Measuring Impact: Why Nonprofits Should Care About “Impact Reporting”
We live in a world where it is no longer acceptable to be socially unaware. With new markets touting their ethically sourced and sustainably developed products, it’s no wonder that consumers have placed a greater focus on their consumption and their resource allocation. Profitability is second to the impact of the product being offered. Will a consumer choose one handmade bowl over another because it can fund the education of two children for a year?
In the same vein, it’s no longer enough to say you have made a donation or volunteered regularly with a charity if you don’t know how you’ve specifically impacted the community you are serving. Donors are becoming increasingly particular about what compels them to make contributions to organizations.
Where “Impact Reporting” Comes In
Impact reporting is a way for an NPO to explain how donations are directly serving the source. It is beneficial for organizations to provide donors with this type of information that they are seeking. Impact reporting can really bolster donations and volunteerism in a meaningful way. So, I’ll ask the obvious question: why don’t more organizations report on impact?
In the US there are approximately 1.5 million nonprofit organizations in operation today. For an uninformed donor, it may seem a daunting task to find an organization that is reputable, and is doing work that makes an impact in their chosen community.
Fortunately, there are organizations whose only goal is to help inform donors by grading, monitoring, and measuring how donations flow into and out of nonprofits [in relation to the goal they report]. Organizations like the BBB’s Wise Giving Alliance, Guidestar, Charity Watch, and Charity Navigator are all great resources to see if an organization has historically contributed a majority of their donations to their mission and show the breakdown of those donations within that mission. But while the reporting these organizations provide is necessary and extremely helpful, it does not offer insight into how the organizations measure up against their stated yearly goals.
As a way to bridge the information gap, nonprofits create annual reports for their donors. These reports provide a broad overview of donations that were received by a nonprofit and how they were used to accomplish objectives. Not only do these reports provide a more personal look at the work performed by the organization, but they help donors understand how their contributions fit in with the bigger picture.
When an organization provides insight into how donations are being used, it adds a depth and breadth to the mission that could not be gained any other way. International Justice Mission does this by attaching stories of men, women, and children that have been directly helped by their organization. It is one thing to know you gave money to help widows provide for their families—it’s another to see the faces of those widows and their children. Increasing transparency helps organizations demonstrate the value of the donations they receive. While it may not be easy to correlate dollars directly to actions, estimated costs allow donors to understand how their funds impacted the work that was made possible.
The Challenges of Reporting
The nonprofit market is robust and diverse, but that is often what makes impact reporting so difficult. With a market so broad, there are endless opportunities to compare similar organizations without much consideration for how these organizations intend to accomplish their intentions. How does an organization use reporting to explain why they do what they do, why their technique is the best way to go about it, and why people should trust them enough to donate? Limited resources for marketing and execution and inadequate framework often make it difficult to report whether annual goals have been met. The data provided by the traditional annual report is generally void of any actual insight into the continuing impact that was made by donations and volunteering conducted over the previous year. Also, these reports are oftentimes difficult to understand.
For donors, the desire to understand how contributions are being used is not going away. As nonprofits mature and adapt to the changing market, they will need to incorporate a plan to measure impact in a snapshot (annual reporting) as well as long term impact in a year-over-year reporting model. Year-over-year numbers will encourage donors to stay engaged by showing them the evolution of programs and get to see how communities are impacted long term.
NPOconnect
NPOconnect is the nonprofit database connecting million of employees and companies for CSRconnect and GrantsConnect. When an employee logs into their employee engagement platform, powered by CSRconnect to search for a volunteer event or make a donation to a charity they are searching through the NPOconnect database. The free portal for nonprofits allows organizations to create a charity profile to add volunteer opportunities or register for ACH to receive donations faster. Learn more about the benefits of NPOconnect and the Global Goals Gateway.