Measuring Impact: Nonprofit Outcomes

Measuring Nonprofit Outcomes

“Public funders — and eventually private funders as well — will migrate away from organizations with stirring stories alone toward well-managed organizations that can also demonstrate meaningful, last impact.” — Peter Orza, former director of the federal Office of Management and Budget (OMB)

Nonprofits operate in the complex — trying to solve complicated, far-reaching, multi-faceted issues — and simultaneously measure their impact on these issues. These complex challenges are compounded by the fact that they are often affected by multiple organizations, corporations, states, and the public. Nonprofits struggle with measuring impact due primarily to (1) the lack of a clear definition around desired outcomes and success metrics, and (2) the lack of clear program results tied to expenditures, as resources like people and money are not always linked to outcomes.

Accounting standards and metrics like those developed through Charity Navigator also play a role. For instance, Charity Navigator uses a metric to calculate overhead, or the percentage of donations going to actual programs. This metric, may in fact, discount the need for sound infrastructure to support the nonprofit’s mission. Accounting standards also require nonprofits to bucket expenses into fundraising, programmatic, and operating expenses. This can constrain nonprofits from spending money where it may be most needed to support the mission. Negative public opinion of overhead and overhead rating metrics by evaluating organizations can lead to underfunded and destabilized programs that place a band-aid over a gaping wound.

According to an Oracle “Connecting Dollars to Outcomes” report, nonprofit decision-makers face three primary pain points: (1) financial stability, (2) staff attrition, and (3) donor retention. These often are mutually reinforcing as donors contribute to financial stability (or the lack thereof), and financial stability leads to the allocation and funding of programs, resources, and training, which can lead to staff retention/attrition. Technology companies can aid nonprofits by providing pro-bono services and capacity building resources to support nonprofit missions. Moreover, nonprofits can create an ecosystem with grant makers to more directly connect dollars to program results by defining the success metrics, outcomes, and showcasing how grants support the mission. Philanthropic organizations can also play a role in de-stigmatizing investment and overhead costs and enabling nonprofits to be comfortably transparent in sharing infrastructure and general operating costs.

Nonprofits need to consider technology resources as well as providing training to program managers and financial staff to tether finances to outcomes. Building the knowledge and understanding internally with employees and critical stakeholders can aid in developing the appropriate process and technology capacity needed so support connecting dollars to outcomes.

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