Making Metrics Meaningful

Making Metrics Meaningful

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.

 

  • Design your metrics thoughtfully.  The performance numbers you choose to track and share with the public will inevitably be used as shorthand indicators of success or failure.  Therefore, you need to design them wisely so that they accurately define the heart of your mission.  Make sure the metrics you choose reflect what you are really trying to accomplish; that the numbers are reasonably easy to collect; that they are objective rather than subjective; and that their relevance to your mission is immediately obvious to anyone who considers them.
  • Measure outcomes, not inputs.  The most meaningful metrics track results that affect the lives of human beings rather than merely the effort expended by the nonprofit or the resources deployed.  Example: Counting the dollars spent on building wells in sub-Saharan Africa is an input metric; the number of wells built and the number of villagers who now have easy access to potable drinking water are outcome metrics.  The latter are more meaningful as gauges of success.
  • Enlist the help of partners in designing your metrics.  Some of your organization’s leading partners can provide valuable expertise in designing useful metrics.  Foundations, corporations, professional service firms, and other NGOS may all employ experts who have studied organizations similar to yours and can offer unique insights into the kinds of metrics that work and the management or IT systems needed to implement them.  When donors participate in designing your metrics, the results you obtain will be doubly meaningful to them.
  • Live with the numbers and learn from them.  If your metrics are well designed, you should find them valuable tools for managing your organization.  Many nonprofit leaders assemble “dashboards” of three to five key metrics that they study on the weekly, monthly, or quarterly basis, searching for clues as to which programs and initiatives are proving to be effective and which ones need to be modified.
  • Use your metrics honestly.  Don’t fall into the trap of thinking about your metrics purely as selling tools—“red meat” to attract donors and satisfy their demands.  This attitude creates several temptations: to fudge the numbers; to alter your processes or procedures in order to “hype” your metrics (without producing any real-world benefits); and to continually redefine the metrics in order to make them look better (and to disguise the fact that your program may be foundering).  Play fair!  If your metrics look bad for a season, be transparent about the problems and about your plans for improvement.  In the long run, your partners will respect you more for being honest with them—and with yourself.