Success in the nonprofit sector is often hard to quantify. Carolyn Egeberg, vice president of strategy and communication at Minnesota Philanthropy Partners, a regional community foundation in St. Paul, identifies several reasons for this. First, and perhaps most readily apparent, is that outputs are measured differently than they are in business. “It’s easier to measure success in the for-profit sector. You make something and sell it,” she explains. “In the nonprofit sector, the value is highly individualized.”
While the benefits provided by nonprofits are no less tangible than those provided by for-profit businesses, they tend to be shared among a more diffusely defined group and can require more time to manifest.
Another difference is that while for-profit businesses typically share a single measure of success—profit—nonprofit measures vary. For example, one nonprofit that Egeberg worked for provided a Web-based communications platform to medical patients. Success measures there were highly data-driven and tracked in real time using online dashboards. Egeberg’s next nonprofit was a science museum. Although its mission was STEM (science, technology, engineering and mathematics) education, the leadership focused on numbers, such as visitors per day, ticket sales and event attendance, because they were much easier to measure.
A third key difference between nonprofit and for-profit measures of success concerns the expectations of people who invest in them. “Donors talk about impact, but I’m not convinced that they want us to spend the money it takes to do that,” Egeberg says. Why? Many donors simply do not realize that an organization’s ability to achieve outcomes and goals (its effectiveness) depends on having the resources it needs to accomplish them (i.e., its capacity).
Convincing donors that effectiveness cannot exceed capacity can be difficult. “Success is in the eyes of the stakeholder,” explains Wesley E. Lindahl, Ph.D., the Nils Axelson Professor of Nonprofit Management and dean of the School of Business and Nonprofit Management at North Park University in Chicago. “Organizations with a complex set of stakeholders will have a difficult time knowing what success is and whether they have reached it. An organization with only a few simple stakeholder groups will still face issues, but perhaps there may be more overlap/ agreement on success.”
At a college or university, for example, Lindahl offers what the following stakeholders may feel success means to them:
- Alumni: They are nostalgic, and so success is remaining in the “same place” as when they attended the school. They also like a high public reputation to use when job hunting.
- Faculty: Success is getting a high ranking for publication use from research publications and attracting many students to their major, and they seek to hire well-known researchers in their field.
- Board: Success is growing the endowment and working well with the president.
- Major donors: Success is having their money used and recognized properly.
- Governor/legislative body: Success is having a high graduation rate, with all students’ finding employment after graduating.
- Students: Success is a great teaching faculty, several opportunities for scholarships and getting a job after graduation.
- Development office: Success is raising greater amounts of money, year after year.
- Administration: Success is admitting a full/diverse class of students and having a steady stream of tuition income.
“Stakeholders define the terms of success, so it’s important to define and establish your stakeholders and what they consider priorities,” Lindahl says. In some cases, their definitions of success can conflict or even contradict each other.
He suggests trying to achieve consensus around three or four broad goals as a way to find common ground. “If you just use outcomes, some organizations’ mission will be very difficult to fulfill,” he says. “You can’t simply say that success is just to focus on achieving the mission, because sometimes the mission is so lofty that you can’t achieve it.”
In their article, “Measuring the Efficiency and Effectiveness of a Nonprofit’s Performance” (Strategic Finance, Vol. 93 No.4, 2011, pp. 27–34) Marc J. Epstein and F. Warren McFarlan offer a methodology for identifying those goals and finding a broad consensus among stakeholders. They argue that nonprofits can overcome donor reluctance to invest in impact by providing donors with five types of data.
- Inputs: the resources that enable the nonprofit to perform programs and tasks
- Activities: the programs and tasks themselves
- Outputs: the tangible and intangible results of the
programs and tasks
- Outcomes: the specific changes in the individual recipients of programs and services
- Impacts: the benefits to communities and society resulting from the outcomes
Performance measures then can be developed for each type of data. “Breaking the organization into these pieces and analyzing it in parts,” write Epstein and McFarlan, “give insight into how the organization is performing against mission.”
The result is information that allows each donor to trace the particular route from the gift to its impact.
This post was adapted from “It’s All Relative: How Your Organization and Its Myriad Stakeholders Define and Measure Success,” by Paul Lagasse, Advancing Philanthropy, Fall 2016 (reprinted with permission). You can read the whole article here.