Why Major Donors Demand MeasurementChris Allers | Centerview, April 2013
“When charity organizations get better at communicating results that are clear to the donors, and the donors get a more nuanced image of the charity organizations’ work, it helps strengthen the overall trust and engagement in civil society.”
— Lukas O. Berg, founder and CEO, Charity Star
When gauging their options, today’s major donors are increasingly looking toward impact, defined as the results produced by an organization’s efforts compared with a reasonable estimation of outcomes without the organization’s involvement. As nonprofits face growing competition for resources and support, your most important and unique selling points are concrete examples of that impact.
But to find those examples, make those comparisons, and attract the support of big donors, you must first measure your results.
So why are nonprofits playing catch-up when it comes to measurement? Historically, the sector simply hasn’t had the same motivation as the for-profit sector. According to Tom Tierney, chairman of the Bridgespan Group: "There are no market forces, there are no competitors to take market share away, there are no customers that are going to shop someplace else. The absences of competitors and customers create this kind of protected zone for philanthropy."
But today, there are no “protected zones.”
Many nonprofits now find themselves on the hot seat with donors, who expect higher levels of accountability—not just about how their money was spent, but what that spending really achieved.
According to Alnoor Ebrahim, professor with the Harvard Business School, “Nonprofit leaders must prioritize among accountability demands—from foundations, government agencies, individual donors, and their own staff and clients—otherwise they’ll be pulled in all directions.” This is no small challenge, given historical and practical variations in the definition and measurement of “impact” by various donor groups.
Major donors invest in organizations because they perceive it as resilient, well-managed, and enduring.
Private donors are still largely driven by their hearts, compared to corporate or government donors; this is not to say that data doesn’t matter to them, but that individuals generally connect to an issue on a personal or emotional level before crunching the numbers.
Corporate donations, on the other hand, are generally a part of that company’s Corporate Social Responsibility program, often correlate with the company’s core business strategy, and typically go to nonprofits whose work centers in the community where the company operates and its employees live. You could more fairly compare these donations to a business investment, supporting causes that most enhance the company’s brand image and social responsibility strategy.
Government funders measure with another set of issues in mind, including the increasing demand from citizens for effective services, needed information, and transparency. Elected officials and government administrators must demonstrate to taxpayers that public funds are providing a reasonable return on investment.
Ebrahim warns, however, that nonprofits are not accountable primarily to funders, just because they’re providing the money. By defining and measuring impact, charities can hold themselves accountable to their goals—the real priority—and use that data to inform funders as well as improve their work. With data on outputs and outcomes, a nonprofit is also positioned to make strategic business decisions that can preserve the organization in times of scarcity and maximize opportunities when resources are plentiful.
Major donors invest in organizations because they perceive it as resilient, well-managed, and enduring—a venture that will remain long after a particular contribution is spent. Major donors’ demand for impact measurement is not just a way to justify giving—it’s an assurance that an investment made today will be part of a philanthropic legacy tomorrow and, as Berg wrote, “strengthen the overall trust and engagement in civil society.”
Chris Allers, Ph.D., is a long-time member of GCN’s Nonprofit Consulting Group and recently took over the position of Executive Vice President, Programs