Benchmarking is a tool nonprofits use to determine how well their organization is performing relative to external peers or to other sites in their network. The goal is to identify best practices and opportunities, and subsequently to adapt to improve. External benchmarking involves identifying a relevant pool of peers and creating a detailed analysis comparing the costs and benefits of one nonprofit's program or capability with another's. Internal benchmarking identifies the most effective practices of each program or site in order to replicate them. Benchmarking can be applied to many different aspects of a nonprofit organization, including elements of strategy (e.g., program design and partnerships), organizational structure (e.g., job descriptions and use of volunteers), and performance measurement (e.g., outcomes).
How it's used
By identifying the most effective practices across a nonprofit's sites or among its peers, organizations can use benchmarking to learn how to strengthen their operations, identify their relative position in the field, and refine their approach to improve outcomes, processes, and fundraising techniques. In this way, benchmarking can be used to inform almost any kind of strategic decision or strategic planning process, including conducting performance measurement and improvement, identifying and assessing potential strategic alliances, and developing funding models.
Benchmarking is most useful when used to inform specific strategic decisions. To employ benchmarking, nonprofit managers can follow these six steps:
- Clarify the key decision that will be informed by benchmarking: Clearly identify the decision facing your organization (e.g., how to optimize costs per beneficiary), how benchmarking could be helpful (e.g., by benchmarking multiple sites, you might find approaches that are more cost-effective per outcome), and what specifically you are trying to learn from benchmarking (e.g. number and type of staff required to achieve best program outcomes).
- Decide on the key data to gather: Determine the specific metrics or information needed to inform your learning goals (e.g., number of staff, program length, or beneficiary completion rate).
- Choose organizations to benchmark: Brainstorm relevant peer organizations with senior leaders, staff, board members, funders, and other stakeholders. Select organizations that share relevant characteristics, such as target beneficiaries, issue area, size, program approach, or geography. Select organizations that are widely regarded as high quality. If possible, select organizations where you have connections (e.g., a common board member) to provide an introduction.
- Collect data: Gather information on metrics via bench research, site visits and interviews. Good sources of information about other organizations include annual reports and online databases of nonprofit financials and performance such as GuideStar or Charity Navigator.
- Analyze, decide and identify opportunities to improve: Analyze the information collected to identify insights and best practices among peers. Using this information, work with key stakeholders in your organization to identify the most promising solutions to your important issues, and other best practices to adopt.
- Adapt and implement: Benchmarking is not used to simply copy peers; innovatively adapting and building upon peers' best practices to fit your organization's culture and needs is essential.
Benchmarking: How nonprofits are adapting a business planning tool for enhanced performance
This article not only explains the importance of benchmarking for improving performance but also provides multiple case studies from both the for-profit and nonprofit sectors.
Health Care Benchmarking
This journal article provides an overview of benchmarking terms and approaches and shows how benchmarking can be applied to the field of healthcare.
Benchmarking for Nonprofits: How to Measure, Manage and Improve Performance
For additional information on benchmarking, this book provides an in-depth explanation and worksheets that can help an organization work through the process of benchmarking.
Examples and case studies
Benchmarking in Non-Profit Organizations
This PowerPoint presentation provides an overview of benchmarking and then details how Mid-America Transplant Services went about performing a benchmark analysis of its performance.
Benchmarking the Roca Transitional Employment Program
This case study explores how Roca was able to benchmark one of its transitional employment programs against other service providers to establish the program’s value.