How Nonprofits Can Measure Outcomes and Why They Should

A Toolkit of Techniques

Business people looking at flow charts in meeting
••• Tom Merton/Caiaimage/Getty Images

Demand keeps growing for nonprofits to provide proof that what they are doing accomplishes something.

That demand comes particularly from donors and grantors, such as foundations. Unfortunately, many nonprofits do not have objective data showing that their outcomes are worth supporting. That lack of supporting evidence can be a disappointment to donors who, after all, donate all that money for results, not out of a desire to get anything for themselves.

That fact is a bit shocking when you think about it. But, then, charities have been very busy providing programs, and sometimes just hoping that the band-aids they apply to social needs work.

But even the smallest nonprofit has heard the call for greater emphasis on outcomes measurement, reporting, and transparency. However, just how to do this has often been obscure or scattered from here to there.

That is where this book comes in. It is The Nonprofit Outcomes Toolbox: A Complete Guide to Program Effectiveness, Performance Measurement, and Results, Robert M. Penna, Ph.D., John Wiley & Sons, Inc., 2011. 

Although the "Toolbox" is now a few years old, it continues to be the most comprehensive work yet on how nonprofits can fundraise more effectively by measuring and reporting outcomes.

Impressed with the scope of the book, but also daunted a bit by its 350 pages, I wondered how to convince smaller nonprofits to invest in an obviously helpful resource that could serve as an all-in-one course in outcomes management.

I turned to Dr. Penna with some questions. Here is a summary of our interview.

Nonprofit Guide: How can a focus on outcomes benefit even a small nonprofit? What are the potential outcomes of outcomes management for nonprofits that are time and resource strapped?

Penna: The greatest benefits of an outcomes approach for smaller nonprofits come from the knowledge of what, among their efforts, truly works and knowing precisely how well those things are working. While any organization would benefit from this type of information, it is particularly crucial for smaller, less well-resourced organizations that must make every dollar, every hour of staff time count. How do these benefits play out? In two ways:

  1. Knowing what works allows an organization to focus most of its resources on those efforts. This is particularly important at a time of cuts being made in funding by various sources. In the event that a smaller organizations needs to scale back on its own activities, how is the decision of where to reduce commitments to be made in the absence of solid information regarding the performance of one effort or another?
    All organizations, even smaller ones, need to know how their programs and initiatives are performing, and the best way to accomplish that is to use an outcomes framework that sets targets and measures progress toward achieving them. In the absence of this, much remains guesswork;
  2. In an era when more and more social investors, individuals, institutions, and governments, are asking for evidence of performance in their grant-making, smaller organizations cannot afford to rely upon traditional pleas for support, many of which are based upon the size of the problem or need to be addressed, or upon how hard the organization is working.
    While these approaches worked in the past, as the outcomes movement spreads those who lack evidence of performance are increasingly going to be left behind. Add to this the fact that rating services such as Charity Navigator are moving to assessment platforms that include a performance or impact component.
    Furthermore, numerous recent studies have demonstrated that an organization's effectiveness is the primary thing in which donors are interested, and it becomes clear that, within a few years, results will become the standard by which most nonprofits are judged.
    Smaller organizations simply cannot afford to be left behind as the rest of the sector moves inexorably towards outcomes; such an occurrence will only make worse the disadvantages under which so many of them now operate

Nonprofit Guide: If a nonprofit had to choose just one or two things to implement from your book, what do you recommend?

Penna: The answer to that question rests largely with where that organization might be in its use of outcomes already. If the entire subject of outcomes is new, or still very confusing for an organization and its staff, by all means I'd suggest that they start at the beginning and get the first four chapters under their belts.

For the organization that understands the basics of outcomes, their terminology, and how to identify meaningful, sustainable outcome targets, I would suggest beginning with Part Two of the book. Working with Outcomes. Planning (Chapter 5), Capacity Assessment (Chapter 6), and Tracking (Chapter 7) would be the places I would suggest starting. More advanced organizations could benefit from Parts Three and Four.

All that said, Part Two really is the heart of the book and that is the section I would suggest most organizations, if their time and resources are limited, focus upon.

Nonprofit Guide: How can outcomes management help a smallish nonprofit raise more money from donors and grantors?

Penna: Donors of all sorts and stripes are increasingly looking for indications of performance and effectiveness. This is particularly true of donors giving more than $100.
Once an individual’s giving goes beyond limited sums, which are often given on an emotional basis, some measure of impact becomes mandatory. Outcomes management is necessary for even small nonprofits to stay in the game.

But, even small nonprofits can make a compelling case for support if they have evidence of their impact. Traditionally, and particularly for many smaller, local nonprofits, this was not necessary. If the focus was local, and the donors were local, all that was needed was to say “Here is the problem, you are all aware of it, and we’re trying to help solve it.”

In today’s economy, however, even this type of appeal has become harder. Whether the small nonprofit seeks money from the city or county, from a local foundation, from an organization like a local diocese, arts council, or the United Way, resources are scarce and the competition is stiffer than ever.

Given their limited size and often finely-tuned focus, smaller nonprofits are often a lot closer to the situations they address than are their larger, often more well-resourced cousins. This situation, where they are closer to those they serve, operate with fewer intermediaries, and have a more intimate view of positive and negative influences on the community, can give them a unique advantage when it comes to capturing evidence of their impact.

However – and this is a big “however.” It also means that they have to set the right targets, gather the right information, and avoid the usual “feel good stories” that focus on a star individual or case. Charities must learn to tell their stories in a way that does not simply reflect the absence of a problem.

Outcomes management does not have to be an overwhelming undertaking for a small nonprofit. It starts with identifying and setting the right targets, and presenting those in terms that everyone, leadership, staff and stakeholders, understands.
The first step for nonprofits is to identify the indicators that will tell them in real time whether they are on track or not. Then making course corrections when the evidence suggests it is necessary. And by presenting achievements in a way that important audiences understand, and that demonstrate the true value of what the organization is doing.

It does not take a super-computer, massively expensive software, or a high-priced team of analysts. Rather, it takes the commitment of leadership to do this, knowledge of the basics, and a staff trained in the elementary steps.

Appeals for financial support built upon a sound basis of demonstrated effectiveness are the key to fiscal stability for nonprofits, large and small. There are numerous programs, many of them smaller and not particularly well resourced, that have been very successful in using outcomes evidence to enhance their fundraising. It can be done!

Nonprofit Guide: The book is a pretty hefty meal for small nonprofits that are time and resource strapped. How should we approach it in the most productive way?

Penna: The book is designed so that organizations can start at the beginning and work their way through, at their own pace, from simpler concepts to more advanced ones. They can also tackle single chapters as stand-alone primers on various subjects. The book is meant to be comprehensive. But just as one generally does not read the encyclopedia cover to cover in an extended sitting, the Toolbox is best used as a resource for finding answers to immediate pressing.

If you are not sure just what the difference is between “outputs” and “outcomes” or how to communicate your outcomes, once you know them, to your donors, then I think this is the book for you.

The Toolbox is laid out carefully, using easy-to-understand language, lots of case studies and examples, as well as exercises that cut the most daunting theories down to size. As Penna suggests, it is not a book you’ll consume in a couple of sittings, but it might just become one of your favorite resources.

Ken Berger, former President and CEO of Charity Navigator, wrote the foreword to the book, and sums up the hopes of all of us that nonprofits can and will become more accountable:

”Dr. Penna and I both share a dream that, thanks to these tools, some day the most effective and efficient nonprofits will get the vast majority of investment in the time and treasure of our society….Stories are important, but without data to back them up, they are largely meaningless in the bigger picture of changing our world for the better.”

Be sure to check out Penna’s blog.