Giving Compass' Take:

•  Peter Fortenbaugh, writing for the Stanford Social Innovation Review, describes the hardships nonprofits face when trying to report compelling outcomes. 

• How can philanthropists build strong relationships with grantees that encourage transparency and help philanthropists to understand nonprofit challenges better?

• Read more about how thinking about impact measurement on a spectrum can help organizations develop a clear idea of how or why their programs work.

When I joined the nonprofit sector 15 years ago, I was confident I would have a succinct answer to making an impact.  I understand the importance of measuring outcomes. I majored in mathematical economics in college, got an MBA, and worked for McKinsey & Company. I love analysis. I studied philanthropy with the Philanthropy Workshop West, Legacy Venture, and SV2. I bought into the gospel of strategic philanthropy.

But the task is more challenging than I expected. On the one hand, based on personal observation, I strongly believe we are providing a valuable service to our community and improving kids’ lives. I can articulate how we are having a positive impact. But despite investing in program monitoring, we still lack a succinct measure of impact.

As we have invested in measuring impact, we have kept running into three seemingly intractable obstacles:

  1. The subjectivity of defining success. 
  2. Social service organizations like BGCP address long-term problems. 
  3. The challenge of distinguishing between causation and correlation. 

I have reviewed results from countless organizations to find approaches we could replicate, and let me offer this caveat emptor to philanthropists: When reading a nonprofit’s annual reports or other documents, take a look behind the numbers. When you see percentages, understand the numerator and denominator before drawing any conclusions.

I do not mean to imply that nonprofits are intentionally deceiving donors. Rather, they are under pressure to have succinct and compelling outcomes, and they report what they can. Philanthropists should acknowledge the challenges nonprofits face and avoid celebrating simplistic claims.

I have heard people say nonprofits should be run “more like businesses” and be accountable in the same way for-profits are. But for-profits report income, not outcomes. Every nonprofit leader knows exactly how much money he or she raised and spent.

Read the full article about the struggle of outcome measurement for nonprofits by Peter Fortenbaugh at Stanford Social Innovation Review.