Key Performance Indicators: A Nonprofit Tool for Gauging Program Effectiveness and Setting Priorities

02-19-2025 1:00 PM EST. In today's slow-growth economy and high-priced environment, nonprofit executives are under increased pressure to justify every dollar spent. When it comes to determining their program priorities, nonprofits often use zero-based budgeting. Donors, directors, grant makers, and others, however, are now demanding an alternative method for determining program priorities and measuring budget efficiency. As a result, nonprofit leaders are increasingly turning to key performance indicators (KPIs). KPIs are simply ratios of financial data that can be used to tell a story when constructed properly. KPIs measure many aspects of nonprofit management. You can develop KPIs for measuring program efficiency, donor retention, volunteer recruitment, financial management, benchmarking against other nonprofits, and more. The information they use comes from the financial information you provide in your annual regulatory filings along with information from your daily business opera