2017-03-08 00:00:00 Nonprofit Organizations English Learn why measuring nonprofit impact and not just donations is so important, and discover a step-by-step process to track results... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Exterior-door-of-Canadian-nonprofit-with-employee-in-background.jpg https://quickbooks.intuit.com/ca/resources/nonprofit-organizations/how-to-measure-impact/ How Can Canadian Nonprofits Measure Impact?

How Can Canadian Nonprofits Measure Impact?

3 min read

In the nonprofit arena, success is defined by a measurable impact on the world. One of the biggest challenges for a nonprofit is measuring that impact in a meaningful way. Attempting to calculate impact by looking at donations is ineffective and may even be counterproductive. If people and businesses donate to your charity, but it fails to deliver on its stated mission, your charity isn’t making an impact and it’s wasting donors’ money. Rather than using internal metrics to measure impact, nonprofits should look at the external world they’re trying to change and find a quantitative way to measure the effect they’re having. This process requires defining what you are trying to change, establishing establish a plan for delivering that change, and determining the metrics you’ll use to measure whether your nonprofit is meeting its stated goals.

Why Measuring Nonprofit Impact Matters

Unlike for-profit businesses, which exist to make money for shareholders, nonprofits have one reason for being: to improve the world, or at least some part of it. Imagine a publicly traded company that didn’t measure its profits and losses, neglected to keep its books balanced, and failed to track its stock performance. The business probably wouldn’t remain solvent for long, and its investors would flee like rats abandoning a sinking ship. A nonprofit organization that doesn’t effectively measure its impact is as lost as a for-profit company that doesn’t effectively track profits. Donations and community support eventually dry up when those who support your organization cannot see any measurable change it is making to society. To achieve long-term success, your nonprofit needs clearly defined goals and a way to measure whether it is achieving them.

Defining Objectives

To measure impact in a way that matters, you have to define the impact you wish to have. Say you establish a nonprofit to improve high school graduation rates among at-risk youth in Toronto. Obviously, the broad objective is to get more at-risk young people in Toronto to graduate from high school. To measure impact, you need to define your organization’s goals more narrowly. For example, what criteria are you using to define “at-risk” as it pertains to young people? Is it based on household income, the presence of learning disabilities, enrollment at a low-performing school, or a combination of several factors? You need to know the current graduation rate for your target population so you have a frame of reference by which to compare future performance. You also want to determine a reasonable numerical goal for improving the rate and how long you expect it to take to get there.

Preparing an Action Plan

Once you outline your specific goals, it’s time to formulate an action plan for meeting those goals. Say you want to raise the graduation rate of a certain population from 60 to 75% within five years. That’s an admirable goal, but a goal without a plan to achieve, it’s just a dream. Determine what actionable steps you’ll take to achieve your organization’s goal, and lay them out in a clearly defined manner. Your nonprofit’s plan might include identifying schools where services are needed, establishing a mentorship program at those schools, recruiting at-risk kids to join the program, providing support and enrichment activities to those kids, and so forth.

Measuring Results

Now that your organization has defined objectives and a concrete plan to meet them, you can track your nonprofit’s impact and how it is stacking up to the goals set beforehand. If your target group features a large population, you’ll probably want to use statistical sampling methods to track results rather than trying to survey every member of the group. If this is outside your area of expertise, consider bringing an experienced data analyst on board to help with impact tracking. Given the importance of measuring impact, the investment is well worth your money. If your nonprofit uses multiple methods to achieve objectives, consider tracking the results of each method independently to see where you’re getting the best results. Your organization could be better off shifting resources from an underperforming area to others that are producing bigger impacts.

Real-World Example

Habitat for Humanity Canada offers an example of how a nonprofit can track its impact effectively. The housing charity enlisted a Boston consulting firm to quantify the impact of donations to the organization. The firm determined that every $1 invested in Habitat for Humanity results in $4 worth of benefits to society. In 2012, the charity conducted a survey of beneficiaries of its housing initiatives; the research found demonstrable increases in happiness and quality of life. Measuring nonprofit impact, not just donations, is vital to ensure your nonprofit organization is meeting its stated objectives.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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