In the current economic climate, the grant funding pool available to nonprofit organisations (NPOs) has shrunk. This situation requires NPOs to demonstrate how their activities provide a social return while ensuring that their operations are financially sustainable.
This requires a strategic approach that allows for greater understanding of how organisational activities lead to social return. There are two disciplines of strategic management that, at first glance, may seem unrelated, but share a lot in common and can assist in managing these tensions.
These disciplines can address the funding, accountability and sustainability requirements of NPOs. The first is lean thinking, and the second is monitoring and evaluation (M&E) practices. This article provides a synthesis of the two approaches, and proposes that by following one, you will be able to adopt the other, which in turn may help with addressing funding requirements and aid in ensuring long-term sustainability.
Lean thinking provides a focus on collecting data that relates to indicators of efficiency and effectiveness within an organisational system (Miller, Bogotova, & Carnohan, 2011). The information collected is informed only by what is needed. This is similar to the requirements of an M&E data collection. In essence, the focus of M&E data collection is monitoring NPO programme implementation and evaluating its effectiveness in achieving its intended outcomes and goals (Rossi, Lipsey & Freeman, 2004).
Moreover, lean thinking provides a methodology that assists with streamlined data collection. As such, implementation reports are presented in a streamlined way, for example an A3 report is written on one page and communicates business problems, how they were identified and action plans to resolve them (Liker & Meier, 2005). In addition, visual management in lean management provides data visualisation in a centralised location for anyone in an organisation to access. The visualisation communicates operational efficiency and effectiveness rates. This promotes information sharing, learning and collaboration to improve service which is also becoming a key component of reporting within M&E which uses performance dashboards to achieve similar results within an organisation (Azzam, Evergreen, Germuth & Kistler, 2013).
In addition, data is collected in a cyclical way that promotes information to be used for decision-making and fosters continuous improvement. In particular, lean follows a plan, do, check and act cycle (PDCA) or define, measure, analyse, improve and control (DMAIC) cycle (Liker & Meier, 2005; Miller, Bogotova & Carnohan, 2010). These cycles have information utilisation built into their design, which means that there will be a continuous feedback loop between reporting and decision-making to promote programme improvement. M&E cycles follow a similar pattern and encourage information utilisation for the same purpose (Shapiro, 2011).
A lean approach promotes the strengthening of relationships within a supply chain to ensure business sustainability and operational (service) improvement across all stakeholders. A similar approach is followed in M&E to ensure that shared value is understood and fostered within a social value chain (i.e. across funders, NPOs, programme beneficiaries and the general public – and, in some instances, government as well) (Porter & Kramer, 2011).
There is one fundamental difference between lean thinking (or a lean approach) and M&E. The former focuses purely on efficiency and effectiveness to create quality products (and services) by reducing waste in a value chain. The latter focuses on providing better service so that social programmes can offer better services to programme beneficiaries, and that these services make a difference in their lives.
Although there is this difference, using a lean approach to organise how an NPO operates will aid it by helping it to start thinking evaluatively about its strategy and operations, which in turn will make the implementation of M&E within an organisation much easier. Both approaches will ultimately aid NPOs in operating in a more sustainable way.
- Asgar Bhikoo is monitoring and evaluation specialist at Tshikululu Social Investments (TSI). This article first appeared on the TSI website.