A big topic of conversation lately has been whether donors really care about impact, or whether they simply just give based on less scientific things like their emotions, or their friends recommendations. Which is why I’m excited to announce that I’ll be participating in a Google Hangout April 30th about using data to attract donors.
Writing in the Stanford Social Innovation Review, Tim Ogden claims that donors have never really been interested in impact. And Ken Berger from Charity Navigator and William Schambra of the Hudson Institute debate (here and here) whether moving the nonprofit sector toward performance management helps or hurts social change efforts.
To add to this conversation, David Henderson and I are hosting a Google Hangout, “How to Use Real Performance Data to Raise More Money,” on Tuesday, April 30th at 2pm Eastern. David is a super smart guy who runs Idealistics, a consultancy that helps nonprofits learn from their outcomes data, increase impact, and demonstrate results to funders and stakeholders. David’s professional focus is on improving the way social sector organizations use information to implement higher impact poverty interventions. He has been quoted in the Chronicle of Philanthropy and has written for Change.org and the Huffington Post. You can read my interview with him from a year and a half ago here.
David and I thought it would be interesting to host a conversation with nonprofit leaders about how nonprofits can use real performance data to raise more money. We’ll kick off the hour-long conversation with a couple of points and a case study or two of nonprofits that are using data to raise more money, but then we’ll open it up to you for questions. You can send us your questions ahead of time (via email to email@example.com or firstname.lastname@example.org) or simply post them to the Google Hangout here as you watch.
I hope you’ll join us!
How to Use Real Performance Data to Raise More Money
A Google Hangout with David Henderson and Nell Edgington
Tuesday, April 30th, 2013
Can nonprofits that use real performance data to raise more money? Are donor increasingly interested in impact data? How can nonprofits communicate their program data to donors? And how should nonprofits respond to questionable performance claims by other organizations? Join David Henderson from Idealistics and Nell Edgington from Social Velocity in a Google Hangout on Tuesday, April 30th at 2pm Eastern to discuss these and many more questions about how nonprofits can use real data to raise more money. We’d love to have you participate in the discussion, so send your questions ahead of time to Nell or David, or leave a comment at the Google Hangout here.
Photo Credit: 401(K) 2013
The Nonprofit Finance Fund (NFF) today released the results of their fifth annual State of the Nonprofit Sector survey. This year almost 6,000 nonprofits responded and the results point to a nonprofit sector that is shifting fundamentally, where traditional funding sources (like government dollars) are shrinking, while demand for services is increasing. Nonprofit leaders must adapt their business models in order to keep up.
As NFF CEO Antony Bugg-Levine put it:
Nonprofits are changing the way they do business because they have to: government funding is not returning to pre-recession levels, philanthropic dollars are limited, and demand for critical services has climbed dramatically. At the same time, 56 percent of nonprofits plan to increase the number of people served. That goal requires systemic change and innovation– both within the sector, and more broadly as a society that values justice, progress and economic opportunity.
With demand increasing and traditional resources drying up, something has got to give. Nonprofits are finding that they must get more strategic about using money and determining the impact of their work.
Some of the most interesting findings from the 2013 survey are:
- 42% of survey respondents report that they do not have the right mix of financial resources to thrive and be effective in the next 3 years.
- Over the next twelve months, 39% plan to change the main ways they raise and spend money.
- 23% will seek funding other than grants or contracts, such as loans or investments.
- For the first time in the five years of the survey, more than half (52%) of respondents were unable to meet demand for their services last year (up from 44% in 2009), and 54% say they won’t be able to meet demand this current year.
As one survey respondent put it, it is time to move from the reactive to the strategic:
Our greatest challenge is financial stability and sustainability. We must be more effective to raise 50% more money than we did two years ago—with the same number of staff members, but using all the skills and talents each staff member brings to the table to maximize our efforts. Our budget is to the bone, and our staff is overstretched….We…must learn how to work proactively and strategically… and stop playing catch up, as we have for most of our existence.
Because NFF has been doing this survey for the past 5 years they can start to look at trends over time. They’ve developed a pretty cool Survey Analyzer Tool that lets you slice and dice the data by geography, sector, budget, and more.
I encourage you to dig in and take a look at the data. You can find all of the survey reports and tools at the Nonprofit Finance Fund website here.
Photo Credit: Nonprofit Finance Fund
Just a few years ago, the only measure for a nonprofit’s effectiveness was the percent they spent on overhead expenses. If a nonprofit spent a magic 20% or less on non-program expenses they were deemed worthy of donations. This destructive way of evaluating nonprofit organizations has been losing favor over the last few years as rating agencies like Charity Navigator have recognized the need for a broader evaluation of nonprofit effectiveness. New measures have started to include outcome and impact elements.
But all of this begs the ultimate question which is how do we create a system for measuring and comparing nonprofits across the many social issues and operating models that make up the sector? Because however faulty the overhead percentage measurement was, at least it allowed a comparison of apples to apples. You could see how one nonprofit stacked up against another. But if each nonprofit organization is now creating their own theory of change, and their own outcome and impact measurements, how do we compare those to another nonprofit’s outcome and impact measures?
Enter a host of efforts to solve that very problem. One of these efforts is Markets for Good. They aim to create an infrastructure for evaluating nonprofit effectiveness based on outcomes and impact. You can watch their video explaining their efforts below, or if you are reading this in an email click here to watch the video.
And there are many other efforts to move the nonprofit sector toward measuring outcomes instead of spending practices. These include Idealistics, GiveWell, Philanthropedia among many others. But it’s not clear yet how any of these efforts will be able to analyze and compare the effectiveness of social change efforts because there are many pieces to that puzzle.
To truly be able to evaluate and compare the effectiveness of social change efforts, we have to:
- Encourage nonprofit organizations to develop a theory of change, because you can’t measure whether an organization has created change if they have no idea what they are trying to change in the first place.
- Give nonprofits resources with which to measure whether their theory of change is actually coming to fruition. Measuring outcomes and impact takes time and money.
- Separate a single nonprofit’s efforts to create change from other forces working on the same social problem so that we can understand the effectiveness of a single organization.
- Create a standardized system for comparing the ability of one nonprofit organization to create change to another’s ability to create change.
- Connect such a system for measuring nonprofit effectiveness to systems already being created for for-profit social entrepreneurs (like GIIRS) so that those with money to invest in social change efforts can compare the social return they would get in a for-profit and/or nonprofit setting.
- Communicate the results of those measures to philanthropic and social investors so they can make more informed, more results-focused investments, whether those be to nonprofit or for-profit social change organizations.
To me, comparing the ability of organizations to create social change is an enormous nut to crack. But it is an incredibly worthy endeavor. I applaud Markets for Good and the many other efforts working to create a system for understanding and comparing social change efforts. It will be fascinating to watch this space develop.
Photo Credit: KJGarbutt
Last week I spoke at the Women’s Collective Giving Network (WCGN) national conference about the power of a theory of change. The WCGN is an affiliation of women’s philanthropic groups across the country. The members pool their money and give grants to nonprofit organizations. It is critically important that they, along with every nonprofit organization, understand and embrace the power of a theory of change.
With increasing competition for social change dollars it is absolutely crucial that nonprofit organizations develop their own theory of change. A theory of change is basically an argument for why a nonprofit organization exists. It describes how an organization uses community resources (money, volunteers, clients) to perform a set of activities which result in changes to the clients’ lives (outcomes) and changes to broader communities, institutions, or systems (impact).
Essentially a theory of change describes how a nonprofit creates social change.
So a very basic theory of change for a literacy program would look like this:
It used to be enough for a nonprofit to talk about what they produced (or outputs), such as meals served in a soup kitchen, hours spent reading to a child, beds provided in a homeless shelter, but that just doesn’t cut it anymore. In a world where there are fewer and fewer dollars and more and more nonprofits fighting for those dollars, philanthropists, government funders and others are increasingly asking the question “To What End?” So what if you created outputs, did anything really change because of your work? Did the lives of those in your program change and did our community change?
That’s where a theory of change comes in. If you can articulate what change you hope your organization is creating, then with that fundamental building block in place you can:
- Chart a strategic direction
- Prove your results
- Secure more support for your organization
And ultimately achieve the holy grail of the nonprofit sector: sustainable community change.
A theory of change is the fundamental building block that makes all of this happen, like this:
A theory of change is so fundamental because you cannot chart a strategic direction if you don’t know what you are trying to change. And you can’t prove that you’ve changed something unless you have articulated what it is that you want to change. And you certainly can’t get funders, volunteers, and key decision makers to support you if you can’t tell them what you are trying to change and whether you are actually doing it. So the only way to truly create long-term social change is to start with a theory of change. Which is why I encourage every nonprofit organization to go through the exercise.
If you need help crafting your own theory of change, check out our Creating a Theory of Change step-by-step guide, or if you need customized help to chart a strategic direction, check out our Strategic Planning consulting services.
Photo Credit: Kristymp
In this month’s Social Velocity blog interview, we’re talking with Adin Miller. Adin is the Senior Director for Community Impact and Innovations at the Jewish Community Federation and Endowment Fund. In this role, he develops new strategies and programs to bring about change and impact within JCF’s mission. Adin focuses on defining metrics to document impact, maximizing measurable impact and increasing the visibility of the organization.
You can read past interviews in our Social Innovation Interview Series here.
Nell: You have always been on the funding side of social change. How do you think philanthropy must evolve in order to add to, instead of detract from, the new energy around social innovation?
Adin: I actually believe the philanthropic sector is embracing social innovation, although at a slower rate than we expected. Our modern version of philanthropy, which traces its roots back to the formation of private foundations and federated systems over 100 years ago, has had many examples of supporting innovation and taking risk. However, I believe the growth and demand for metrics, data, and measures of success and impact may have unintentionally tamped down the sector’s willingness to take risk through innovation.
The Bay Area community is identified with entrepreneurship and innovation. That same ethos is also evident within the nonprofit sector (for example, see The Joshua Venture’s profile of it’s 2012 applicant pool (PDF)). The Jewish Community Federation and Endowment Fund has embraced this ethos by providing funding to support social innovation in new and established organizations. I have also advocated for a broader embracing of innovations in how we fund in order to further support new approaches.
By embracing the energy around social innovation, I can engage new donors in our efforts while also providing the means to support an evolving ecosystem of organizations that make up our local Jewish community. In some sense, I believe philanthropy’s resistance to the new energy around social innovation seems misplaced. Harnessing that energy can be an effective tool in a comprehensive strategic philanthropic approach.
Nell: You are fairly passionate about connecting traditional philanthropy to the emerging world of impact investing. Why is it critical to bring the two worlds together?
Adin: I believe our current societal challenges and the continued shift by government away from social, safety net, and education services requires that philanthropy look beyond the confines of simply applying a 5% spend rate on a private foundation’s net investment assets. The general principle of impact investing encourages philanthropy to make better use of the other 95% of assets it manages. Whether structured through Mission-Related Investments, Program-Related Investments, or emerging fields such as social impact bonds, philanthropy has the opportunity to put more of its resources into action to support social change efforts and grow them in scale.
Community foundations and federated systems (such as my employer, the Jewish Community Federation and Endowment Fund), in my opinion, have the greater opportunity to embrace impact investing. They directly engage individuals through donor-advised vehicles, supporting foundations, or annual fundraising appeals, and have the unique opportunity to also encourage individual social impact investing that compliments and aligns with their individual charitable giving and philanthropic behavior. The market opportunity is big and when it’s finally realized, will have a much bigger disruptive impact on how philanthropy functions and supports social change.
Nell: In your current role at the Jewish Community Federation and Endowment Fund part of your charge is “to define and develop metrics to document impact.” Determining social impact is such a holy grail in the social change sector. How do you go about defining and measuring impact in your work?
Adin: As an institution, the Jewish Community Federation and Endowment Fund is looking to better understand and track its ability to affect social change. The need for and supply of data have been hallmarks of the current disruptive state of philanthropy. But, I’m also cognizant that we cannot overwhelm our grantees with outsized and overwhelming data requests. As such, we’re methodically working with our funded organizations and community donors to identify the key data points we should be collectively tracking to measure effectiveness and impact.
For our large-scale initiatives – such as our Reducing Barriers and Increasing Access to Participation in Jewish Life initiative – we have adopted a Collective Impact approach and the specific intention to work with partner organizations and community members to define shared goals and intended impact. We have also positioned our new grantees to set aside funding for smaller-scale efforts to assess and measure their effectiveness. I expect that my team and I will continue to work with grantees and partners to craft the right recipe to allow us to effectively measure impact while also emphasizing the impact may take years to become evident.
Nell: You have been involved with social change both as a staff member at funding institutions and as principal of your own consulting firm. What role do you think consultants play in the social change ecosystem?
Adin: Consultants have the opportunity to bring their wider field of vision, built through multiple and diverse interactions with clients, into play. In some respect, consultants serve as ambassadors of thought and action that can bridge institutions in the social change ecosystem. When I managed my own consulting firm I had the privilege of learning about crosscutting issues and approaches that I could then bring into my interactions with clients. There is a tremendous amount of quiet coaching and mentorship that happens as a consultant and that’s the entry point by which I could advise as well as gently push clients to consider additional paths to achieve their missions and goals.
Nell: Before moving from consulting to the JCFEF you were active with your Working In White Space blog, but you haven’t been as active on the blog recently. What role do you think social media plays in social change and how do you stay engaged with it from within an organization?
Adin: Oh, I very much miss my blog. Writing is undeniably a muscle that requires constant use and dedication, and my own ability to do so took a dramatic hit over the past 12 months. Nevertheless, I believe in the power of social media and blogging to share experiences, push ideas along, and test out theories. In my current work, I’ve encouraged my team to find their own voices and become engaged in social media and blogging. The opportunity to exchange ideas in public is a key element of how philanthropy professionals can further extend the effectiveness of their efforts while also raising the transparency quotient so needed in the sector.
On a personal level, I still try to maintain an active profile in social media (mostly Twitter – I’m @adincmiller – but Google+ , LinkedIn and Facebook as well) where I push along interesting content. I follow about 80 different philanthropy, social media, and impact investing RSS feeds that give me a great window into current debates and trending issues. And I continue to coach and push for greater communication through social media platforms.