It’s pretty common for most grantmakers to track the number of lives touched and dollars distributed to grantees. Those data points are great to know and sound like they have “impact” but they don’t really help grantmakers figure out what to do next. 

Nonprofits fall on difficult financial times. Competition for funding is getting fierce. Foundation endowments decline by 25%. Donors want to understand their return on investment. Organizations are closing their doors.  While these are the current and most pervasive headlines about the nonprofit sector, there is another kind of conversation and groundswell of activity percolating: how to best measure or assess social impact. It is no longer enough for organizations to say that they do good work because their mission statement references the social change that they aim to generate. Today, more and more organizations are looking for, developing and finding meaningful ways to understand and communicate the results of their work. 

The social sector is abuzz with language related to measuring results, measurable impact, and outcomes-based thinking these days, but what do these terms really mean for funders? 

At a recent client meeting, the Executive Director of a large advocacy and policy organization frustratingly asked, “I wish I had a way to measure our work, in a way that makes sense not only internally, but externally…how can I measure policy and advocacy work?” We hear similar sentiments from the majority of clients, especially those that work on policy and advocacy. Achieving policy change can take years and at the end of the day, is typically measured based on whether or not a piece of legislation has been passed. We, and the people who live and breathe policy and advocacy work, understand that there are many intermediate steps that happen in order to get to that point.

"We just met with a foundation the other day, and that's what piqued their interest — the outcomes. A lot of donors are saying, 'If you can't show me the difference my dollar makes, I'm probably not going to give you that next year.' " - Joshua Hale, Big Shoulders Fund Executive Director "...over the years there's been an increase in requests to understand the tangible outcomes. Now [donors] say, 'Give me a specific story, give me a quantitative result.' " - Lorrie Lynn, United Way Director of Research, Planning and Education

Thomas Siebel, founder of Siebel Systems, Inc., achieved significant results when he decided to take a stand against methamphetamine ("meth") abuse in Montana a few years ago.  Investing several million dollars in media campaigns, Siebel dramatically improved the state's ranking among U.S. states in terms of meth abuse—moving from 5th to 39th—and more than tripled the percent of Montana teens who are aware of the dangers of meth—shifting that number from 25% to 93%.

This great post over at the Manage by Walking Around blog shows how a focus on activities can distract you from creating the impact you desire – and how asking "why" and using outcomes focused metrics can make all the difference.

In a webcast hosted by Stacey Barr, "The Performance Measurement Specialist", three dashboard implementation insights resonated with my personal experience with organizations engaging in performance measurement for the first time.

The John Irvine Foundation created an Evaluation Toolkit based on information gathered from foundation trustees, CEOs and evaluation experts. Based on our work and the growing needs we observe in the sector, such a toolkit is invaluable in assisting funders develop better evaluation tools and strategies. Mission Measurement’s work with nonprofits, foundations, and corporate giving programs, has allowed us to understand that funders, trustees, and nonprofit executives need more useful information from data such as data points that will inform resource and financial allocations.

The Bill and Melinda Gates Foundation recently released its annual report for 2008 along with a letter from the Foundation’s new CEO, Jeff Raikes, that highlights the Foundation’s grant making for the year, results on the Foundation’s Grantee Perception Report and results from the Gates Foundation annual employee survey.