Nonprofits must provide exceptional transparency into the organization’s outcome metrics, controls, and reporting. Outcome metrics not only show funders and constituents how the organization is performing; they also help pave the way for sustainable growth and greater efficiency.
Amid increasing demand for transparency and accountability, today’s nonprofits are seeking ways to both produce and to demonstrate successful outcomes. Heightened expectations and heightened scrutiny come from several sources—including ever more-engaged funders looking for financial management techniques and principles employed by for-profit businesses.
To meet this demand, nonprofit organizations are embracing outcome metrics to measure and report their performance.
What are Outcome Metrics?
Outcome metrics are powerful, essential tools for demonstrating accountability and transparency. They can measure financial or non-financial criteria that reflect an organization’s, program’s, or initiative’s efficacy. They’re derived by carefully defining outcome indicators, data-collection methods, analytical techniques, and presentation vehicles that collectively show a rich picture of organizational performance. These outcome metrics may go by many names and fit in countless categories. Many nonprofits obtain their best results by measuring across multiple dimensions for
blended scorecards that encompass activities, capacities, financial results, and other metrics. Ultimately, well-defined outcome measures help organizations to continuously adapt and improve.
The importance of outcome measures can be seen from a variety of perspectives and functions within the nonprofit organization. These include:
- Funding: In a competitive environment, the ability to define, measure, monitor, and report the metrics that define success can encourage new and additional funding from donors, foundations, and other benefactors. For instance, demonstrating achievement of key milestones can unlock subsequent rounds of multi-year grants.
- Accountability: Funders are increasingly tying their support to stringent accountability. They want to see where their monies are going and the results that are achieved – whether it’s organizational growth and new locations or more nonprofit partnerships and matching funds. Nonprofits must provide exceptional transparency into the organization’s outcome metrics, controls, and reporting.
- Stewardship: From development and accounting to operations and programming, the ability to define, track, and report outcome measures–showing where you are and where you want to go—will help ensure good stewardship. This, in turn, will boost donor confidence and strengthen your credibility—which supports your growth and your ability to pursue your mission.
Linking Metrics to the Mission
Outcome metrics deliver value only if they are tightly linked to your core values and mission. It’s best to start with a simple template that defines what matters—your organization’s short- and long-term objectives—and the impact measures that effectively map to them. Set goals and strategies that help ensure your activity measures support the overarching mission. These might include progress toward goals, and program implementation; projects launched and sites protected. Finally, drill down to define the supporting tactics and activities. These might be measures of memberships, funding, or growth in fundraising. However you establish and define your outcome metrics, keep it simple—and never lose focus of what truly matters to your organization.
Outcome metrics include all measures that reflect organizational performance and impact.
With your mission and a balanced approach firmly in mind—and with your leadership engaged—define the top three indicators that best reflect your progress and impact, and how you will measure and monitor them. Next, identify supporting metrics that help ensure peak performance. Ensure each metric aligns with your strategic mission. Make those measures integral to your annual strategic plan. When you focus on what and how to measure, you inform other aspects of your strategic planning, strengthen your stewardship and performance, and increase your mission impact.
The Right Financial Software System Matters
As you pursue a strategy based on outcome metrics, consider your financial management solution and how it can simplify the process. A modern, fund accounting solution will automatically tag and track your data by key dimensions—giving you instant visibility and insights so you can proactively manage locations, programs, members, and funds. The right system can provide access to statistical data that enables you to automatically calculate key metrics such as financial (revenue), statistical (membership), or a combination (donations per attendee). Also, it can offer the visibility, automation, access, and adaptability you need to grow your organization and succeed.
Whether you benefit from fast and easy reporting or automated processes that yield greater efficiencies, you will be a better steward of all funds.
Perhaps you want to measure attendance, volunteer hours, meals served, immunizations given, or constituents funded. The key is to integrate and calculate those statistics against budgets, plans, projects, and expenses. For example, if your organization is membership driven, you may want to track revenue by membership count compared to the prior year. Metrics such as these let you easily monitor, track, and report on outcomes. A best-in-class financial management solution can do it all–within your system of record.
Ready to define the key metrics that best measure what is most important to your mission? Contact CompuData’s Sage Intacct experts today!