Emerging threats and underperformance cause organisations to engage in benchmarking. Benchmarking also moves the focus from absolute improvement to relative improvement.

In the Not for Profit sector, at any point in time, organisations can concentrate on step-change innovation or improving efficiency, since it’s difficult to do both simultaneously. Yet both are necessary for growth. And growth is necessary to achieve greater impact – to reach more beneficiaries. And improve their lives in more significant ways.

Competitive markets, not captive audiences

In a recent study of long run income growth across 135 UK-registered charities[1], ranging in audited annual income from £7M to £680M, the annual growth in income over the five years up to 2018/19 barely exceeded 2% across all charity sectors. Of course, different charity areas (health, education, environmental charities etc), grew at different rates of income level, as did different charities within each charity area i.e. there were relative winners and losers.

The point is that the Not for Profit sector, like the For Profit sector, operates in a competitive market for funding. And if we assume that astute future funders will give significant funding to organisations displaying step-change innovation, or strong efficiency, to achieve beneficiary impact, then perhaps benchmarking those things is a useful action to adopt.

It’s also worth considering that by championing and promoting step-change innovation, there may be some very wealthy business people suddenly interested in supporting your mission (as new-convert philanthropists), because like them, you’re innovation-led.

Case Study

What do animal-protection charities and arts charities have in common? Both charity areas have donors who are passionate patrons, believing in protection and long-term sustainability. With both, the habitat/venue capacity significantly limits their growth prospects.

Arguably, arts charities could learn (via benchmarking) from the innovative approaches of some animal charities. For example, WWF has changed its emphasis from protecting endangered species to protecting the environments they operate in. WWF realised that you can’t achieve one without the other. Likewise, game reserves and zoos enable genetically diverse, breeding populations of certain species to flourish. Can some arts charities translate this idea into their own context, by championing blended artforms to reach new generational audiences?        

Finally, if some charities blend health research with healthcare (for beneficiaries suffering a particular health problem), while some charities blend animal protection with animal welfare, can arts charities use this idea to broaden their mission beyond arts promotion, perhaps to arts therapy as well?

What else can benchmarking do?

Benchmarking can provide a perspective on poor, average and best practice, whether within comparable business units, your charity area (health, education, environmental charities etc), or best practice in the Not for Profit Sector as a whole.

Benchmarking can be useful to identify organisations operating above your current operating scale. Ones that you can examine in more depth, to understand what is needed to move from your current scale to theirs. Benchmarking can also uncover desirable organisations to partner with.

Is benchmarking a silver bullet in planning?

Benchmarking isn’t the tool to identify future market trends, emerging threats, current performance problems, key risks, or internal control deficiencies. What it can do well is follow on from those things, by uncovering best practice at a certain point in time. It can identify average practice and poor practice. Therefore, to improve your planning, do your analysis first and your benchmarking second.

With benchmarking, where do I start?

Since most Not for Profits cannot afford the time or cost to do extensive benchmarking, perhaps a good place to start is with top-level benchmarking, for an SMT and board audience. Some peer organisations can be identified for closer examination and comparison of impact outputs.

If within your charity area, there are few examples of best-practice efficiency or innovation-led growth, but plenty of evidence of beneficiary need expanding faster than sector impact (environment & leadership-orientated charities being prime examples), then it’s timely to look outside your charity area at the charities keeping pace with rising need in their chosen charitable area.

Equally, if your charity area, perhaps because of population demographics, or sudden health cures,  has a reducing number of identified beneficiaries over time, look to other charities who have successfully reinvented their mission, for ideas on how to expand yours.

Simon Leicester

SME Consultant

---

[1] smeconsulting.org.uk study 2020.