This past weekend I was doing a lot of thinking on the long road from Saint Louis to Chicago – five full hours of blissful thinking time – and I was thinking back to a previous blog post regarding how nonprofits need to focus more on the changed lives and the impact they are making in the world and less on the financials.
More precisely, I was lamenting how many people in the nonprofit field don’t “measure” the success of their organization by the impact it’s making but rather by how much they raised and how much of that money gets allocated to “program” or “ministry”.
A lot of this mindset is exasperated by the Form 990 process and the heightened scrutiny of both donors and the proliferation of charity rating systems such as Charity Navigator. Simply put, people in my opinion are fixated on financials and not on the “impact of mission” or the lives being changed in a positive way.
This is a problem because there are plenty of nonprofits making a huge impact that have what may appear to be poor financials – and at the same time there are nonprofits that look good on paper but aren’t making nearly the impact that donors believe they are making.
Consequently, many of us in the nonprofit sector live and die by Charity Navigator ratings and the infamous pie chart in our annual reports and on our website showing the three broad buckets which include administration, program, and fundraising. And we try to ensure we have good ratios and a four-star rating so that we look good when compared to our peers or others that are competing for a donors hard earned money.
Well, instead of this approach, what would it take for us to figure out a way to measure and highlight – in an analytical way – the impact the nonprofit is making?
In other words, demonstrate in some compelling fashion just how effective the nonprofit is at fulfilling its stated mission – which in some shape or form has to do with lives being impacted in a positive way.
It seems to me that this should become the primary basis for measurement – not just financial success.
So in my blissful driving state I came upon an idea. Why don’t we downplay financial measurements and instead play up IOM – Impact of Mission. It seems there must be a way to do this. I don’t have the exact answer, perhaps you do.
But more importantly, we need to begin to change the minds and hearts of our donors so they focus more on how lives are being changed with the money raised and less on a formulaic financial reporting approach, which albeit is a government regulatory requirement, that only highlights part of the picture.
Let’s begin thinking of how to do this. No one is going to do it for us. It’s going to take a grassroots approach – perhaps by a large and influential nonprofit.
Any ideas?
Jason, Thanks for your thoughts. I really like how touched on what is measurable besides dollars; particularly -
1) donor and volunteer engagement (this is a huge point because our goal needs to be about engaging people in mutliple ways. Its a proven fact that the more ways people are engaged the more value they bring to the nonprofit)
2) Service hours (no question about this one – people want to give their money put perhaps even more importantly they want to give themselves; this is a deep need of everyone, especially the younger generation)
3) Partnerships and reciprocity in the community (interesting thought, this has all sorts of implications that reach way beyond the nonprofit itself; it suggests an impact on the greater community at large and the hidden value that is brought to the public through a nonprofits service to its constituents)
Really great stuff Jason!
Eric, great spark here. Because we do “live and die” by our financial reports, no matter what sector we’re in, and because the bottom line numbers are quick and easy ways for everyone to measure performance, it *is* tempting to measure success in dollars alone. But you’re 100% correct: dollars alone do not tell the whole story.
What don’t dollars measure? Donor and volunteer engagement. Service hours. Partnerships and reciprocity in the community. Network value and reach. Attributes like these are quantifiable, scalable to organization size and mission, and lend themselves to communications and outreach in ways that dollars alone do not.
Gail – Thanks for your comments – you offered some fantastic insights that affirm this perspective. Its exciting to see this played out in your church and to see people truly give from their hearts. Take care, Eric
You are speaking my language. I become concerned when an organization or a church begins to focus solely on the financials.
People build ministries within churches and organizations thinking about the possible dollars raised and not on changed lives. I continue to say, “If we would focus on building relationships and making an impact on indiviudals – lives will be transformed, lives will be impacted, and the money will come.” It is when we chase the almight dollar we lose out on making an impact. It becomes all about the money and not about the person or people.
Me and my husband pastor a church and we refuse to chase after the dollar. People call us crazy, however, we do not pass the offering plates during worship service. The baskets sit on the altar and who so ever will, will come and bring their tithes and or offering to the basket. The offering prayer is a part of the regular prayer – nothing separate. There are times we never mention the offereing, but it never fails – we always have the money needed to pay every bill and give resources to the community surrounding the church.
I like that and I like what you have said in your blog.
Hi Eric, I’ve left my email, I’d like to talk to you about your business focus on non-profits…I look forward to hearing from you. Cheers, Walter
Amazing article, lots of intersting things to digest. Very informative