A Single Metric To Measure Your Membership Non-Profit Organization’s Trajectory

Are you starting up or growing a non-profit? Then just being under-budget is no reason to celebrate. What we need is a ‘Membership Value Perception Index’.

As part of my volunteer work, I have had the privilege of working alongside accomplished entrepreneurs who pay it forward by creating events and programs to foster entrepreneurship. This blog post has been adapted from an email exchange with the management of a non-profit that simply staying under budget does not tell us how well the non-profit organization is serving its membership community, or how positively its service is being perceived in the larger community of prospective members.

I was looking for a single metric that would help busy non-profit board members know where the non-profit is headed.

The metric had to be simple to calculate using data that can be generated without complex reporting systems.

A suggested metric is ‘Net Cash Flow per Member In Good Standing’.

This can be separated into two parts. Cash Inflows divided into average number of all categories of members. And the same for Cash Outflows.

I think watching the index trending over two or three membership periods will help a non-profit know whether members are actually getting value from the organization’s existence.

It can be an indicator of how the organization’s brand perception is trending. If positive cash flows per active member keep increasing year over year, or quarter over quarter then we have an idea of the general optimism about whether the non-profit organization is delivering on the expectations of the community.

It will also help us understand how capital-efficient we are as an organization. If the metric shows a dramatic improvement, while the average memberships is stagnating or sagging, it might be an indication that, we have programs that do not involve spending cash but are creating great value — such as mentor matchmaking. Or it may be that the increasing cash is not resulting in increasing membership, and it will start adjusting by itself (meaning, sponsorships will eventually drop or membership will eventually rise in the months to come, depending on how well or poorly the cash is deployed)

To obtain the average member-count, it can be a simple average of starting count, and ending count divided in half … for whatever period we choose to track this.

The person producing the financial reports should be able to easily set this up as a formula and add it to the periodical reporting.

Of course, we always need a fancy label to lend legitimacy to such ideas. Perhaps it could be labeled as Membership Value Perception Index or Cash Efficiency Metric, so that it becomes a standard item in the non-profit’s reporting.

Maybe something like that already exists in most membership based organizations — I do not know and haven’t researched it. Maybe there is something better out there.

Variances from budgets are incomplete as a measure of performance, especially because there is a tendency in organizations to rush to spend cash merely to retain a budget base. It misses the whole point of budgetary controls. Worse, the consequent risk of complacency and possible lack of financial discipline could be the undoing of a fledgling membership-organization.

The author Ramesh Sambasivan is the principal designer and program lead at SiliconGlades, a business innovation and design firm helping organizations achieve growth while giving. He is also the past president, and current board member of TiE Tampa Bay, a 501c6 non-profit fostering entrepreneurship.

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