In today’s virtual environment, it’s more important than ever to know the difference between crucial information and noise when it comes to decision-making. In Part 2 of this article series, we identify two more key performance indicators than can be used to formulate actionable plans for your association.
If you missed Part 1 last week, click here to access the article. We discuss how your organization can analyze and apply key performance indicators including operating reserve, current ratio trend and revenue mix. This week, we uncover revenue trends and intangible resources.
When reviewing revenue trends over time, an association can further analyze its value and revenue drivers. This allows for plans and resources to be established for the inevitable growth plateau or revenue decline. The purpose of the exercise is for the association to be proactive in its activities rather than reactive; or in other words, base activities on the anticipated future instead of reacting to the past. Declines and deficit performances are faster acted upon trends. Unfortunately, the association will be depleting resources faster, as it takes actions to reverse the decline now and address any potential future deficit. The faster the decline, the faster the response action from the association should be. There are three things to consider:
- Availability of resources – Do such resources exist? If not, what actions should be taken to release them? These can be either financial or non-financial resources, such as staff and technology. Refer back to the association’s financial reserves discussed earlier.
- Anomalies – Are there any particular events that are driving the specific performance decline, such as an unsuccessful conference or a loss of personnel? The same reasoning should be applied in the reverse. If things are improving, are they in precise correlation with any new initiatives or due to unforeseen circumstances? This is where an agile organization will thrive, as it is positioned by its very nature to quickly adapt to uncertainty. The agile or lean organization is also addressed with the fifth performance indicator.
- Outside influence – Are the results driven by the industry or market? If this is the case, then the actions the association can take are more limited. Potential outside influences could include the market getting smaller due to mergers and acquisitions or the economy experiencing a decline.
Associations must first look at their staff as an intangible resource. There are certain ratios that address a variety of attributes, which can affect the association’s performance and responses, from their staff talents to talent retention. These ratios can include employee salary competitiveness and salary per revenue unit. Analyzing them can help assess how lean your association is, or in other words, how efficient it is in using both financial and non-financial resources. It is also agile as it is able to quickly course correct when needed.
Let’s discuss the two ratios mentioned above and why they are important. As association’s people are what drive the competitive advantage of the association, so if your employee salaries are not competitive, it may result in the association losing valuable talent. Your people carry the strategy, develop the relationship with the member base and deliver the content that will keep members engaged with the association. It’s important to look at the salary competitiveness ratio in conjunction with the per unit output to ensure the association is efficient in using its resources. In addition to making sure you have the right people and the right number of people, an association should also ask if its staff has the necessary resources, guidance and motivation to drive success.
Technology is the other differentiator when it comes to an association’s competitive advantage. The ability to be “tech–savvy” and implement new technologies before competitors can affect the success of an association’s strategy in retaining and engaging both members and staff. Technological developments can be internal, such as support of staff performance, or external, in the form of deliverables to the association’s member base. Though there are no ratios that evaluate technology, we recommend incorporating a review of your technology against your peers into the analysis of the association’s current and future performance.
Ultimately, an association is in constant flux as it develops and revises its strategy and actions to meet its two primary objectives: uphold its mission and do so in perpetuity. We have provided some financial and non-financial tools and methods to evaluate an association’s performance to formulate realistic and actionable goals to improve performance. The success of this process will depend on the accuracy of the analysis and the willingness of the association and its shareholders to invest resources into implementing and monitoring the activities.
Don’t forget to check out Part 1 of this article series for more key performance indicators your association can utilize to measure success. If you’d like more advice on how your association can review and enhance performance, please contact our not-for-profit professionals or reach out to our author, Rally Kamenova.