As an MBA seeking employ in the nonprofit sector, I am
somewhat of a rarity. That’s not to say that the nonprofit sector is completely
devoid of MBAs, but there are a number of barriers that stop the average MBA
from going into the nonprofit sector. Among them are lower pay, and lower
perceived prestige—many of the conversations I’ve had with my MBA classmates
involve assertions that nonprofits are, on the whole, well-meaning but poorly
organized. And at the heart of this assertion is the claim that nonprofits don’t
know how to measure their impact, and therefore are often “just throwing
spaghetti at the wall and seeing what sticks.”
I have two primary assertions that I’d like to defend in
this post:
·
Nonprofits will benefit from becoming better at
measuring outcomes (not an earth shattering assertion).
·
For profits aren’t that great at measuring the
very things they encourage nonprofits of measuring poorly.
Measurement of
outcomes
First, it is important to understand the difference
between outputs and outcomes. For the sake of discussion, I will define outputs as things you do and outcomes as the end results of things
you do on things you care about. Outputs
sound like this: “120 books given to a local literacy organization;” “100,000
hours of volunteer work provided by our program.” Outputs are helpful tracking
numbers, but they are like “inventory” numbers in a for-profit. Outcomes, on the other hand, answer the
question “what did my outputs do?” My 120 books and 100,000 volunteer hours helped move a
cohort of students from 15% of students on grade level in reading to 29% (a 14% increase). My
work with this workforce development program helped make a 20% in the 5-year
recidivism rate of the participants involved.
This highlights a key point—outcomes come in different
flavors (namely short, medium, and long-term). K-12 education has recently
become a core passion area of mine, so I will take this example. Many
education, youth development, and poverty alleviation groups seek to end
poverty, both on the individual and generational levels. Here is a progression
of metrics that they may engage in:
·
Outputs—Number of students enrolled in school/an
after school program
·
Short-term outcomes—Changes in school attendance
rates (which is abysmally low in many of the communities these organizations
operate in); changes in test scores, reading comprehension, math ability,
reasoning ability and critical thinking, etc.
·
Medium-term outcomes—High school graduation rates.
(In my admittedly limited experience, it seems that few nonprofits measure and report these outcomes, with education being perhaps an exception; I’ve seen few do this well). I would even put college
acceptance rates in this category.
·
Long-term outcomes—College graduation rates;
number of students employed soon after college graduation; long-term earning
potential of graduates.
·
Very-long-term outcomes—average net worth of
area families; average earning potential/employment level of area families.
If your goal is to end cycles of poverty in an area, it
is going to take a long time to see those effects come to fruition. But if you
are measuring progress against a BHAG (Big, Hairy, Audacious Goal) like ending generational
poverty, it is not enough to simply improve the test scores of 2nd
graders. Those second graders need to grow into high school graduates who
thrive in college and find gainful employment. College attendance (and
graduation) needs to become the norm in a low-income community, rather than an
oddity. Only when these things happen is the mission truly being accomplished.
Why nonprofits
benefit from measuring
Nonprofits benefit from measuring predominantly because
the words “proven effective” are very effective in attracting the top two
resources nonprofits need—talented people and money. Simply put, people are
more attracted to working for a nonprofit that is effectively accomplishing its
mission than one that simply doesn’t know how it’s doing. And people are much
more willing to invest in such nonprofits.
Turns out it didn’t take much to support that assertion.
Why traditional
business are actually not that great at this
My MBA friends often seem to believe in the superior
measuring ability of for profits. Businesses are much clearer about their (economic)
bottom line than nonprofits are about their (social) bottom line. But note two
things:
1)
Nonprofits are actually pretty good at measuring
their economic bottom lines as well (I say this facetiously, as they submit
yearly audited financial statements, so they are equally as good as their for
profit counterparts).
2)
For profits seem to do a poor job measuring
anything but short-term economic outcomes—namely profit, revenue, and market
share (market share could be argued as medium term, depending on the context).
The fact of the matter is that corporations, even ones with great CSR
departments, do not seem to have an overall handle of the environmental and
social effects they create in any given year. And they definitely don’t track
the long-term effect they have on the earning potential of an area, or on poverty,
or literacy, or anything of the sort. In fact, many businesses don’t even measure
their own market share—they typically buy data from companies like Nielsen or Kantar
to do that.
The fact of the matter is that social impact is much
harder to measure than profit. That does not excuse nonprofits from measuring,
but is simply to say that neither sector is good at social measurement yet.
The moral of the
story
This world needs top talent in highly effective
nonprofits. Nonprofits need to measure their outcomes, not just their outputs,
to figure out what is working and to draw that talent (and the resources to pay
them) into the organization. MBAs need to realize that measuring profit is
easy, and that if their company needed to measure social impact, it would be
pretty horrific at it. And everyone needs to start identifying what their long-
and very-long term social impact metrics might look like, and start working
towards those outcomes.
Photo from www.ouropendoors.com
