Because the impact of nonprofit activities is much harder to quantify than for-profit businesses, the advent of improved data harvesting and analyzing technologies can only help nonprofits gain a better sense of how to improve themselves over time.
Margaret Lindquist penned this article for Forbes:
To help assess the impact of donations and reinforce that accountability, many nonprofits are looking to the same technologies used by successful businesses to measure investment outcomes and impacts. Nonprofits face a critical difference, however: Measuring the impact of a charitable program on people’s lives is much more difficult than measuring profitability in the for-profit world. It can require data that’s difficult to collect, and lots of it. And because nonprofits have very different missions from those of for-profit organizations, some nonprofit leaders resist the idea that they need to adopt the management practices of for-profit businesses.
Critical to solving this challenge is an understanding, for nonprofits and donors alike, of the difference between an output and an outcome.
For example, if a nonprofit’s goal is to help children become healthier through good nutrition, it can measure output simply by counting the number of distributed food packages or children fed. But an outcome such as a healthier society or lower long-term medical costs would be much more complex to measure. Outputs often can be measured immediately, but measuring outcomes can take time—sometimes years—and require collaboration with other organizations. For society’s toughest, most systemic issues, no single organization has access to all the relevant data.
Technology can help nonprofits address these challenges. One of the first innovations adopted by many has been marketing automation, which helps organizations better engage with current or potential donors, streamline fundraising processes, and personalize messages so that donors and volunteers receive messages targeted to their interests.
Technology tools also can help nonprofits dig into the numbers related to their missions. For example, when a donation is earmarked for a specific purpose, such as spay and neuter services for a dog rescue, the nonprofit is required to spend the money only on that effort. This means that the organization’s finance people need to understand exactly what percentage of costs—such as dog crates, food, and medication—can be tied to that specific program.