Last week, my colleague Emily Upstill wrote about the
need for nonprofits to “right size” their mission in order to better
communicate what they can (and can’t) realistically accomplish. This post
focuses particularly on the issue of funding your nonprofit’s investment in
data collection and outcomes measurement. What are the financial implications
for nonprofits dealing with the pressure to measure and report outcomes?
First, how did we get here?
The language of “investment” is inaugurating a paradigm
shift for nonprofits. As the philanthropic sector continues to evolve,
charitable giving is adopting a Wall Street lexicon—and this trend will only
intensify as nonprofits compete for diminished resources to serve increased
needs. Foundations produce logic models asking grantees to demonstrate their
long-term outcomes and impact while venture philanthropists and social
entrepreneurs encourage “informed donors” to ask about their contribution’s
return on investment.
In the most clear-cut example, Social Impact Bonds (also known
as Pay for Success Projects) set forth a defined investor role, one whose
returns materialize only when the participating nonprofits can quantifiably
demonstrate successful outcomes. NFF recently hosted a webinar on Social Impact Bonds,
in which Jeff Edmondson, President of Strive,
succinctly summarized the shift, “As we move from a charity mentality to an
investment mentality, social impact bonds reinforce the need to use data to
For these philanthropic investors, funding decisions favor
nonprofits able to prove their impact with data. At the same time, we’re seeing
many nonprofits, formerly dependent on government funding, working in unfamiliar
territory to court more individual and foundation supporters. As a result many
nonprofits harbor uncertainties about what data and provable outcomes are
expected of them.
What’s a nonprofit to do? Read More