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Measuring Impact Nonprofit
Hetal Sheth 9/29/22 10:35 AM 6 min read

3 Reasons: Why measuring impact for nonprofits is essential?

A time was when nonprofit organizations were only required to provide annual reports. Due to the increasing number of social problems and social-driven organizations, measuring impact has become essential in demonstrating nonprofits' impact. Measuring your social impact will help you understand, manage and communicate the social value that your work creates in a clear and consistent way. 

The results of a recently conducted survey indicated that 85 percent of nonprofit executives believe impact measurement will improve fundraising success. According to 49 percent of respondents, recurring donations will increase. In addition, 52 percent of executives believe it will enable them to reach new donor demographics, while 42 percent believe it will enable them to meet the demands of funders. 

With the above numbers, we can say that measuring impact is essential for nonprofits' fundraising. Moreover, measuring impact helps nonprofits to understand, manage and communicate their impact. Every nonprofit organization sooner or later has to start measuring the impact of continuous learning and improvement to sustain and scale.  

In this article, we are answering the question

Why nonprofits should measure their impact?

  1. Stay on track with the mission by measuring the impact 
  2. Enhances integrity and credibility of the nonprofit
  3. Impact evidence creates value

Stay on track with the mission by measuring the impact 

Often Nonprofits get caught up in the what and how of creating social impact, sometimes at the cost of the why. Measuring impact can actually help us reclaim why nonprofits exist to do what they do. This facilitates the generation of a streamlined, relevant approach to measuring the effectiveness of their activities.

There can often be a temptation to pursue impact reporting shortcuts or to create hyperbolic narratives of incredible impact to achieve, for example, further funding security. This has never been a sustainable strategy in the long run for nonprofits. We believe it is becoming increasingly ineffective in the short term as well. Impact measurement is becoming more refined and widespread, thus raising the bar for its quality. 

Nonprofit stakeholders like employees, beneficiaries, and funders may have different priorities regarding impact measurement. However, all parties are likely to share the same mission. Moreover, if you are a mission-driven organization, shouldn't one of your critical drivers for impact measurement be your mission?

As a result, nonprofits measure impact not for the funders, but for the beneficiaries, for whom the impact measurement should ultimately serve.

Read More: Mentoring Young People into Adulthood with Impact Data


Enhances integrity and credibility of the nonprofit 

Nonprofits should measure their impact from the perspective of funders. Those who provide the capital to make impact possible have been the traditional drivers of impact measurement. The Mulago Foundation, for example, will not invest unless the potential investee has a process in place for measuring and reporting impact. From a social returns perspective, this could be considered a form of de-risking investments. While The Mulago Foundation doesn’t demand a certain process or reporting style, other foundations and funders do.

The point here is not to measure impact because we are obliged to do so. Aside from such demand, and keeping mission in mind, nonprofit measuring impact encourages stronger relationships with the capital sources, whether that’s funders, customers, or something else. Social capital will flow to nonprofits whose impacts have been well demonstrated. In the process of impact measurement, nonprofits interpret and analyze the impact data acquired.

With impact data we can more clearly understand the efficacy of a nonprofit's implementation - the what and how of our approach. In this way nonprofits aren’t tracking impact solely for impact reporting, nonprofits can also measure to uncover inefficiencies and potential areas for process improvements.

Read More: The Art Of Actionable Impact Storytelling

This means that in measuring the impact nonprofits must allow space to be critical of themselves. It invites pragmatism where there is likely a heavy dose of idealism. And with the courage (and impact data) for self-evaluation, nonprofits can then move into creating more effective processes. With it, our impact grows. If nonprofits are engaged in ongoing measurement and evaluation, nonprofits are likely also engaged with stakeholders along their impact value chain.

Read More: Can impact data improve our health and wellbeing?

Implementing effective impact measurement may even mean fundamentally shifting the culture of the organization, or the mindset of the funding priorities. Either way, stakeholders across departments, across partnerships, and across funding sources, all the way down to nonprofit’s beneficiaries, are positively affected by a transparent commitment to impact evidence.

For example, it could invite increased fulfillment for passionate employees. It could encourage investors to activate more capital. It could amplify the voices of beneficiaries. It may even induce favorable policy changes. People and entities across our sphere of influence will respond and engage with the impact data because it represents an actionable authenticity to a greater purpose for nonprofits.

Read More: How Impact Data Pipeline Can Simplify Impact Management?


Impact evidence creates value

If a nonprofit is seeking funding and can tangibly demonstrate impact, then it represents a sound impact investment compared to a similar competitor that does not. Conversely, if you are an investor seeking an impact-first investment you will likely want a potential investee to have made a strong commitment to impact accountability. If you are seeking approval to implement a conservation program in a new market, having impact data becomes a necessity of that persuasion process. The competitive reasons are many, and previous items on this list contribute as well.

Simply put, impact evidence creates value for nonprofits. Any time nonprofits can leverage the untapped value that they can wield an immense advantage. Think of it as a feedback loop:

Of course, if nonprofits measure and find that they aren’t having an impact though, then nonprofits iterate their product or service. Either scenario culminates in more impactful results and a nonprofit return to achieving the mission that motivates in the first place.

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Importance of measuring impact of nonprofits

You may have noticed some overlap amongst these drivers. That is intentional. And unavoidable. At the highest level, nonprofits must measure impact if nonprofits are to consider who they are and what they do to be driven by the desire to affect positive change. Because all the steps and various side effects of that measurement process ultimately serve that greater goal.

With that greater goal in mind, nonprofits also measure impact because it helps to define and articulate what that is. In addition to that, below are reasons why nonprofits should measure impact. 

  • To infuse integrity into social markets. 
  • It makes nonprofits better at delivering core offerings. 
  • It brings more stakeholder voices to the table. 
  • It encourages staying true to who nonprofits are and why they exist.

Defining nonprofit goals. Infusing integrity into lives. Self-improvement. Giving a voice to the voiceless. If these are ideals we strive for as human beings, I think nonprofits' impact journey should reflect them as well. Because as in our own lives, why we do what we do shapes the nature of our journey, and ultimately the quality of our destination.

Read More: 5 Biggest Challenges that nonprofits face in impact measurement

Impact measurement and management


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Hetal Sheth

The founder of Ektta, and co-founder of SoPact, Hetal holds a deep passion for establishing enduring impact management practices in the social sector to have built-in learning and accountability.