With intense competition for donor dollars — and funders insisting on greater accountability and visibility — not-for-profits must show fiscal responsibility as well as program results. Agile not-for-profit organizations have learned that using outcomes to measure not-for-profit success facilitates the financial transparency that's in demand. Like them, you can use outcome metrics to easily measure and report on your organization's performance which enables not-for-profit financial transparency.
The call for greater transparency and accountability is increasingly louder. Just like the way financial analysts and credit rating agencies scrutinize a corporation’s financial performance to make recommendations, charity evaluators are diving deeper into not-for-profit results — and they’re expanding their criteria to include the tracking and reporting of non-financial performance and outcome metrics.
Charity Navigator, for example, has historically used highly specific, financial metrics when calculating its not-for-profit ratings, which can have a significant impact on not-for-profit funding. Now the organization has stated that financial metrics are not enough to see the whole financial health picture.
Your efforts to track outcome metrics for your organization will encourage accountability among other organizations while building your credibility and reputation. You can expect your community to become more engaged and supportive. Ultimately, this results in a virtuous cycle of greater visibility, better transparency, strengthened credibility, and a more committed support network.
Outcome metrics are valuable only if they are clearly linked to your core values and mission (otherwise, they are only a resource-draining distraction). So it’s better to start with a simple set of financial KPIs for not-for-profits that define what matters — your organization’s short- and long-term objectives — and the impact measures that effectively map back to them.
Set goals and strategies that help ensure your activity measures support the overarching mission. These might include:
Finally, drill down to define the supporting tactics and activities. These might be measured by memberships, funding, or fundraising growth. However you define your outcome metrics, keep it simple — and never lose focus of what truly matters to your organization.
The increasing demand for transparency and accountability from donors is compelling today’s not-for-profits to seek ways to both produce and demonstrate successful outcomes. A recent survey showed that more than 25% of not-for-profits struggle with heightened expectations and increasing scrutiny from several sources — including ever more savvy funders looking for financial management techniques and controls employed commonly by for-profit businesses.