Over the last twenty years I have had the difficult, yet rewarding experience of raising funds from individual investors in order to start several new commercial businesses.
In every case, the investors insisted on a solid game plan revolving around proper staffing and winning strategies.
Those same investors also demanded frequent updates (every quarter of each year) about our results (outcomes).
In no way was this request unreasonable. In fact, everything from quarterly investor or stockholder updates to highly orchestrated analyst calls outlining in detail public company quarterly results are rather commonplace in the business world – so common that it does not go unnoticed when companies do not compile and share their outcomes each quarter!
Exception Rather Than the Norm for Small-to-Medium-Sized Charities
When we turn to the charity sector, especially nonprofits considered small-to-medium in size, only a small percentage properly chart, measure and report the outcomes crucial to their mission.
Why is this?
There are many reasons or as some would refer to them as excuses for charities not measuring outcomes.
In my opinion, the number one reason, rising above all others is that their stockholders (affectionately called funders or donors) do not demand to see outcomes reported.
What is even more surprising is the top donors, who often comprise as little as 12% of the total donors, yet provided 88% of the funding, are also not insisting upon proper outcome measurement and reporting.
Will This Change?
Since I have now been CEO of numerous companies serving the nonprofit sector from both a fundraising (Bloomerang, eTapestry, Master Software) and an outcomes measurement (Social Solutions) perspective I am often asked if this lack of demand for accurate outcome measurement by major donors change.
My answer is yes, but over an extended period of time.
Such change is slow to happen in the nonprofit sector. Philanthropy has been successful without it because of the traditions involved and the truly “feel good” nature of donating.
But change is now on the horizon.
Removing the Overhead Myth
A key reason for the change mentioned above happening faster is the realization that measuring the percentage of overhead maintained by nonprofits was stifling growth and the ability to truly better achieve most missions.
Just a few years ago, three major watchdog groups banded together to make a bold statement about the pitfalls of focusing in on the percentage of overhead by charities.
Ending the “Overhead Myth” was a truly bold statement by Charity Navigator, Guidestar and The Better Business Bureau Wise Giving Alliance! This statement drew a line in the sand saying there were many much more important items for charities to measure and use for comparison purposes by funders.
The awareness of the proper measurement of outcomes by charities thanks to the donors who support them is now gaining more strength.
I for one am going to predict this awareness will steadily increase until it becomes a clear mandate! Once it becomes a mandate, those nonprofits engaged in fundraising will need to heed in order to be successful in growing their donor base, maintaining the donor base and increasing their mission funding.
An easy way to get started is to report on program outcomes.
Does your organization quantify your direct service every year (or more frequently)? In other words, do you measure:
- How much of what your organization does gets done each year?
- How many meals were served?
- How many families were sheltered?
- How many animals were adopted?
- Do you ask your clients/beneficiaries if they are satisfied with the services/assistance/etc. they received, and report that to funders?
Fundraising outcomes can take many forms:
- what is the cost per donor acquisition? (fundraising ROI)
- did your average gift size increase?
- did your donor retention rate increase?
- # of in-kind gifts + value
- # of major gifts secured + value
You might already be sharing these kinds of metrics with your board. Certain funders may be emboldened by seeing these figures as well.
What do you fundraisers out there think?
Is the measurement of outcomes going to rise in value over the next decade? Does your organization already report on outcomes to stakeholders? Let me know in the comments below!