I read this quote someplace and wrote it down so that I could use it in a Blog. Although I remembered the quote, I have forgotten where I wrote it down so I cannot attribute it to the proper individual, my apologies.

The book Moneyball: The Art of Winning an Unfair Game was written by Michael Lewis in 2003 and became a popular movie last summer. The book introduced many to an analytical, evidence-based, approach to evaluating baseball players and their teams. The central premise of the book is that the collected wisdom of baseball insiders over the past century is subjective and often flawed.

Bill James, a hobbyist statistician is widely credited with changing the way many of us look at baseball players and teams today. While working as a security guard doing night shifts at a Stokely-Van Camp Cannery, Bill began doing statistical research and wrote about the insights he gained from studying the facts and figures of the game. For example, he documented how the effectiveness of pitchers changed, as the number of pitches they threw increased; how teams that were constructed to score a certain number of runs over a season could expect to win a specific number of games; how the runs-batted-in statistic is irrelevant to how good a hitter the individual may be and so on. A hitter’s runs-batted-in total is more a measure of how lucky he has been to be at bat with players on base and in scoring position, rather than a measure of how good a hitter he is. Over the years, teams that have adopted the concepts first put forth by James; have generally enjoyed greater success than those that have not.

Lewis quotes James a number of times in Moneyball. I was surprised that none of these quotes made it to the movie. One that I found most notable since I read the book is this one: “It is not surprising that we develop all of these statistical measures of success in the game of baseball – what is surprising is that regular business is not generating a similar set of statistical measures of success.” If you think about this quote, nowhere is this truer than in the not-for-profit world.

For the most part, we still evaluate non-profit charitable organizations on the percentage of expenditures devoted to program activities vs. fundraising and overhead activities. While it is obvious that spending more on program activities than any other activity is important, it barely scratches the surface of trying to evaluate the effectiveness of a charity. What is needed is a set of metrics that tell us the important facts about an organization’s performance.

Who will develop these metrics? It won’t be Bill James – he did baseball. It could be Congress – heaven forbid! It could be the resource providing community – the larger foundations and granting organizations. However, I believe that the best people to explain their effectiveness and develop analytical measures of their success are the not-for-profit agencies themselves.

Not-for-profit organizations work on extremely complex social issues. Frequently they address only a portion of the problem, while other agencies address other parts of the issue. If analytical measures and performance metrics are imposed from the outside, the probability that they will be accurate and relevant to the nonprofit world is unlikely.

However, the resource providing world is demanding these performance measurement tools. Resources are scarce and will never be sufficient to fully address the need. Spending resources in the most efficient manner is the challenge. Not-for-profit organizations should develop performance metrics for their own internal management purposes and then share these with the resource providing community. Organizations that adopt this concept will be more successful, just like the baseball teams that have sharpened their analytics.

As one of the largest CPA firms in Boston, KLR is unique because they service over 220 not-for-profit organizations with compliance and consulting services. We have extensive experience helping Nonprofit organizations regarding boards, and board responsibilities, charitable contributions, taxes and 990 filing requirements.