Is your non-profit too trendy?

Is there such a thing as being too trendy? I’m not talking about fashion, pop culture, or the latest hair styles – this is not that kind of column.  The trendiness I’m talking about is the propensity organizations have to report financial and non-financial data in the format of how data points have trended over time.

Who doesn’t like a nice graph with data points trending up over time?  Even a simple “this year vs. last year” or “this month vs. last month” presentation is really a representation of the short-term trend. Not-for-profits often utilize trend analysis as part of their reporting and management decision-making when considering recent and historical performance and go-forward strategy and planning.

Trend analysis is particularly dangerous right now. Organizations are rethinking their trend analysis in the context of identifying the most meaningful data points, understanding whether those data points mean what they are thought to mean, and determining whether there are different data points that might be more meaningful for decision making right now.

Why is trend analysis more dangerous right now than at any time in recent memory? There are several reasons:

• Noise in the data: It’s hard to think of any organization that has not experienced unusual results due to the disruption of COVID and/or the various government relief measures associated with COVID. Virtually every data point you can measure has an accompanying “asterisk” for the last two years due to some effect of the COVID disruption. This is true for your own organization’s data and for any peer organizations’ data that you may access or use for comparison purposes.
• Timeliness: Many organizations have struggled with timely reporting due to the increased volume of work, staff recruiting and retention issues in accounting and other administrative areas, and process changes related to accumulating and tracking financial and other performance data. Therefore, the data you may have historically used from your own organization or from peers may not be timely enough to have the same relevance it once did.
• Establishing expectations: For any given measure, it is unusually challenging in the current environment to establish whether a trend upward, downward, or flat is good or bad. For example, are personnel costs up because the organization is growing (generally good), or because recruiting and retention problems have created inflationary pressures (generally not so good)?

Because of these factors, accumulating and reporting data trends in the same or similar manner to your historical practices may be of diminishing effectiveness in terms of evaluating performance and making go-forward decisions. If your trend reporting or dashboard data set hasn’t changed since before the pandemic, it may be time to consider a refresh.

All of this trend reporting and analysis is supposed to help management and the governing Board understand what’s going on and make decisions about the path forward.  Spending time compiling, reporting, and consuming trend data that is not helpful for decision-making doesn’t add value. Focusing work effort on tasks that do add value is very trendy.

Here are some ideas for data points proving to be more relevant and useful in terms of observing trends in the current environment.

1: Measures of employment and open positions. Call it the “Great Resignation” if you like; finding and retaining staff is particularly difficult at this time. Tales of organizations operating at less than full service-provision capacity due to staff shortages are common. This is driven by demographic trends that are larger than the COVID disruption, but which were exacerbated by COVID.

Do you know how your organization is trending in the context of staffing? Data points to measure, report, and be cognizant of your organization’s trend over time include:

• The number of open positions, in total and by position type
• The percentage of positions open as a share of total desired employment
• Positions filled and vacated each reporting period
• Retention rates in the context of what percentage of new hires are still with the organization six, twelve, or some other number of months later.

You can certainly compile this information for your own organization for current and historical periods. You can also get meaningful information on some of these data points from peers, many of whom list open positions on their websites or on other publicly viewable job boards and sites.

2: Measures of wage costs. One tactic that employers are using to address the retention and recruiting challenge is to raise wages. Some organizations have received (or been invited to request) specific government funding to increase pay for certain types of employees, especially front-line health and human service workers. The recent Healthcare Worker Bonus rolled out by the New York State Department of Health is an example. In the context of wage cost trends, understanding wage costs that are sustainable vs. non-recurring compensation payments like the Healthcare Worker Bonus and others is important. At the most basic level, comparing entry-level starting wages offered by peer organizations over time to your trend in starting wages can provide meaningful information.

3: Measures of services provided. Many measures of revenue have been distorted by the alphabet soup of COVID relief programs since 2020. To the extent these funding streams are non-recurring, looking at data on total revenue can be misleading. Understanding your organization’s service provision level separately from revenue dollar figures can help provide a clearer picture of what the organization is actually doing and how that activity has changed over time. Trends in service volume may be caused by a variety of reasons, so being able to articulate not just the trend but also the reason for the trend is important.

4: Measures of program profitability. Every organization should be able to articulate the financial results of its major programs, both with and without COVID relief income. Showing profitability over time for each program rather than just in total for the entire organization speaks to the sustainability of individual program activities in a way that is meaningful in an environment of strained resources. If and when you have to choose, how would you determine program activities to which additional resources should be allocated?

5: Measures of timeliness. How long does it take to get billing out? How about the time it takes to fill a staff position from initial job posting or initial inquiry by a potential candidate to that person becoming a productive staff member? How long does it take to intake a new patient or person requesting your organization’s services? There are tasks critical to your organization’s operation, where completing the task timely is better for the organization. Identifying what those are, measuring them, and observing the trend over time is meaningful to go-forward strategy.

This kind of trend analysis doesn’t have to be complicated or involved.  It does not have to be presented as colorful graphs or require a lot of infrastructure and effort to track and compile data. If staff vacancies are a problem worthy of attention, but you don’t have detailed data at your fingertips, it might be of value to simply state that before COVID, you typically had x% of front-line positions open at any given moment; during the COVID peak that percentage was y%; and currently it’s z%.  Then talk about some of the reasons for the changes over time, what you’re trying to do to address the trend, and how you believe those efforts have been effective (or not). Having this conversation to ensure that management and the Board have a shared understanding is important as the organization moves forward.

The more data you have to support these conversations, the better. But just because you don’t have a comprehensive set of data immediately available doesn’t mean you shouldn’t report the trend and converse about it. This type of trend identification and discussion lends itself to establishing go-forward targets and goals for where you want this trend to move in the future. Active discussion also takes the danger out of trend analysis since it enhances understanding beyond the data points. Discussion of this nature can also help support the allocation of resources to achieving established goals.

So go ahead and be trendy. Focus on following and reporting the trends that will add value for your organization in the form of meaningful discussion with a shared understanding as you move forward.

Jeff Paille is a CPA and partner at the Bonadio Group and has consulted with tax-exempt organizations for almost 30 years.