Shared measurement is a key element of collective impact.  As an armchair economist and policy-wonk wannabe, measuring outcomes and tying funding to results appeals to me greatly.  We need to know whether our investments of money, time and effort are paying off.  And the adage – you get what you measure – is true.

A recent conversation, however, reminded me that the abstract idea of measuring outcomes is very different from being measured.  In response to a suggestion that we start measuring fundraising output, maybe keep track of our number of donor visits and our funds raised from these visits, a Development Director’s response was immediate and seemingly visceral, “That will not be necessary,” he said firmly.

I was surprised by his reaction and thought more about measurement from his perspective.  Perhaps he thought that the numbers would be used to judge him and his performance in a stark way that might not do justice to the whole picture.

As soon as I shifted my perspective from numbers analyst to person being measured and judged, I saw the scary side of measurement more clearly.  In fact, I had a flashback to my first semester of law school.  After hours of studying and endless lectures about how good grades were essential to obtaining jobs and clerkships, first semester grades finally became available.  I grabbed my envelope from the registrar and ran into a bathroom stall.  Not only did I not want anyone to see my grades, I didn’t want anyone to see my reaction to my grades.

For nonprofit staff, I imagine, outcome measurements can seem much, much worse.  Donors, board members and competing organizations will see the measurements, and surely offer opinions on what went wrong and how to do better.  I can’t imagine a group of people sitting around and second-guessing my decision to attend a basketball game instead of spending the time studying torts or debating whether I made a strategic error in not taking property pass/fail.  It would be potentially humiliating to sit there while others discussed my weaknesses and mistakes.

I’m not saying that we shouldn’t measure outcomes or I wouldn’t have benefited from the insight of others.  Only that we should have more empathy for those being measured, especially as we begin to implement measurement and analyze the results.

To help better understand the nonprofit staff perspective, I decided to take the thought experiment one step further.  I came up with a personal dashboard, a set of benchmarks that could be used to measure my personal performance.  I shuddered as I imagined a committee of outspoken, driven, performance-oriented people developing these outcomes.  They would want to see stretch and would want to measure areas where they suspected underperformance.  And they would probably want to see a high success rate, say 80 percent.  The dashboard would expose my shortcomings and the committee would starkly discuss how I could get back on track.

My dreaded dashboard might look something like this:

1.   Nutrition.  Maximize fruit and vegetable consumption.  Minimize chocolate and baked goods consumption.  Switch from coffee and cocktails to green tea and water.

2.   Exercise.  Earn a minimum of 3000 Nike Fuel points per day.  Attend bootcamp, jog or jump rope on a regular basis.  Stretch after every tennis practice or match.

3.   Promptness.  Respond to all email within 24 hours.  Arrive at all meetings, appointments and pick-ups on time.

4.   Housekeeping.  Maintain a clean kitchen, including washing dishes immediately.  Complete long-term maintenance projects in a timely manner, including window washing, gutter cleaning and tree trimming.

5.   Parenting.  Fully engage in homework assistance as appropriate, including 20-30 minutes of reading at bedtime every day.  Maintain a calm demeanor at all times.

6.   Volunteer projects.  Substantially advance at least one project per day.  Make all fundraising calls in a timely manner.

There is no doubt that I could improve on each of these areas and that keeping track of my performance would focus my attention on these goals.  I also know it would require a lot of courage and strength.

What would be on your dashboard?  How would you feel about public discussion of the results?

--

Sherri Wolson

But, discussing the attitude toward donors - which is defined as how donors are perceived, related to, and integrated into an organization’s work - gave me pause. What’s not to like about donors? They provide the funding to allow nonprofits to take action. Right? Maybe when some people think about donors, they think about reality TV “rich people,” like the Kardashians or the Real Housewives. Surely, real donors aren’t as wacky as that, especially not in the Pacific Northwest. Right?

Then, I remembered a donor visit I made a while ago. Somewhere near the end of the visit, the donor took out a $100 bill, dramatically ripped it in half and let the pieces fall to the floor. I can’t remember why he did it. Only that it took every ounce of restraint I could muster to stay in my seat with a patient smile on my face. Inside I was thinking, “What the...?! We could really use that money to help families.”

Last week, I went to a meeting of the Road Map Project’s aligned funders workgroup. At this meeting, representatives from the area’s biggest and most generous foundations and corporations discuss ways to support the collective impact effort in South King County. On my way to the meeting, I wondered what it would be like. Would there be a lot of $100 bill ripping? Cigar chomping? Maniacal laughing? Rationally, I knew this wouldn’t be the case. But I had to admit that I wasn’t quite sure what to expect of these funding powerhouses or how I would relate to them.

Long story short, the meeting was inspiring. I left energized about the work of the Road Map Project (a topic for another blog post!) and, more to the point, impressed by the honest interest and passion of the funders. They wanted to see South King County institutions and organizations succeed, but mostly, they wanted to see the kids of South King County succeed. When participants reported various accomplishments there was honest celebration and there was a lot of discussion of how to help as many kids as quickly and as effectively as possible.

My experience reinforced Emily and Julie’s point about attitudes toward donors. When we start to think about asking for money, it’s easy to perceive donors as fundamentally different folks, who destroy currency for fun, and don’t share nonprofit passions and values. In reality, most donors share a desire to see our nonprofit work succeed and to advance our mission. We might not always agree, but we all want to reach the same end goal. From now on, in my donor work, I’m going to try to be aware of my unhelpful, unconscious stereotypes and to talk about these attitudes more openly.

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Sherri Wolson

My original post was a list of do’s and don’ts for fundraising event organizers.  Maybe I’ve attended too many events.  Maybe I’m still a little scarred from the last crowded, overly long, poorly catered event I attended.  The post was a rant.  A pretty angry one.

A very kind SVP staff member told me that I needed to rewrite the original post.  It’s too angry, she said in the gentlest way possible.

That got me thinking.  Yes, I’m a little angry about fundraising events that go awry.  But mostly I’m frustrated.  Frustrated because staff members and volunteers spend countless hours on these events and, despite their best intentions, the guest experience is sometimes lacking.  I’m also frustrated to see multiple organizations make the same set of mistakes.  I want to inspire them to change, to do better, to think through their choices from a donor’s perspective.

So I’ve been thinking about the most persuasive way to inspire change.  In some cultures, angry rants might work.  But insults and accusations rarely inspire me to change.  Vu does a great job using humor to make his point.  But not everyone can pull it off.  Often, what inspires me most is positive encouragement and coaching.

My mixed doubles tennis partner reminded me of the effectiveness of this approach.  He’s about a foot taller than me, a lot more experienced, and a much stronger player.  In order for us to win as a team, he needed to help me get better quickly.  He did so with positive encouragement and coaching.

When I hit the ball into the net during a match, he would gently offer a suggestion.  When I repeated the mistake, he calmly repeated the advice.  When I followed his suggestion, he gave me a high-five or a nod and we moved on to the next point.

This approach worked for me because I always had the sense that we were in it together.  We both knew if I played better, our team would do better.  A result we both wanted.  Also, he recognized that I might not be able to implement his suggestion right away.  It might take a little trial and error to get it right.  Finally, his suggestions usually led to a positive result.

My partner could have been a tennis diva – angrily criticizing me, flaunting his superior experience and skill, demanding a new partner.  But, instead, he worked with me and I was able to up my game and, together, we won some tough matches.

I’m planning on taking this lesson into my nonprofit work and the next time I want to inspire change and improvement I’ll act like a patient coach and not a diva.

Well, first, let me tell you what not to do: Don’t say yes to everything.

A few years ago I wanted to learn more about the landscape of nonprofits in Seattle. So, I decided to say yes to (nearly) every nonprofit event to which I was invited. I drank coffee with board members and executive directors, I attended nine fundraising events in three months, and even went on a tour of water projects in Ethiopia. Yes, in Africa.

When my exploration ended, I had great memories, a deeper knowledge of many Seattle organizations, a lighter checkbook, and a strong desire to limit the number of events I attended in the future.

Other SVP partners, who give more than I do and are probably invited to many more events, suggested that I develop a giving framework or mission statement and only give to nonprofits that fit within that framework.

In her book, Giving 2.0, Laura Arrillaga-Andreessen proposes a similar approach. Laura has a lot of experience in this area. She is the founder of SV2 and the Stanford Center on Philanthropy and Civil Society. Her parents gave very generously and thoughtfully through the Arrillaga Foundation, and, she is the wife of entrepreneur and venture capitalist, Marc Andreessen.

Laura describes her journey from random to more strategic giving. She began by looking back on past gifts and asking, which gifts made her most proud. For her, it was gifts that educated givers and advanced the field of philanthropy. So, she decided to concentrate her giving in this area.

Laura recommends that all donors reflect on gifts they have given and make sure the gifts are given from a sense of enthusiasm, not a sense of obligation. She also suggests that donors consider focusing on one organization or program that inspires them. Finally, she recommends keeping track of how your donation was spent.

Like the SVP partners I spoke with, Laura believes that having an area of focus and a giving strategy makes it easier to say no.

As the next year rolled around and all those organizations started asking me to their next event, I decided I needed a giving strategy. Upon reflection, I determined that the work I value most is in early childhood education and building an effective social sector. I try to limit my event attendance, volunteer time and donations to those causes. Having this approach has made it easier to say no to events in other issue areas.

At the same time, I’m realistic. I realize that we will give to my daughter’s school, because, in addition to doing great work in early childhood education, it’s just part of the deal. And, I acknowledge that some friends, speakers or opportunities are too fun to pass up. Conversely, some events are too dreary, boring or poorly produced to be worth the cost of hiring a babysitter. So I adjust my RSVPs accordingly.

For me, the result has been fewer luncheon salads and more enthusiasm about the events I do attend. What about you? How do you decide which events to attend and which nonprofits to support?

--

Sherri Wolson

As I was considering various options, I heard an ad on the radio for the Susan G. Komen 3-Day Walk. The walk raises money for breast cancer research and requires each participant to walk 60 miles over three days and raise at least $2300. Thousands of people participate and the logistics are complicated. Two nights are spent in giant tent cities, where walkers eat, take showers in portable shower trucks, receive first aid, and sleep. The advertising for the event rivals any major marketing campaign using radio, TV, print and Internet ads.

Before I registered, I thought about the logistics and the advertising – it was a lot. That stuff is really expensive. Was it right to ask my closest friends and family members to donate to a cause where their money might be used to pay for my pasta dinner instead of scientific research? Would I be better off holding a small fundraising luncheon at my house and donating all the money to local research efforts?

Then I thought about Dan Pallotta, the founder of the 3-Day Walk, and the author of the book, Uncharitable. Uncharitable is based on Dan’s experience operating the 3-Day Walk and a response to criticisms leveled against him and major fundraising events.

Dan argues that our society places many constraints on non-profits that we would never consider placing on business. In brief, these limits include:

1)    Limiting employee compensation to well below the private sector;

2)    Limiting money spent on advertising and marketing;

3)    Discouraging risk taking and therefore preventing innovation;

4)    Preventing long-term investment by demanding immediate results;

5)    Prohibiting profit-making.

According to Dan, these limits arise from the Puritanical idea that charity is about helping others while business is about helping yourself. In other words, economic self-interest is allowed in business, but not in nonprofits, and these constraints limit the effectiveness of charitable organizations.

Dan’s discussion of limiting advertising and fixating on overhead costs seemed most relevant to my decision.

Advertising

Businesses are allowed to use advertising to maximize consumption, and blanket advertising is common. Meanwhile, nonprofits are strongly discouraged for “wasting” money on advertising. This pressure not to advertise exists even where a $50,000 newspaper ad brings in $500,000 in contributions. Instead of one moral dictate – that advertising is wrong - nonprofits should use cost-benefit analysis to make advertising decisions, Dan argues.

With respect to the 3-Day Walk, Dan provides the advertising costs and benefits for the 2001 Seattle event. That year, approximately $650,000 was spent on advertising. The event brought in more than $8.7 million dollars and netted more than $4.95 million. These numbers suggest a very strong return on advertising investment, but this ROI is not apparent to the person who notices the abundant ads.

In addition, Dan argues that advertising allows nonprofits to build demand for their products. Advertising, which generates interest in nonprofits, can result in more money to put toward the solution in the long run.

Fixation with overhead and fundraising cost ratios

Many donors are concerned with the percentage of the donation that goes toward programming. These fundraising cost ratios are appealing because they are easy to acquire and have been promoted by many charity watchdogs and emphasized by the media.

Dan argues against focusing on this ratio because this measurement is not an indicator of likelihood of long-term success. Instead, Dan argues, we should focus on a different question: How well is the nonprofit serving its mission? In other words, as Dan says, an efficient fundraising operation does not necessarily mean good program operation.

Dan’s further arguments address my concerns directly. First, he notes, it is more expensive to produce events on a large scale than on a small scale. Big groups of participants require large-scale logistics. Second, the fundraising percentage statistic ignores the intangible benefits like raising awareness or inspiring people. Finally, there is a value to raising money quickly. The sooner donations come in, the sooner research can be funded and lives can be saved.

Conclusion

In all, Dan believes we need to allow nonprofits to apply the ideas of capitalism in order to make them even more effective. In the end, he persuaded me. Yes, the advertising for the 3-Day Walk is extensive, but it is building awareness and demand for the cause. And yes, the money I raise might go toward Gatorade or band-aids, but collectively, the walkers are providing a great infusion of money to breast cancer research. Probably much more than if we each just wrote a check or held a small fundraiser.

So, I registered for the 3-Day Walk. This big endeavor felt commensurate with my passion and concern, and Dan’s arguments addressed my hesitations. Now the only question is: Would you like to meet up for a walk?

-- Sherri Wolson

The Uncharitable web site: http://www.uncharitable.net/

Sherri’s 3 Day Walk page: http://www.the3day.org/site/TR/2012/General?px=1141408&pg=personal&fr_id=1769

These concerns helped motivate Lowell in his work at Cascade Philanthropy Advisors and in his role as co-editor of the book, Leap of Reason: Measuring to Outcomes in an Era of Scarcity. Recently, Lowell led a discussion of this book for SVP partners and friends.

Honestly, I wasn’t sure how many people would show up to discuss outcomes measurement when they could be holiday shopping or spending time with their families, yet the discussion was well attended by Executive Directors, board members of current and past investees, SVP partners and other friends. This turnout, coupled with the fact that 25,000 copies of the book have been printed or downloaded, demonstrate that outcomes measurement is top of mind for many folks in the nonprofit field these days.

Simply put, managing to outcomes means defining organizational goals, measuring performance on those goals, and managing based on those measurements. Managing to outcomes requires an organization to be very clear about what it seeks to accomplish and how it will measure its progress, and to decide that management and resource allocation decisions will be based on those measurements.

The outcomes measured must be carefully selected. Organizations need to decide what outcomes information will improve the quality of service for clients and measure that information. They need to avoid the temptation to measure what’s easy. They also need to avoid basing the measurements exclusively on what funders require.

Similarly, funders need to be careful that what they require is really helpful to the organization. In fact, Lowell considers the book an impassioned plea to funders to think about what information nonprofits really need in order to deliver.

So what is all the fuss about? Why are SVP and Lowell encouraging a conversation about managing to outcomes?

Good Intentions Are Not Enough

First, we realize that good intentions and anecdotes are not enough to prove that a program is working. The folks I know who work in the nonprofit sector are incredibly passionate and hard working. Still, sometimes the most well intentioned people and programs are not achieving the results they seek. In fact, sometimes they are actually causing harm. The book provides the example of the Latin American Youth Center (LAYC), an organization that added a domestic violence module to their parenting program. The purpose of the discussion was to teach that domestic violence is not acceptable and there are safe ways to escape domestic violence situations. However, a survey given before and after the program demonstrated that after participating in the program, more parents thought domestic violence was an appropriate expression of love and an accepted part of Latino culture. In other words, the program was increasing the rate of domestic violence acceptance! Armed with this knowledge, LAYC was able to modify the program. Outcomes measurement allowed the program to change course quickly.

With Funding, Data Matters

The second reason why managing to outcomes matters is because in an era of scarce resources, proven outcomes will be necessary to secure funding. In this economy, where nonprofits are required to do more with less, they need to show governments and funders evidence of their effectiveness. They need data to show they are not only meeting needs, but also making a real difference. Lowell considers this point in time an inflection moment for nonprofits. Organizations that take matters into their own hands and provide a compelling case that they are making a difference and saving the government money will be at a real competitive advantage.

Making the Cultural Shift

Third, nonprofits need encouragement to make this shift. As SVP partner Tim Schottman noted, it’s hard for boards to be visionary in tough times. When the economy contracts and funding sources decrease, boards are focused on short-term cost cutting. Lowell agreed and said he hoped Leap of Reason would inspire boards to be more visionary and to have the courage to make investments in tough times. Lowell also noted that starting to measure outcomes doesn’t require a large investment in technology. Sometimes measuring outcomes can be as simple as recording on a white board. Measuring outcomes does, however, require a cultural shift. It’s a matter of culture, mindset and leadership, Lowell stated. Changing an organizational culture and possibly adding an additional burden on staff can be difficult. Leaders must portray this task as important; this tool can help nonprofits wisely use resources and give confidence that their time and efforts are well spent.

Nonprofits ask donors for money, volunteers for time and communities for their trust and participation. Proving the value of these investments by measuring and managing to outcomes will give everyone confidence that the resources are being used wisely.

So, what do you think about measuring to outcomes? Should SVP be doing more to support outcomes measurement? In what way?

- Sherri Wolson

Leap of Reason is available for download at www.leapofreason.org.

I’ll admit it.  More than once I’ve looked at a board meeting agenda or an investee review and thought, I hope we wrap up the financial discussions quickly so we can move on to the interesting part of the conversation.

David Greco from the Nonprofit Finance Fund is on a mission to help nonprofit leaders (including staff and boards) understand that intelligent financial management is critical to program delivery and mission fulfillment. 

Whether motivated by a fear of numbers, a lack of understanding, or a belief that involvement with finances and fundraising taints the purity of program delivery, many nonprofits are failing to make decisions based on accurate financial information, and forgoing opportunities to strengthen their organizations.

“501(c)(3) is a tax status, not a business model,” David Greco from the Nonprofit Finance Fund reminded a conference room packed with SVP partners on March 3.  Nonprofit leaders need to use financials to understand operating performance, determine the strength of their balance sheet, and assess the organization’s ability to handle risk and pursue opportunity.

To understand operating performance, we all need to understand the differences between restricted and unrestricted revenue.  Restricted revenue can only be used for limited purposes, a fact that can result in misleading assessments of an organization’s financial health.

Greco provided an example of a nonprofit that had raised $1.7 million in a year and had expenses of $1.2 million.  At first glance it looked like the nonprofit was in a solid financial position, clearly covering their expenses with a significant surplus. However, as we examined the situation more closely, it turned out the nonprofit was raising money for a capital campaign – funds restricted for the purchase of a building. 

When you pulled out the restricted funds their operating revenue was only $1.1 million, revealing that they were actually in the red.

Also, after reviewing previous years financials in a similar manner it turned out the organization was operating in the red four of the last six years – begging the question…Is this the right time for this organization to purchase a building without having a solid foundation of operating dollars?  Can they handle the risk?

If this example made your eyes glaze over, you may have missed the critical point: by masking the fact that the organization was operating at a deficit, the presentation of the finances prevented the nonprofit’s staff and board from addressing the shortfall early on and making changes necessary to keep the organization financially sound. 

Put simply, good financial information leads to good decisions.  Bad or misleading financial information leads to a false sense of security.

Similarly, Greco emphasized the importance of understanding an organization’s balance sheet.  An organization’s adaptive capacity, its ability to change, is directly related to its financial strength.  An organization in a weak financial position has very little ability to adapt or grow.  Stated as an equation: Risk – Cash = Crisis.  (If you'd like to learn more, feel free to download Greco's slide deck and an audio recording of the session.) 

Greco’s message came through loud and clear:  I should care about financials.  And SVP partners, board members, and nonprofit leaders should care about financials.  Financial statements can lead to interesting discussions.  Perhaps more importantly, financials can lead to strategic discussions that can result in a thriving organization.  And reluctance or failure to have those discussions can be devastating for an organization.

I’ve always known that I should care about nonprofit financials.  In less than two hours, Greco convinced me to move beyond my indifference and to take an active interest in financial statements and the stories they are telling or hiding.  I should use financial statements to assess exposure and risk and to address that risk with thoughtful questions.  Nothing less than the future of the organization is at stake. 

The question is: How do we convince others to move from glassy-eyed to actively engaged?

- Sherri Wolson, SVP Partner