The Philanthropic Conundrum: How to Show Breakthrough Results

In their efforts to manage strategy, nonprofits struggle with coming up with the best way to measure results, which can make it difficult to demonstrate results to their philanthropic benefactors.  This measurement problem is often due to the nature of their work and the environment within which they operate. 

The missions of nonprofits tend to be hard to measure.  Things like increasing social justice or even improving development in impoverished neighborhoods or countries aren’t easy to quantify at all, never mind at regular, (non-glacial) frequencies.  Plus, there are usually multiple actors in any of the spaces in which they operate, so the problem of attribution arises:  Whose activities are causing the results?

This makes it difficult—at best—for nonprofits who want to manage their strategies with the Balanced Scorecard or any other strategy management system that uses strategic measures or key performance indicators (KPIs) to measure and demonstrate results.

How Do Foundations Hold Grantees Accountable?

For foundations, or grant makers, it makes it even more difficult to determine whether the programs they fund are achieving the intended, beneficial outcomes.  In Jan. 4, 2016, issue of The New Yorker, Larissa MacFarquhar wrote a terrific profile of the president of the Ford Foundation, Darren Walker—“What Money Can Buy”—in which she touched on this issue.

MacFarquhar framed the issue as “accountability”—how can grantees be held accountable by grant makers if there is no way to determine whether they are achieving results?  According to her, once money was spent at the Ford Foundation, they didn’t always assess whether projects were successful.  This was partially due to “a rule of thumb at Ford that program officers should stay in their jobs no more than eight years, lest they become complacent. Thus, by the time a project was established enough to be evaluated, its progenitor had moved on, and the replacement was not usually sufficiently interested in his predecessor’s enterprises to spend time and money figuring out whether they had succeeded.”

“Strategic Philanthropy” Tracks Returns

Some began to promote “strategic philanthropy,” MacFarquhar said.  The concept that “[d]onors ought to behave more like investors” and instead of just leaving his their money with one organization, an “investor” should “track his returns, and if they did not meet his expectations he would withdraw his funds and invest them somewhere else.”

Of course, following this logic leads to the requirement of measuring results—because, after all, what gets measured, gets done.  However, that might lead donors and nonprofits “to focus on limited sorts of things that could be measured precisely: administering vaccines, for instance, rather than attempting to improve overall health; or counting missed days of school rather than evaluating student achievement,” according to MacFarquhar.

I would argue, however, that these two—focusing on smaller, measurable things, in lieu of the grander idea—do not have to be mutually exclusive.  Yes, administering vaccines (a good thing to measure) or missed days of school (a bad thing to measure, in my opinion) do not necessarily lead to improving overall health or increased student achievement.  However, administering vaccines is a good first step. 

In the school case, I think she was being a little disingenuous with her example because you could use student grades or test scores as an initial measure of achievement (acknowledging the flaws in these metrics, they are still better than absenteeism)—though certainly not the final metric.

Four Levels of Measures

  1. In fact, in my experience, measuring things like vaccines administered—or miles of roads built—is exactly the first step an organization needs to take on its way to determining the success of a long-range development or social justice program.  The key is organization-wide awareness that these are not the final measures of success.  This first level of measures, let’s call them “action” measures, helps an organization know that it is incentivizing the behaviors required to achieve the overall, grander result.
  2. As the program or organization matures you can move to second level “learning” measures.  In the health example, one such measure might be the decrease in occurrence of the disease for which the vaccination was given. 
  3. A third level measure would attempt to observe behavior, which in the health example could be how often people wash their hands after performing particular unsanitary activities.  Again, it is a measure that while takes some effort to track, it can be tracked in the short term.
  4. Finally, once success at each of these levels has been measured and achieved and an appropriate amount of time has elapsed (probably years), you can measure actual results.  In the health example, the result level measure might be “increase in life expectancy” or “decrease in infant mortality rate”.

So, I think I have illustrated how organizations can use these rather simple, or first level “action” metrics, to start to measure their progress toward achieving hard to measure results. 

In my experience, it is very difficult for nonprofit organizations to come up with that one, silver-bullet measure that they can use to track results.  When they try for that, they often get frustrated and conclude that they just can’t measure what they are trying to achieve, so why bother?

Instead, you should use an integrated system of measures that build upon one another.  Track them one level at a time while managing expectations and your organization will be able to demonstrate that it is on its way to achieving its mission.