Impact measurement: How to measure your nonprofit’s impact
If you operate a nonprofit organization or have thought about starting one in the near future, there are certain signs that indicate success. They’re called key performance indicators (KPIs), and there are several of them that you’ll need to monitor, especially if you’re seeking funding from donors. Some KPIs include retention, engagement, and lifetime value, but the most important KPI is your mission impact measurement.
Measuring impact is essential because it helps you illustrate the actual difference your nonprofit makes by fulfilling its mission. The National Council of Nonprofits encourages you to identify what “success” looks like, develop a plan to get there, collect data to measure outcomes, and communicate your findings.
The information is expressed as a single data point that you can then use for comparison against past performance, future goals, and national averages. Everyone who volunteers for or supports your organization should be working toward one number, and they should know whether or not it’s improving.
According to a recent survey of 355 nonprofit decision-makers, 76% of respondents said that measuring impact was a top priority, yet only 29% thought they were “very effective at demonstrating outcomes.” This post discusses different strategies nonprofits can use to measure social impact and express outcomes. Determine what makes the most sense for your organization and its valued stakeholders.
Step one: Build a logic model
In the past, too many nonprofits focused on measuring what they were doing rather than how those activities lead to meaningful change. One way you can avoid this problem is by developing a logic model for your organization that includes: inputs, activities, outputs, outcomes, and impact.
Here’s an example. Let’s say your nonprofit organization has the vision of alleviating poverty by helping individuals secure affordable housing through an apartment lease or rental agreement. Your logic model might look like this.
Impact: What measurable change are you striving to achieve in the long-term?
- Create and provide access to affordable housing for low-income families, seniors, and people with disabilities to reduce the rate of poverty.
Outcomes: What measurable change are you striving to achieve in the short-term? What would indicate that you are progressing toward your goal?
- Parents have more money to spend on food and children do not worry about their next meal.
- Mental and physical health improves among formerly homeless seniors.
- People with disabilities receive the assistance they need to live safely off the streets.
Outputs: What tangibles can you measure immediately?
- 25 apartments leased
- Seven strategic partnerships acquired
- Two residential developments constructed
Activities: What high-level steps are required to run the program?
- Proactively pursue partners
- Enroll program participants
- Identify highly impacted communities
Inputs: What resources (staff, money, technology, etc.) does the program require to be successful?
- Capital to expand and maintain the portfolio
- Recruiters for health and other services from third parties
- Staff to coordinate housing placements
- Funding to pilot the program
These are just hypothetical examples, but once you identify your organization’s outcomes and outputs, you can begin to strategize questions about impact that can inform how you choose to measure performance. In this case of residential impact, some questions might include:
- Did affordable housing alleviate poverty among enrolled participants?
- Do participants feel a greater sense of financial security and quality of life?
- Have impoverished communities experienced a positive change?
Step two: Determine the need for measurement
You should know why you’re measuring the impact of your nonprofit, or think about what your findings will help you accomplish. First, are you measuring for management or for strategy?
- Measuring for management: Often referred to as “monitoring,” this approach focuses on processes, efficiency, and execution (i.e. the number of participants). The data is usually collected and analyzed more frequently, on a monthly basis.
- Measuring for strategy: Otherwise known as an “evaluation,” this approach focuses on the long-term effects and information needed to support future planning. The data (i.e. the effects of the program on participant livelihood) typically pertains to outcome and impact statistics and is conducted less frequently, on a semi-annual or annual basis.
In most cases, it’s better to measure the performance of outcomes on impact to effectively communicate how your nonprofit is succeeding in its vision—rather than measuring impact-per-dollar, which is not a concrete way to prove an organization’s effectiveness. Several strategy-based reasons to measure impact might involve:
Refining the organization’s model or method
- I need construction workers and want to maximize impact with skills-based volunteering.
Making decisions about the program
- I am constructing a new residential development next year and need to know how to budget my resources most efficiently.
Establishing a baseline
- I want to compare the number of enrolled participants and poverty reduction to prove the organization’s success when applying for grants.
Using this framework, you can then determine which data you’ll need to collect to measure impact, and what tools you’ll require to do so.
Step three: Collect the data
Determine whether you need to collect qualitative or quantitative data to measure your determined impact.
- Qualitative: Narratives on attitudes and feelings
- Quantitative: Raw numbers
Both are important. Quantitative data allows you to make quick calculations, while qualitative data can then provide context to those findings. We recommended collecting both to best express the significant impact your organization makes by fulfilling its mission. Some sample data points for our running example include:
- Dollar amount of housing units financed
- Number of people in the area with access to affordable housing as a result of the nonprofit’s efforts
- Number of people able to hit some sort of financial independence benchmark (i.e. no debt, ability to pay taxes, etc.) due to living in affordable housing
- Number of children and youth who have received access to stable housing
- Number of community businesses in the area reporting a positive image toward the housing complex
There’s an endless list of measures that can indicate impact performance that might be helpful depending on your organization, such as:
- Fundraising metrics
- Marketing metrics
- Human resource metrics
Once you understand what data to collect in order to measure your nonprofit’s impact, you can begin using the right tools to get the information you need, like field surveys or Excel formulas. Share your discoveries, and market your impact on your website, Candid nonprofit profile, and elsewhere to showcase the good work you’re doing to volunteers, donors, and the entire world—and encourage others to get involved, too.