Why Measure Impact

The finding that intrigued me the most from the Nonprofit Finance Fund survey was that 53% of the 6,000 respondents regularly collect data on the impact of their programs.  I thought the number would be higher.  In a time when nonprofits are facing government funding cuts and will be looking to individuals and businesses for more funding, they need to be measuring and communicating impact.

The 53% that measured impact corresponded closely to 54% of respondents who noted that funders ask them to measure long term impact.  While the survey does not note that the same nonprofits who measure impact are the same ones who are asked to do so, the similar percentages lead me to believe that is the case.

The number one reason nonprofits did not measure impact was that they noted they did not have enough time (69%).    The other reasons related to not having enough knowledge to measure impact.  These reasons included:  impact is not easily measurable (54%); no resources to hire an outside consultant to help collect data (52%); and not having the right staff expertise (40%).

Nonprofits must make the time to measure impact.   If they cannot explain to their donors, staff, and stakeholders that what they do makes a positive difference, how will they sustain the organization?

Now I know that studies show that 2/3 of donors give without consideration of the data.   I also know that many organizations provide services to recipients that they cannot track in the long term.

But consider this—1/3 of donors do give with consideration of the data.  So those organizations that regularly measure impact will appeal to more donors and be better positioned to thrive.  

On the difficulty of measuring long term impact, nonprofits need to engage in robust conversations, locally, regionally, and nationally to make sure that what they are doing is truly impacting the community.  They need to clearly define how they will validate and measure the impact.   Small local nonprofits can and do use national studies that refer to research based results.    This can provide the long term impact statistics that some donors consider.

Of all the survey results, this is the number to improve.  Over time, if this number increases and the impact is communicated to donors, staff, and stakeholders, not only will the financial viability of nonprofits improve but the impact of the nonprofit sector on the community will improve as well.

Reflecting on the Nonprofit Finance Fund survey

Nearly 6,000 nonprofits participated in the Nonprofit Finance Fund survey from all over the country.   Nearly ½ the organizations were between $500,000 to $5 million in revenue.    Most (40%) of the organizations were human services organizations with arts & culture (16%) and education (14%) the next two largest.   A few notable statistics:

Only 30% of the organizations received federal funds.  About ½ of the organizations received state and local funds.  Of those who received state and local funding, 63% received the same or more funding in 2012 as they did in 2011.  The % was about the same for federal monies.  I had expected government funding to decrease.  Based on the federal debt and looming state pension benefit funding requirements, I suspect these figures will go down in the future.   

I had also expected that more nonprofits would have less cash on hand.  However 44% had 4 or more month’s expenses on hand and 32% had 2-3 months.    It is not good—especially for those organizations that are likely to experience cuts in government funding.   And 25% of those responding to the survey had one month or less, which is very sobering.   But considering how lean the last few years have been, the nonprofits have really worked hard to hang onto some reserves.

The section of the survey on organizational management actions related to finance and operations asked respondents to check off actions they had taken from a list of prepared actions (in other words—it was not an open ended question).   I would have expected the highest responses to include changing the way funds were raised and spent.   However, that was actually the 4^th most frequent response (39%) compared to attending conferences and networking (58%); advocating to the government on behalf of cause (46%) and upgrading technology to increase efficiency (46%).     Many nonprofits had already pursued funding differently and cut expenses in prior years.    Nonprofits had cut back and even eliminating attending training.  We see a lot of great networking and collaboration come out of seminars.  It is great to see that nonprofits are able to get out again for training and networking.

The statistic that jumped out at me the most was on measuring impact—that is a whole post in itself so I will address that next time.

2013 Nonprofit Finance Fund Survey

Economic challenges continue while demand grows.  This is the primary message from nearly 6,000 nonprofits in the Nonprofit Finance Fund’s 2013 survey.  There is so much great information in here I want to take a few posts to explore it. 

The summary of the survey does a nice job grouping findings into several areas and concluding the following:

1. Nonprofits need new funding sources and models

2. Nonprofits that receive government funding face particular challenges

3. Under these challenging conditions, many nonprofits are unable to meet growing need in their communities

4. Nonprofits are changing the way they do business to adapt to the new reality. 

 Graphs, charts and pictorial representations clearly communicate the results making this a quick but powerful read.