The Correlation of ROI and Strategic Performance Management for NGOs - Coursework Example

GOVERNING AND LEADING NONPROFIT USING ROI RELATED LITERATURE This chapter will explicate the theory and application of “return of investment” to nonprofit organization’s system of governance to leverage access from donor communities and other charity institutions. Researcher will endeavor to explicate the correlation of ROI and strategic performance management for NGOs to gain and strengthen its integrity, credibility and trustworthiness as partner for community-based developmental interventions. This will primarily use the theory of ROI for Nonprofits authored by T. Ralser as foundation in furthering the discussion on NGOs sustainability. A significant aspect here is the needed paradigm shift about viewing the donor community as investors for positive change in the community. The Nonprofit Organization Non-governmental organization has the very limited funds sourced from partners for its operational and administrative activities. As consequence, the organization is perpetually challenged to sustain its programs and projects due to its inherent dependency from funders or philanthropic supports – the latter is also undertaking shifts and new models adaptive to financial crises hitting in most advanced countries. Ralser (1997), an author of ROI for NonProfits: The New Key to Sustainability, explored the significance for NGOs to manage programs effectively to enable return of investments (ROI) internally and for its partners, albeit limited financing, as illustration that an organization is able to attain valuable outcome to convince potential partners or funders to support the NGO based on the results and success outcomes it can provide to its beneficiaries and to funders. This invites NGOs to develop systems using the economist vantage to upscale its performance management to change the image of the institution as charity-dependent to an investment-oriented institution. No, Ralser (1997) does not literally wanted an NGO to amend its nature from non-profit to a corporate. It merely encourages NGOs to evaluate and refocus programs and make its implementation bring more credibility, integrity and trustworthiness by acculturating success or outcome-oriented performance. Thus, instead of packaging the organization using emotional approach, the organization must rebuild its image to become attractive to funders on the basis of expertise, effectiveness and efficiency in delivering services to its beneficiaries. This system is otherwise known as ROI-based approach with ROI metrics in evaluating the organizations’ capacity for success and profitability in their respective services and products. True, there are certain difficulties in demonstrating the organization’s value and impact it derived from their programs. To ease this system, Ralser (1997) introduced Organizational Value Proposition (OVP) as NGO’s counterpart to a corporate ideation on Economic Value Added. He also recommended some framework or mechanism to advance nonprofit ROI scenarios and the significance of communicating NGO’s ROI-based program to funders and philanthropists to improve the capacity of the organization for resource generation (Ralser,1997). This meant that NGOs should not rely on its capacity solely but must also illustrate capacity, character, capital, collateral, and conditions (Ralser, 2007, p. 26). This will also be utilized as a strategy in developing an institutional blueprint for sustainability using an investment-driven mechanism (Ralser, 2007). ROI for NGOs Return of investment technically is a profit earmarked from an annual income equitably divided to common stock and preferred stock equity (InvestorsWord, 2012). It measures how proficiently a company uses its capital to gain profit (InvestorsWord, 2012). It’s otherwise understood as the income generated from profit (InvestorsWord, 2012). For some economist, ROI has wide application as predictive measurement and can be an instrument for causal analysis methods to bridge results to actions and it quantify targeted business results (Stetar, 2003). It’s also a tool to measure the correlation of productivity and efficiency (Stetar, 2003). For an NGO, non-profit in its nature, ROI can be derived distinctly and this depends on how an organization package itself based on its capacity, expertise, performance management scale and tract record of successes in its development intervention (Stetar, 2003). Reckon that like a company, an NGO have its vision, mission, goals, structure, programs, projects, beneficiaries, and funds for operational and administrative cost. But unlike corporation, NGO does not have its capital to realize plans and operationalize system. They generally make proposals to funding or philanthropic institutions and lobby for financial support. Imagine in America alone, there are 1.8 million non-profit organization competing to access to about $ 250 billon in 2005 from philanthropic individuals, foundations, bequests and corporations either for rural development, medical necessities, social services for nearly inaccessible communities, educational support, climate change impact mitigation, conflict resolution and management, and developing transparency to democratize a government. Ralsey (1997) was bit astonished to note that there were three nonprofit organization able to access $443 million for their program. Is this acceptable for the rest who are only able to access lesser funds? Ralsey (1997) however objectively assessed that these institutions that are able to generate much fund are also able to deliver quality services with effectiveness. This is not just pertaining to fundraising effectiveness. Ralsey (1997) argued that if non-profit demonstrate results, then there is high probability that funders will finance a program because amid scaling competition to access for support, funding donors would opt for those whom they can invest for proficient and effective results. Hence, quality output and success level becomes a standard requisite to gain the donor’s trust and confidence. Managing NGOs: Building Credibility How should we be certain those outcomes are satisfactory to meet the standards of the donors? There is only one answer to this. Improve the capacity of the NGO to manage its performance like how a corporation is run. NGOs therefore must be engaged in strategic performance management in its operation to attain competitive leverage with the rest. As such, they must work to define its institutional plans, policies and mechanism; regularly conduct social and business analyses; and, manage its financial and human resources are strategically (Stewart, 1991). Effective project management should consider achieving such framework to understand the business operational management taking into account performance quality control, constant monitoring and conduct of employees’ evaluation or appraisal. Disciplined decision-makings is a must to advance its performance and increase employees motivation, and make internal policies effective in attaining goals and targeted outcome based on desired key result areas (KRAs). NGOs must also improve its human resource management (HRM) by optimizing its organizational structures functions to make the system fully integrated in its operations. Executives should also enforce and nurture value-system (Ralser, 2007). Managers should therefore be knowledgeable of the nature of the programs and the needed skills from workers. Principle-centered institutions would always consider the pivotal significance of trusts and strong commitments from staff. As managers are tasked to enforce regulations and policy-based decisions, distinct and competitive guidelines should be enforced for administration and in HR management to refine their relations with their respective community-based beneficiaries-- putting at heart the relevance of producing unrivalled quality service. Working ethics should also be practiced while encouraging teamwork amongst workers and volunteers. It is therefore crucial for managers to be equipped with knowledge on quality control to ascertain time management, cost efficiency, open communications, systematized procurement and risk mitigation (Ralser, 2007). Working environment should also be standardized to make it conducive for operation. Moreover, project managers must also illustrating advanced skills for planning, organizing, directing and controlling, financial management, and technical ability. Thus, it’s really important to systematize relations, management, services, and social marketing as added value to its credibility. Managers must be regularly conduct institutional assessment to note the organization’s strength, weaknesses, opportunities and threats (SWOT) and regularly evaluate the political, economic, social, technical, environmental and legal (PESTEL) analysis to strategize methods in dealing with threats and weaknesses (Stewart, 1991). Nowadays, organizations have websites depicting its reports, achievements and challenges as an organization working with sectors within communities. For businessmen and entrepreneurs, portals are ways to expand their reach and an illustration of their commitment for transparency. While this assists business managers in expanding commercial opportunities, this will similarly assist the NGO to communicate to potential donors and philanthropic groups their status, conditions, credibility and their needs. Such increased access became an alternate cost-efficient medium of offshore communication although such require scaling up their communicative level of the institution to rigorously promote their services and programs (Stewart, 1991). It likewise helps hasten management by automating communication and coordination of all offices within its structures. Currently, information technologies have already improved e-commerce transaction and have supported electronic banking, online transactions mechanism, automated accounting and electronic data exchange management. This should support in improving the services and proficiency of the organization. NGOs should uphold at all times the values of accountability. Such encompass maintaining responsible financial status and corporate decisions by publicizing all forms of media. This covers performance appraisals. Regular performance appraisal is also imperative in project management. This is to permit organization to evaluate the performance of the employee in accordance to expected results and to standards. As such NGOs must have some quality control or standard of measures or criteria to accurately test the performance of employees and managers. This will inspire to reveal the hard labor toiled by employees and is a cause for granting rewards, benefits, or promotions. It will also help the management to understand the needs of their employees and to determine which of their skills needs improvement though training and seminars (Stewart, 1991). Demonstrating Impacts NGOs must demonstrate the impacts of their intervention by publicizing best practices and results of their programs in the community. This can be done by conducting press conferences to bare results and benefits shared to the community. Other ways are publicizing outcomes of projects in the website and modeling results and effectiveness to other NGOs. Changed lives and better conditions are often the themes here to depict how intervention improved the beneficiaries’ conditions. Evidences here are those that will depict positive changes. Aside from revealing these in narrative report and web-based information, the same can also be shared in social networks for public information. In ROI, changes can even be tabulated and graphically shown. Showcasing these will increase the credibility of the institution and adds to its power of influence. NGOs must start acculturating their best practices and translate this in their job performance. This will bolster in nurturing organization leadership and expertise. Successful organizations have firm institutional structures and have made their vision as the image of their workers, too. If success is nurtured as an organizational behavior, they will become more discipline about recounting, understanding, forecasting and calculating possibilities or results, including the human behavior within the organization. This is in fact the core of institutional management where leaders are adherent to systems and control to predict patterns of behavior and events at all levels. Psychologists adopt organizational behavior theories using four basic concept of behavioral science: individual, group, in organizational structure, and in organizational processes. The motley of influences, factors, causes, and aspects of human behaviors as reflected by workers’ individuality, discernment, work satisfaction, dynamisms, and internal politics or governance depend on the kind of organizational behavior and leadership that is being wielded within an organization. Experts posit that behavioral psychology have serious impacts to institutions hence all matters pertaining to workers condition, salaries, benefits, perks, opportunities, and working conditions should be considered at all times because this will certainly affect positively or negatively to their motivations. This is very significant since NGOs have always espoused ideation that they are for shared values, principles, and commitment. Like corporations, NGOs can also use psychological themes to ascertain the behavioral responses of their workers. Personality development should be part of the activities of the institution, too, in calibrating workers qualities (Stewart, 1991). Organizational experts opined that organizational problems happen when (a) there is misunderstanding of its vision, mission, goals and programs; (b) when conflicting interest dominate economic interest and thus, hinder innovation; (c) there’s too much of bureaucratic maze; (d) there is lack of worker’s adaptability to changes; (e) there is organizational mismanagement and lack of leadership resulting to demotivation, (f) and, there is absence of teamwork, coordination; and (g) absence of systems efficacy and empathy” (Stewart, 1991). Effective managers must be considerate on understanding organizational structure, mechanism, and organizational culture. NGOs workers must therefore work to attain business leadership status. Issues pertaining to organizational behaviors must be resolve through: a. Organizational Development – an organization should have clear vision, mission, goals (VMG) and programs. VMGs are its sole direction in advancing the institution and it’s the unifying force. These are foundational aspect of an institution and it’s from these contexts that its values are ideally derived. b. NGO executives should practice a combined transformational, transactional, authentic, and socialized charismatic leadership to bridge relations in their work and operations. These are significant in enforcing legitimate authority for operations and acquiescence to monitoring and evaluation. With this combined form of leadership, the management is expected to have better relation with its workers. Good leadership nurture trust, neutralize situation and recreate better values. It empowers workers to become persons of foresight, reliability, and with cultural sensitivity Conclusion A well manage NGO with business value as part of its organizational culture will likely be able to present itself to funding partner or to its investors and partners with integrity, competence and quality. This makes an organization trustworthy. The organization, as an independent entity, can maximize its image and its maximum contribution per year to build resource generating capacity. Some experts on resource generation would at times try to quantify the cost and factors of their success following their analysis. They too would include ROI variance that may indicate the need to improve its performance in the future or for possible discontinuity of the activity if losses are hard to recover (YWCA of Greater Pittsburgh, 2012). Indeed ROI for NGOs can assist in strengthening the organizational effectiveness in tracking outcome and success in real-time format. The optimal budget allocation to programs establishes efficiency and discourages redundancies while implementing the services (YWCA of Greater Pittsburgh, 2012). It can also determine specific projects and programs for those needing allocation by itemizing the activities and identifying the long-term successes (YWCA of Greater Pittsburgh, 2012). Most of the data management these days, especially in quantifying these results, can be readily done online as some institutions have already developed their online system (YWCA of Greater Pittsburgh, 2012). In this regard, there is less dependency on manual performance appraisal and more access to information through utilization of web-based information. Ralsey (2007) posited too that through ROI, program management application is develop as modernized integrated system of evaluation. Thus, ROI truly introduce targeted benefits because it can enhance program management by inculcating the ability to evaluate individual program effectiveness. It also optimizes financial planning by replacing a need-as basis fund allocation with performance-driven fund allocation potential (YWCA of Greater Pittsburgh, 2012). Served program beneficiaries can be enthusiastically monitored because ROI system has an integrated approach of program management which is of course, sensitive to necessary adjustments (YWCA of Greater Pittsburgh, 2012). However, NGOs can only effectively use this system if its executives are truly convince that the approach is attuned to the community’s culture and if they are willing to adopt corporate approach in their internal management. The same is necessary as requisite before they could use the instrument for performance valuation to ascertain achievement of their goals as value for competence. References Ralser, T. (2007). ROI for NonProfits: The New Key to Sustainability. John Wiley & Sons, Hoboken, New Jersey. InvestorsWords (2012). Return on Investment. http://www.investorwords.com/4250/Return_on_Investment.html Accessed: July 21, 2012. Stetar, B (2003). Can we Really Measure Training ROI?, UT Cnter for Industrial Services, SOE Annual Training Symposium on ‘Transformation for Success, University of Tenesseee, US. pp. 1-30. YWCA of Greater Pittsburgh (2012). Measuring Social ROI: Non-Profit Performance Management, Datavibes, Pittsburgh, PA. pp. 1-5. Stewart, J. (1991). Managing Change Through Training and Development. Koga, London, UK. Read More