The Power of Nonprofit Outcome Measurement

by: Smith and Howard

April 29, 2015

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A U.S. charity recently made the news when it was accused of reporting an inaccurately high percentage donations that went to program services. The media outlet that uncovered the discrepancy looked beyond that claim, though, to scrutinize the organization’s outcomes — a strong sign of the growing importance of outcome measurement. Savvy stakeholders, as well as savvy nonprofits, realize that outcomes can convey a more complete picture of an organization’s performance than figures pulled from financial statements.

What is nonprofit outcome measurement?

Outcome (or performance) measurement is essentially a method of determining the impact of a program or activity. Unlike traditional measures, such as number of clients served or the amount of donations received, outcome measures allow an organization to assess whether a program is achieving its intended results. An “outcome” is generally described as a specific desirable result or quality of a nonprofit’s services.

Outcome measures should gauge the level of accomplishment of a program goal in terms of changes in the lives of individuals, families or the community at large. For example:

  • A program designed to teach reading to adults may use the literacy rate for the area served as an outcome measure 
  • An organization whose mission is to help teens stay in school by providing a supportive after-school environment with tutors and supervised activities might look at changes in the dropout rate, graduation rate or similar outcomes. 

Bear in mind, that outcome measurement may not prove that the results — good or bad — are due solely to your efforts.

An outcome measurement program will require an organization to identify appropriate outcomes and indicators of those outcomes. It also will involve the collection of data relevant to the indicators (for example, by surveys or interviews of clients, program dropouts and their family members) and analysis of that data. 

The not-for-profit should release regular user-friendly reports of its findings to stakeholders. And, of course, the organization must take appropriate action based on the findings.

Why should nonprofits track outcomes?

Some nonprofits may have no choice when it comes to outcome measurement — grant makers or other stakeholders might require it. But even organizations free of such demands should consider engaging in the process in light of its many benefits.

Outcome measurement can act as a check that the nonprofit is successful at reinforcing the mission and achieving goals for board members, staff and volunteers. Measuring and reporting outcomes can take the focus away from resource allocation; such as the percentage of funds spent on “program related activities”. Achieving sustainable success may include investing in such non-program-related activities as training, leadership development and strengthening internal controls, all of which improve outcomes. 

Sharing outcome measurement with other existing and potential stakeholders cam demonstrate the impact of the organization’s programs and activities. As a result, this supports marketing and fundraising efforts. The results also can prove helpful with short- and long-term planning. It’s easier for the nonprofit to identify effective programs and activities, as well as those in need of improvement.

Are there any caveats?

Yes. For example, outcomes need to be measured on an ongoing basis. Examining clients or other conditions upon immediate completion of a service is necessary; However, nonprofits should also return to re-evaluate the conditions at some point in the future. This provides insight as organizations will be able to see if results have eroded over time.

Additionally, not every important outcome will be immediately measurable. Some outcomes take years or longer to materialize. In such cases, a nonprofit might be able to identify milestones to measure progress against as time goes by. So-called “soft” outcomes — for example, stronger relationships among community members — can be difficult or impossible to measure but still merit regular consideration.

Finally, while outcome measurement can be helpful for planning, organizations should remember that it’s backward-looking. Budgeting, policymaking and other long-range planning decisions, on the other hand, are about the future. And conditions might be different then. 

What about smaller nonprofits?

Outcome measurement isn’t a good idea just for larger, more sophisticated organizations. As a matter of fact, it may even be more important for smaller nonprofits with fewer resources. Organizations that must make every dollar, staff, and volunteer hour count can use outcome measurement to determine which efforts truly work; they can then either eliminate or strive to improve programs that don’t perform as intended, rather than wasting resources.

Moreover, smaller nonprofits can’t afford to stick with traditional metrics such as overhead ratios while larger organizations move on to outcome measurement. Like it or not, those organizations tend to set the trends; as larger nonprofits make their outcomes available, investors will expect to see such measures before they pull out their wallets. Smaller organizations that fail to adopt outcome measurement risk being left behind when it comes to funding support.

Nonprofit outcome measurement is a process

While different organizations will take different approaches to outcome measurement, every nonprofit can expect some stumbles along the way. But nothing is written in stone — the process can be adjusted as necessary. The important thing is to make outcome measurement a regular, ongoing activity that reflects the organization’s mission-driven priorities.

Further questions on nonprofit outcome measurement? Or are you looking to learn more about one of the top nonprofit accounting firms? Reach out to Sabre Linahan, CPA at 404-874-6244 or contact us online and we’ll be in touch.

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