5 Key Nonprofit Outcome Metrics and How to Use Them

Many nonprofits are unsure of how to distinguish between data that offers meaningful insight and data that is simply reported for financial and compliance purposes. Data that matters in the for-profit sector may not be relevant in the nonprofit world, making it difficult to know what is impactful enough to calculate and use to guide future decisions.

Let’s begin with definitions that can help your organization make the best use of your data:

• Measurement – A data point at a single point in time.
• Metric – A data point in context when compared to previous measurements.
• Outcome metric – A metric that looks back at what has already happened to help change behaviors for the future.
• Performance metric – A metric that measures the key activities that lead to successful outcomes; analyzed on an ongoing basis to track progress towards a goal.
• Output or activity – Raw data that tells the story of your organization’s activities (such as the number of people served or the number of projects completed).
• Impact or result – The level of performance or achievement that occurred because of your organization’s activities.

By keeping in mind the differences between measurements and metrics, as well as between outcome and performance metrics, nonprofits of all sizes can gain an accurate picture of their organizational health and growth. This insight can also provide the perspective needed to plan effectively for future growth.

What Outcome Metrics Should Nonprofits Monitor?

If your nonprofit is wondering how to best analyze outcomes and results, start with the following metrics, which are important for recognizing your organization’s outcomes compared to similar nonprofits:

• Fundraising Efficiency = Fundraising Expenses / Contributions
• Operating Reliance = Unrestricted Program Revenue / Total Expenses
• Program Efficiency = Program Expenses / Total Expenses
• Donor Attrition = Lapsed Donors / Total Number of Donors
• Social Return on Investment = Total Value of Impacts – Initial Investment Amount

There is no standard or optimal range to which all nonprofits should aspire, because organizations in different life cycle stages and with different funding models will experience different realities.

When organizations first begin to monitor these metrics, they should observe where they are, determine where they want to be, and chart the course to get there. In the quest to track progress toward these goals, it might be helpful to find publicly available third-party data to provide context.

Tracking these metrics consistently — such as monthly or quarterly — can provide decision-makers with the tools they need to set goals and see the specific steps needed to reach them. One approach is to set annual goals and track leading indicators of progress to inform any necessary adjustments.

This clarity will filter down to all employees, creating a more collaborative work environment where everyone is aiming for the same ultimate goal of serving people well, in addition to the same smaller goals focused on increasing overall efficiency.

How to Use Outcome Metrics

Being aware of outcome metrics and tracking progress over time can help your organization gauge growth and show stakeholders exactly how funds are being used. This open and honest communication can build your organization’s credibility and reputation, encouraging both new and existing donors to support your cause.

There may be times when your organization does not achieve the desired results as measured by the outlined outcome metrics. This is a great opportunity for leadership to review and determine whether the metrics they track are the most impactful and relevant, or whether the methods are inconsistent with the desired outcomes.

With a clear understanding of the effectiveness of various processes that contribute to these outcome metrics, your organization’s decision-makers can streamline and simplify inefficient processes. This will increase your organization’s growth potential and impact on the populations you serve.

Why Outcome Metrics Matter to Stakeholders

In addition to your organization’s decision-makers and employees, there are several other groups of stakeholders with a vested interest in your outcome metrics:

• Board members are responsible for holding the organization accountable, so outcome metrics are a key component of their guidance. They could mandate benchmarks for specific outcome metrics to be met by a certain time.
• Potential donors want to know if your organization is reputable, trustworthy, and efficient. They want to see and approve of the impact your organization is making before they start or continue donating.
• Charity evaluators provide information that potential donors often rely on heavily when choosing where to give. Having current, accessible outcome metrics is important not only to the evaluators themselves but also to the people viewing your information on their websites. It is important for them to be able to compare your organization with others in your niche.
• Community members pay attention to your organization’s outreach efforts. This is particularly true for religious organizations. The positive impact that nonprofits strive to make often extends beyond the populations they serve and into the community at large.
• Other nonprofits notice when your organization is performing well. They may reach out to learn more so that they can serve their populations as well as you are.

As you can see, there are many benefits to using outcome metrics at your nonprofit. If you have questions or would like to discuss how our nonprofit specialists can help empower your organization, please contact us.