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Leading Indicators is a CFO Brew series on important or interesting KPIs. Is there a unique KPI in your industry you’d like us to know about? Get in touch with us at [email protected].
Michael Kennedy is CFO and COO of the Muscular Dystrophy Association (MDA). He spoke with CFO Brew about important KPIs for nonprofits, and how implementing technology allowed MDA to devote more of its income towards its mission of funding research into muscular dystrophy and related disorders and assisting patients and their families.
This interview has been lightly edited for length and clarity.
What are some of the key metrics that you’re always keeping an eye on?
The percentage of our expenses that go to [our] mission. We achieved 70%. That’s top tier in any of the rating agencies. It took a journey to get there and we tend to stay there.
The other one is the cost to raise a dollar. It’s very important. A lot of nonprofits focus on gross fundraising, and then they find out that the net is really what goes to the mission. We’re at a 24% level, 24 cents on the dollar. That’s pretty good in any nonprofit.
And then the last piece is I want to make sure we’re keeping an eye on the administrative, the back office costs. We’re at a 6% level. I’d put ourselves against anybody. Most organizations struggle to get below 10. And we’ve been operating at six for three years now.
How were you able to achieve these results?
We made a significant digital transformation. I threw away 65 systems that were not talking to each other. And we created one platform, a Salesforce platform…this one system in the procurement department to record everything at the point [when a transaction was first made]. From that moment on, I had P&Ls on every possible view I could have on the organization; I [was] not waiting for an accounting group to get an invoice 45 or 60 days later…and booking it into some generic cost center code.
And so this now allowed us to take a look at our organization. It allowed the CEO and myself to realign the organization and get it mission-focused in a much, much bigger way. [Through] that process, we’ve saved over $40 million a year that was going to administrative costs.