Adding up the “Why” for Non-profits

When we get to the end of the year, it is often a time for reflection and looking back at the accomplishments and activities of the past twelve months. For private sector companies, the bottom line is pretty simple – did we earn more than we spent. ESI Present Value NonprofitsBut for our friends in the non-profit world, the accounting isn’t quite as straight forward. Every non-profit wants to run in the black, so earnings being greater than expenditures are always a goal. But for a mission-driven organization, there is also a focus on whether your work has met your mission – in other words, what are the outcomes of the effort that you expended during the past year? But too many non-profits that serve opportunity families and individuals have generally suffered from one common obstacle in giving them the kind of credibility enjoyed by for-profit business ventures: their focus on outputs vs. outcomes. Or more plainly, they count up what they have done (outputs) rather than showing why they do the work (outcomes). ESI text boxMeasuring outputs is important to non-profits. It is a crucial step in understanding how the activities that an organization undertakes leads to achievement of goals or outcomes, either for the organization or the client. For most non-profits, outputs have been measured both at the organizational and opportunity client level. Examples of organizational outputs can include adding up fund allocation increases to program development and operation, counting the number of clients served, documenting the client transition time, and enumerating specific program accomplishments. Similarly, outputs may also be measured on the client side. Client output examples can include completion of program services by the client, exit interview satisfaction ratings, and successful placement of the client in succeeding programs.

Why Outcomes?

There is nothing wrong with measuring outputs. They can help codify organizational mission and sharpen focus on specific work tasks. At the same time, outputs don’t contribute to clarifying and communicating discernible purpose and therefore, mission success. And these days, without the ability to convey success not-profits risk their ability to articulate value, and potentially community and funder support. As the non-profit world evolves and measuring mission success becomes front and center, the challenge of measuring why and how an organization is making a difference to its constituents and community can be daunting. It can be difficult to transform a business model that has traditionally used outputs to one that uses outcomes to more effectively measure success.

Making the Shift

ESI text box2One of the keys to making the shift is using existing outputs to assess what’s important to the client’s success and to stakeholders in the organization. Using a deliberate process that includes realistic expectations of performance, controllable operational factors and rigorous measurement, outputs can be recast or translated into outcomes that impact client success and clearly reflect organizational performance. For instance, an output that measures program exit interview satisfaction has potential to be translated into outcomes. If a client in homelessness recovery is placed in a job before leaving the program, employment becomes an outcome. To be an effective outcome, however, that employment needs to be tracked and measured against established expectations. So, if employment for that client eventually results in the attainment of housing, continued employment, future job growth or mobility, and the ability to pay taxes it has outcome effects that benefit him, his community and taxpayers. Of course, robust outcomes are only as good as the evaluation process that is adopted to measure the ongoing progress in achieving those outcomes. NFPs have considerable choice among evaluators and evaluation designs. As with any high-performing vehicle, however, its performance is only as good as the fuel that drives its operation. For outcome measurement, that fuel is high-quality data that can be organized to support the NFP’s success story. The right kinds of data need to be identified and collected to support the statistical analysis that will attest to the achievement of outcomes.

Devil’s in the Data

ESI Present Value MeetingData is probably the single most onerous hurdle facing non-profit organizations in transitioning from outputs to outcomes. In most cases, the problems are not that data doesn’t exist. Sometimes, the organization doesn’t have its own client data and so needs to depend on creating composites of other similar organizations’ data. In other cases, the data elements for that organization’s programs may exist but they are difficult to mine and organize to tell the success story. Often, the data to tell the success story reside in disparate systems with multiple government agencies, requiring data sharing agreements and data science applications to mine and assemble it. Data needed to fuel rigorous program evaluation will also give the organization the information it needs to modify its programs to better its clients. For some organizations, sufficient longitudinal data will exist and be readily procurable to create a baseline against which to revise strategy and program content. Other organizations will need to begin building their datasets and maintain program operations until such time as they can determine how the data illuminates the organization’s success.

The Bottom Line

Progress is being made by the non-profit sector in determining realistic, evidence-based outcomes that support a stronger business model. While the transformation from outputs to outcomes can be a complex process, it can be a fruitful and rewarding process if the organization’s goals are to truly align mission execution and the demonstration of resulting value. At Econsult Solutions, we welcome the opportunity to work with our friends in the non-profit sector to better tell their story, linking the outputs that show what they do to the outcomes that help people understand why what they do is important.

 

Philip A. Peterson is a Senior Advisor for Econsult Solutions. He specializes in early childhood and homelessness Pay for Success (PFS) strategies using social impact financing. He assists states and local jurisdictions with advisory services in developing PFS projects in the areas of early childhood education, parental/family education for young children, pre/post-natal home visiting and housing and treatment programs for homeless individuals and families.

 

Steve2-WEB-S Steve Wray is a Vice President and Director at Econsult Solutions. Mr. Wray leads projects focused on regional economic competitiveness and civic strategy and policy. He brings to ESI’s clients extensive experience connecting the public, private and non-profit sectors with analysis and strategy development of economic growth, talent development, infrastructure and governance issues.

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