Nonprofits need to measure impact to demonstrate that their work makes a difference. However, nonprofits need help measuring impacts, such as limited resources (software to collect data, staff, or time to analyze and examine it) and insufficient training and guidance.
Luckily, there are tools available that can make the process easier for nonprofits to monitor their progress and understand their impact.
Financial Performance
Nonprofit organizations aren’t static and should be able to adapt their strategies as the community needs change. Likewise, key performance indicators (KPIs) should be adapted to reflect current objectives and the changing needs of stakeholders, including donors, volunteers, board members, and the community.
Financial KPIs are a crucial element in assessing the health and success of a nonprofit organization. They include measures that show how well an organization can pay its bills, sustain services if revenue declines, and invest in its future.
KPIs should be set at a level appropriate to an organization’s scope and size. For example, a small community arts organization may monitor its key financial metrics by program, while an independent school might measure them on an organizational level.
Some of the most critical measuring nonprofit impact is its liquidity and reserves, which measure how much cash it has. This metric is calculated by dividing current assets by current liabilities. The goal is to have enough cash to cover expenses for three to six months.
Another essential metric is consistent surpluses, measured by dividing unrestricted revenue by operating expenses. A consistent surplus demonstrates that a nonprofit can generate sufficient income to cover costs and invest in long-term sustainability. Nonprofits that can’t consistently meet their total costs are less likely to retain and attract supporters.
Volunteer Engagement
Keeping volunteers engaged is the biggest challenge for many nonprofits. Volunteers provide their time and skills to the organization they care about, but if that’s all they require, they may only think about volunteering beyond their on-site hours.
One way to get around this issue is to ensure that your volunteer management strategies are addressing the correct needs of your volunteer base. It can be done through various means, including conducting thorough orientations and providing professional training materials for all roles. Keeping an eye on how long they have been volunteering and the types of assignments they choose to sign up for can also help you identify what types of engagement strategies are most successful at keeping people involved over time.
Another way to keep your volunteers engaged is to ensure they feel their efforts are making a difference in the community. One of the easiest ways to do this is to provide clear and consistent communication on the status of volunteer opportunities. It can be accomplished through email, text messages, phone calls, video chats, and other social media channels. It’s important to remember that some people prefer specific communication methods over others, so try to offer a wide range of options to meet the preferences of your volunteers.
Community Impact
A nonprofit organization’s community impact encompasses changes in a local community’s social, economic, and physical conditions. Communicating and quantifying is a very challenging aspect of the nonprofit sector. Still, it’s vital for the organization to clearly articulate its community impact to donors, partners, staff, volunteers, board members, and other stakeholders to secure funding, create new programs, and make critical organizational decisions.
When measuring nonprofit impact, you want to collect as much data as possible on time. However, take your time collecting micro-level data so that you remember the bigger picture of your organization’s ultimate mission. It’s also a good idea to find reputable sources of quality data you can pull from rather than spending your valuable time and resources gathering the information yourself.
Lastly, be sure that your team is involved in collecting impact data. It will help expedite the process and ensure everyone is on the same page regarding understanding how the data relates to your organization’s goals.
Many critical indicators can be used to assess your nonprofit’s impact. By choosing the right ones and putting them into action, you can see how your efforts affect your community and society.
Program Impact
While for-profits chase revenue like it’s going out of style, nonprofit organizations should chase impact. After all, that’s the nonprofit’s why and the foundation for all their other efforts.
Luckily, many challenges nonprofits face when measuring impact are overcome through many tactics. For example, if your nonprofit doesn’t have all the tools to collect and analyze data (software to track results, staff or volunteers with the time to examine data thoroughly, funds to pay consultants), consider working with other organizations already collecting quality information about your area.
For example, the National Council of Nonprofits has a great tool called the program impact dashboard. It allows nonprofits to view and gain insights from snapshots of their programs, all donations aligned with those programs, and the total amount of impact generated by the programs. It is a great way to show the value of your organization’s programs to donors and the general public.
Another way to minimize the challenges of measuring impact is to remember that there are different types of impact metrics. These include quality metrics, which assess how well a program performed, and outcome metrics, which evaluate the program’s effects on participants’ livelihoods. Choosing the right metrics is crucial, as it can affect everything from fundraising and marketing to internal organizational processes.
