KPIs: one size may not fit all

It has become clear that there is one thing which all 696 of Arts Council England's National Portfolio Organisations have in common. (Apart from their excellence and their funding.) Whether ACE is a major or a minority funder, and regardless of what organisations posited in their applications (unless by some miraculous coincidence they all predicted this anyway) the proportion of income they derive from non-ACE sources is going to increase over the next three years, perhaps in each and every year.

At least that's what their only 'Standard Mandatory' Key Performance Indicator (KPI) will say. This has been the subject of much off-mic muttering and increasing discussion - see, for instance, the contributions by Dawn Langley and Jon Treadway on Bad Culture, which raise most of the key questions about clarity and realism. 

Having written about the importance of well-designed and appropriate metrics fro performance as part of 'situation awareness', and the need for close monitoring so you can 'manage vulnerabilities', I think all organisations should have a set of KPIs, and investors should help develop them - but only 'well-designed and appropriate' ones that fit them. 

Leaving aside the design issue - Jon Treadway illustrates the ambiguities well - there are two aspects to this appropriateness. Firstly is the KPI appropriate to the organisation, its work, its environment, its strategy and its business plan? Put bluntly, the chances of any single KPI making strategic sense for 696 individual organisations of all sizes, shapes and histories are low. (I appreciate the scale of increase is individualized.) Adopting this one freely would suggest we accept that a) ACE funding will be less overall in 3 years b) cuts universal c) there's other funding available to support growth. This may well be the case, but if so, we may need a wider debate about the implications. 

In general, I would agree that decreasing the proportion of ACE funding is a desirable goal for many but not all organisations in the next 3 years, but not necessarily achievable in that timeframe given the defiantly non-growth environment we find ourselves in. For some, an increased proportion of ACE investment in the next three years may be key to long-term resilience and success, and possibly even reduced reliance on ACE funds in the future. The 'Standard Mandatory' nature of this KPI suggests that strategy is out of bounds. One size cannot fit all, surely?  Doesn't that cut across the kind of creative flexibility and individual approach which was widely welcomed in the NPO application process? (That many people - not necessarily all ACE people - can inappropriately attempt to put creative organisations into un-diverse boxes can be seen and felt strongly in Alan Lane's recent blog about preparing Slung Low to join the National Portfolio.)

This KPI goes far beyond what is said about diversifying income streams and organisational sustainability in Achieving great art for everyone. It creates very significant policy through adminstrative practice. To put it another way: ACE policy is effectively that NPOs must now monitor and shape performance so that the proportion of funding from ACE will go down, year on year. (Forever?) Boards must take note when agreeing budgets. NPOs must bring in other income or, presumably, bear some consequences in the future. If this is the case, let's say it clearly and explicitly and know it and allow people to plan long-term now. (As Jon Treadway points out this KPI doesn't tally exactly with DCMS's own KPI about sponsorship and donations - although it started out being about that earlier in the summer, it is now much broader.)

But to achieve this sector-wide KPI (presumably someone can work out the collective increase when all KPIs are agreed and let us know the target?) ACE are likely to also need to adopt a genuinely flexible approach with its NPOs to enable them to be more entrepreneurial and opportunity-seizing when funding or investment opportunity comes along, and not allow permission processes (to make changes to programme and funding agreements) to act as a drag on the kind of 'catch as catch can' spirit organisations will undoubtedly need to have any chance of growing in the next few years. ACE has a strong opportunity here to build on the openness of the NPO process, which even the strongest KPI-cursers praise, and apply it to the rest of the investment relationship.

Given all the economic indicators, and the devastation now being wrought in many local authorities (see the struggles in Derby here), it is hard to avoid the conclusion that ACE, like the government, is expecting an awful lot from private sector funders and philanthropists if 696 organisations are to all, without exception, increase the proportion of funds from non-ACE sources.