Impact investing is an increasingly popular model of philanthropy that emphasizes mutual learning and growth for both nonprofit leaders and the partners who support them. In this model, a gift to a nonprofit is viewed as analogous to an investment in a for-profit business: a specific “return on investment” in the form of measurable, positive outcomes is expected in exchange for the commitment of funds. These outcomes are quantified in the form of metrics—statistical or financial data, generally based on pre-determined targets, that track the nonprofit’s progress towards its goals. As more philanthropists, foundations, and other donors request such metrics, nonprofits are having to devote time and energy to defining, collecting, and reporting them.
The nonprofit world can certainly learn a lot about smart management from the for-profit world, and it makes sense for nonprofit leaders to want to track their results, learn from their mistakes, and improve their practices over time through the use of hard data, just as effective leaders in business do. The existence of well-designed metrics that are tracked over time provides nonprofit leaders with useful tools that can help them gauge their own performance and find ways to enhance it. And the existence of metrics creates an opportunity for philanthropists—many of them successful business leaders in their own right—to analyze the performance of the nonprofits they support, identify inefficiencies and opportunities for improvement, and offer valuable insights, ideas, and advice. It’s a great example of letting powerful resources flow naturally to where they are needed—with the resources, in this case, being information and expertise.
Metrics can also play an important supportive role in your efforts to communicate and work with partners. Donors and would-be donors find it reassuring to receive numerical data about the impact of their gifts—after all, no one wants to think that the money they are giving to an important cause is being wasted. Figures that chart the tangible good being done by a nonprofit—lives saved, needless economic losses reduced, families lifted above the poverty line, students’ test scores elevated, and so on—can form a compelling part of the story you share with partners and potential partners.
Metrics are a way of speaking a familiar language to potential donors. But they should also help nonprofit leaders learn more about how to run their organizations more effectively. That requires metrics that are carefully designed and wisely used. Here are some recommendations that can help you ensure that the process of tracking your own metrics will be a useful, rewarding one rather than a rote or superficial exercise.