March to Metrics: The Downside

from The Nonprofit Quarterly:

What Do Donors Want?

There is little question that data, metrics, and measurement have become embedded into the philanthropic process in recent years – practices were initially met with deep skepticism by some but eventually gained considerable traction among a majority of nonprofits and philanthropic institutions. Today, in fact, few would argue against the need for more evidence-based measures of progress, outcomes, and impact. Foundations, in particular, have been focused on helping nonprofits beef up their data collection and evaluative capacities, due to a growing demand from their boards for evidence that their investments were having an impact. Also a factor is increased public and government scrutiny, and competition from private companies moving into markets in which nonprofits had traditionally dominated. Even among nonprofits that initially recoiled at collecting data on their outcomes, there is now a general understanding that “doing God’s work” may no longer be sufficient to justify their existence in a rapidly changing world.

As a result, the nonprofit world has seen significant investment in the collection and analysis of data, with the hope that it can be used to improve public accountability, and ultimately, help encourage more informed philanthropic giving. The fly in the ointment is that many of these new quantitative analyses focus on variables such as financial performance, the ratio of fundraising expenses to program expenses, governance structures, and other sorts of information that can be easily gleaned from an organization’s IRS-990 form. While important, these data make for a somewhat limited set of indicators, particularly for investors seeking evidence of high performance.

The complete article is available here.