Published:| December 14, 2011|
Author:| Julia Hanna|
In this era of scarce economic resources, the pressure on nonprofit managers to show quantifiable results is greater than ever. Alnoor S. Ebrahim and philanthropist Mario Morino discuss the differences and similarities between performance measurement in the for-profit and nonprofit sectors. About Faculty in this Article:
Alnoor Ebrahim is an associate professor in the General Management unit at Harvard Business School. * More Working Knowledge from Alnoor Ebrahim
* Alnoor Ebrahim - Faculty
For-profit businesses have a common goal: create value for owners or shareholders by creating value for customers. It's a focus that must seem enviably straightforward from the perspective of nonprofit organizations and social enterprises obliged to navigate a path under the watchful eye of multiple stakeholders, including funders, boards, and clients—all while staying true to a core mission and values. In today's climate of scarce economic resources, the pressure for nonprofits to show quantifiable results is greater than ever; as a result, an organization without a strong sense of strategic direction and the internal data to understand its own strengths and weaknesses can be overly influenced by outside demands for metrics that may not always be relevant to its ultimate success. "Without understanding outcomes, you can't get at the issue of what works and what doesn't." —Mario Morino
How can nonprofit leaders address such conflicting demands? Harvard Business School Working Knowledge recently spoke with two leaders in the field of nonprofit performance management. Mario Morino is cofounder and chairman of Venture Philanthropy Partners, which strategically invests money and expertise to improve the lives of children and youth of low-income families in the Washington, D.C., region. Morino is the author of Leap of Reason: Managing to Outcomes in an Era of Scarcity. Alnoor S. Ebrahim is an associate professor in the General Management Unit and the Social Enterprise Initiative at Harvard Business School. He has published extensively on the challenges of accountability and performance management facing nonprofit organizations, including the award-winning book NGOs and Organizational Change: Discourse, Reporting, and Learning and the edited volume Global Accountabilities: Participation, Pluralism, and Public Ethics. Ebrahim teaches the required MBA course Leadership and Organizational Behavior, and chairs the Executive Education program Governing for Nonprofit Excellence. Q: Mario, tell us about Venture Philanthropy Partners (VPP) and how it contrasts with your past experience in the for-profit sector? Mario Morino: My background was in the IT industry, working in systems management, which is fundamentally about tracking the performance and integrity of large computing platforms. What I experienced back in the 1970s and '80s was very similar to what I'm seeing today in the nonprofit sector. Back then, our clients were being asked to make significant investments in IT, so of course they asked, what's my return? As a result I got very engaged in how one collects and presents information to show how the IT function was being productive and what value it was creating for the corporation—which was actually very abstract and difficult to do. I left the for-profit sector in 1992 and spent some time involved with different nonprofits, getting a contextual view of what was possible. That led to the creation of VPP in 2000. My belief was that if a grant or investment in a nonprofit was handled strategically it would yield a greater impact for the people served. In an organization with compelling leadership, vision, and evidence of outcomes that were making a material difference in the lives of those served, our view was that we could come in and make a substantial investment of $3 million to $5...