At the same time, nonprofit leaders can't afford to overlook revenue and profits if they want to keep their organizations running smoothly.
All too often, however, nonprofit leaders collect data without ever really using it to inform their decision-making. With a refined approach to nonprofit metrics and data analysis, your team can gain meaningful insights from those numbers and use them to make decisions that propel your mission forward.
Before we dive into the key metrics your organization should be focusing on, it's important to understand the difference between outcomes and outputs. Sometimes, these terms are used interchangeably, but there are actually some key differences between the two that can drastically impact your insights and decision-making.
Specifically, an output refers to a metric or measurement. It's the raw data you're collecting to get a better idea of what your organization is doing. An outcome, on the other hand, takes things a step further to inform how well your nonprofit is achieving its goals and carrying out its mission.
If the metric tells you what the nonprofit did, it's probably an output. If it tells you what changed because of the nonprofit, it's probably an outcome.
With the difference between outputs and outcomes clear, here are just a handful of the most important outcome metrics that your nonprofit should be tracking and taking seriously.
This refers to the total of your organization's fundraising expenses divided by donor contributions. Compared to looking at total contributions and grants and the average gift alone, fundraising efficiency metrics can help nonprofit leaders evaluate how much your organization is actually spending in order to generate those donor contributions. With this metric in place, teams can work to streamline their fundraising campaigns and allocate resources wisely.
Measurements to consider include:
Another important metric your team won't want to overlook is program efficiency, which is the total of your nonprofit's program expenses divided by its total expenses. This is an especially important metric for organizations that may have multiple programs running at once because it allows leaders and decision-makers to see which programs are the most effective and efficient, and which may need to be revisited or eliminated.
Measurements to consider include:
In addition to fundraising and program efficiency, nonprofits should look closely at operating resilience, or the measure of unrestricted program revenue divided by total expenses. This metric can provide valuable insight into how much of an organization's expenses are supported by unrestricted program revenue, which can help leaders determine how sustainable various sources of revenue are. All of this, as you can imagine, is critical when planning for long-term financial sustainability.
Measurements to consider include:
Nonprofit leaders instinctually want to know what difference their organization is actually making, but this can be a difficult outcome to measure. However, by tracking SROI, nonprofit leaders can get a better feel for the social impact of their programs, as this metric explicitly connects the resources invested in an organization or program with these outcomes.
Ideally, when resources are translating into meaningful outcomes for the populations a nonprofit serves, leaders can rest assured that what they're doing is working.
Last but not least, nonprofit leaders and decision-makers should be tracking donor attrition carefully. This metric is calculated by dividing the number of lapsed donors by the number of total donors within the organization. Ultimately, this can provide valuable insight into how well an organization is maintaining relationships with its supporters.
If attrition is high, leaders may need to revisit their strategies for building and maintaining relationships with donors. If attrition is low, this tells decision-makers that they should continue doing what they're doing.
Donor attrition, SROI, operating resilience and program and fundraising efficiency are all important metrics for nonprofit leaders to track. However, simply collecting this data isn't enough. Taking the time to analyze the data and extract meaningful insights from it can provide leaders and board members with the information they need to make informed decisions moving forward.
By taking the time to track and review metrics monthly or quarterly, nonprofit teams can get the most out of their data and translate those insights into decisions that truly optimize impact.