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Why Measuring Nonprofit Effectiveness is Complex

Nonprofit AF Dec 2, 2019
This article is deemed a must-read by one or more of our expert collaborators.
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Why Measuring Nonprofit Effectiveness is Complex Giving Compass
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Giving Compass’ Take:

• Vu Le, writing for Nonprofit AF, explains why donors need to stop measuring nonprofit effectiveness with impact-per-dollar models. 

• The article notes that the impact-per-dollar model doesn’t measure things like long-term outcomes or equity. 

• Learn about the harmfulness of lean overhead. 


We need to talk about Impact Per Dollar (IPD), the practice of measuring nonprofit effectiveness by calculating units of service that donors can buy with their donations. For instance, let’s say homeless shelter A provides people with 5,000 nights of shelter each year and its total program cost is $50,000. Divide 50K by 5,000, and you get $10 per night of shelter per person. Compare this with Shelter B that provides 2,000 nights of shelter at a program cost of $40,000 per year, which figures to be $20 per night of shelter per person. The argument then, according to IPD, Shelter A is twice as effective as Shelter B, and donors would be fools to donate to Shelter B.

I’m making all these numbers up. But I am not basing it on nothing. This is how many people think nonprofit effectiveness should be measured, and their advocacy of this method to an unwitting public causes all sorts of harm to our work. Here are several reasons why, with special thanks to colleagues Julia Coffman, Jara Dean-Coffey, Beth G. Raps, and others for their insights:

  1. It only measures the easily measurable
  2. It does not factor in geographic differences
  3. It does not measure long-term outcomes
  4. It ignores the complexity of nonprofit work
  5. It fails to take equity into account
  6. It drives resources away from smaller grassroots organizations
  7. It exacerbates the public’s ignorance about nonprofit work
  8. It furthers misconceptions and complacency about societal problems
  9. It perpetuates the nonprofit hunger games
  10. It devalues the intrinsic worth of individuals

Read the full article about measuring nonprofit effectiveness by Vu Le at Nonprofit AF.

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Learning and benchmarking are key steps towards becoming an impact giver. If you are interested in giving with impact on Nonprofit Sector take a look at these selections from Giving Compass.

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    Giving Compass' Take: • The Philanthropic Initiative and Exponent Philanthropy teamed up to provide a free toolkit for seasoned funders.  • Donors don't have to "go it alone," according to the toolkit. How are you incorporating collaboration into your giving strategy? • Read more about impact-driven philanthropy.  If you are a seasoned donor, donor-advised fund (DAF) holder, foundation trustee, or staff of such an organization, you may reach a point where you feel there is potential to achieve an even greater vision, to wield more leverage, to catalyze deeper change. Here at The Philanthropic Initiative (TPI), and in talking with grantmaking membership organization Exponent Philanthropy, we realized that we often field these kinds of how-to inquiries. To assist funders of all types, we decided to work with Exponent Philanthropy to create a free toolkit, Ramping Up for High-Impact Philanthropy, for seasoned funders who are hoping to take an existing philanthropic program to a higher level. The toolkit builds on our 2016 publication, Ramping Up Your Foundation, which helps foundations thoughtfully and responsibly plan for a significant increase in giving and/or adjust to a sudden infusion of assets. If you’ve read that and thought, okay, what’s next?, Ramping Up for High-Impact Philanthropy is your answer. This new publication provides hands-on tools including a diagnostic assessment for funders to use to assess their own situation, descriptions of practical strategies other funders have used to overcome similar obstacles, and case studies that highlight the stories of three different funders. 


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