

Customer survey Employee survey Financial analysis tool Member participation tool

3. Focused on rankings and metrics that were statistically valid

Regression analysis ties activities to outcomes Benchmarks and Comparisons

Against peer chapters in other geographies Against local competition from other organizations Against own prior measures (longitudinal) Within demographic segments of member base (see following slides)

4a. Identify activities associated with outcomes

(multiple regression analysis)Budget Management versus Value for Membership DollarCorrelation

Perceived Budget Management & Transparency(1= strongly disagree, 5 = strongly agree)

4b. Scores compared to peers

4c. Scores by demographic segments

50% 43% 50% 48% 45% 40%

35% 46% 56% 47%

Not at AllOnce or

Twice a Year Quarterly MonthlyMore Often

than Monthly

36% 49% 59% 63% 69%

Less than $100,000

$100,000-$199,999

$200,000-$299,999

$300,000-$399,999

$400,000-$499,999

$500,000 and over

40% 42% 67% 63% 42% 46%

Less than 6 years 6-12 years 13-22 years

More than 22 yrs

25-34 35-44 45-54 55-64 65-74 Over 75

Years of Membership

Frequency of Participation

Income

5. Like doctor, ran diagnostics each year

Select Measures from Customer Survey

Rank (of 15)

Score% Str Agree

Priority Goals & Strategy

Member Value for the Dollar 7 25% Medium Focus on quality, budget perceptions

Professionals welcoming 2 35% Low

Budget Perceived as well managed

14 16% High Double scores in 2 years.

6. Turnaround: focus lead to improvement from low to average in 2 years; now aiming

for top Personal Conversations with CustomersMonthly or more often

7. Chapter ruled by anecdotes: 80% of assumptions were not supported by

data Assumed they were strongest with eldest & wealthiest

portions of membership

Shock, challenged the data, acceptance Management team focused energies on improvement with

eldest and wealthiest. 2 years later, scores significantly higher there.

50% 43% 50% 48% 45% 40%

Less than $100,000

$100,000-$199,999

$200,000-$299,999

$300,000-$399,999

$400,000-$499,999

$500,000 and over

40% 42% 67% 63% 42% 46%

25-34 35-44 45-54 55-64 65-74 Over 75

Likelihood to recommend to a friend % Strongly Agree

8. Top performer: set out to redefine limits of excellence & marketed

success

Surplus Margin for Early Childhood ProgramSurplus as % of Expenses, after allocating all overhead

9. New association policy: value, not price

Assumed that key driver of member retention was price Analysis shows not price, but perceived quality and value-

for-dollar Result: association stopped encouraging price

subsidization, encouraged perceived quality improvement Perceived value and value for dollar are tracked carefully

and promoted system wide

Highest WillingnessTo Pay (center)

A. FinancialAbility

B. CommitmentTo Issue

C. PerceivedQuality of Services Least Ability to Affect

Demand Function

10. Outcome improvement: membership

Chapters that embraced this approach outperformed others significantly in member enrollment and financial sustainability, despite the recession

Member Retention Rate: 91% to 96%

New Member Rate: 5% to 10%

Net Membership: 96% to 106%

Financial sustainability increased: coverage ratio (% expenses from fees & membership) grew from 74% to 80%

Data encourages prioritization:80% of board & mgmt team hypotheses about what we anecdotally “believe” is a problem or issue is not

supported by the data!

From Anecdotal to Data-Driven Decision Making

1. Identify issue2. State hypothesis: “I

believe…”3. Perceived mechanism/

cause4. Design experiment5. Examine data6. Confirm or reject

hypothesis

2. Consumer Latent Needs(Purpose-Driven)

3. InstitutionalStrategic Vision

4. FinancialSustainability

(Surplus/Deficit)5. Resource Intensiveness

(Mgmt Time, Sqft, Foot Traffic)

6. Contribution to People Pipeline

(Intake, Attrition)

1. Consumer Expressed

Data Creates Alignment & Intentionality

Alignment

Who is Measuring Success? Firm that combines advanced analytics, quantitative tools, and

consulting to help management and boards improve their mission and financial performance

Dedicated to shifting the culture of nonprofits and associations from anecdotal to data-driven decision making

Designed custom shared measurement systems for more than 10 associations in the past 5 years, implemented across hundreds of affiliates and tens of thousands of members.

Use survey tools, financial analysis tools, tracking tools, and benchmarking to design its custom dashboards

Use quantitative prediction models to help organizations identify which activities have the greatest impact on desired outcomes.

Offices in Washington, DC and Cambridge, MA www.measuring-success.com

Contact Information

Sacha LitmanManaging DirectorMeasuring Success, LLCOffice: 202-684-7024Cell: 917-370-5836E-mail: sacha@measuring-success.com Websites: www.measuring-success.com

questions? contact info@measuring-success.cominfo@measuring-success.com using data to drive your...

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