Donors, volunteers, and other stakeholders want to know their contributions are making a difference. Data analytics can help.
Not-for-profit (NFP) organizations have always had stakeholders to answer to – boards, donors, volunteers, staff, policymakers, and the community they are serving. But with increasing competition for resources, new regulations and digitally-savvy donors, the pressure to demonstrate measurable impact has never been greater.
Younger-generation donors tend to invest in causes rather than a specific organization. These donors live in a digital world filled with narrative. The stories that capture their attention can capture their donations as well.
At the other end of the scale, larger corporate donors expect the kind of accountability that shareholders demand of them. Nonprofits must find ways to demonstrate their value so they can find and keep donors, big and small. Data analytics tools can help measure and optimize this impact.
What is data analytics?
Data analytics is both an art and a science. Basically, it means drawing insight from the data you have and then using it to make decisions. This could involve something as simple as charting year-over-year donor patterns in a spreadsheet, to using specialized software to generate in-depth reports, to training advanced artificial intelligence to find patterns and make predictions.
NFPs are used to gathering data such as donor numbers, number of beneficiaries served, and dollars spent on overhead. Analytics goes beyond these basics to not only demonstrate impact but help guide programs to maximum effectiveness.
Often, data is spread across an organization and outside of an organization. Decision-makers may not have easy access to the information they need. An analytics tool gathers all this diverse data into one central location while presenting different views of it in an easy-to-understand format.
The Chesapeake Bay Foundation has a mandate to protect the Chesapeake estuary’s health. They collected baseline data such as water clarity, dissolved oxygen levels, migratory fish populations, and size of the surrounding wetlands. The foundation then used this information to set ten-year goals. The beauty was that government agencies were already gathering the data they needed, so the Foundation could track it at no cost.
Datafication of a nonprofit’s activities is key to benefiting from the wider digital technology ecosystem. Analytics, artificial intelligence, risk management tools, and more rely on data to perform tasks. Nonprofits both consume and produce large amounts of data, and data sharing across organizations helps increase overall efficiency.
The Vancouver Foundation, for example, set out to lower access barriers and actively share its data with other organizations, multiplying its social dividends through the publication of this open data. This includes datasets with indicators of community engagement in metro Vancouver, like the number of respondents visiting their local library or attending a cultural event.
Does data demonstrate impact?
Statistics like amount raised, membership numbers, and number of people served are important; however, they do not delve deep enough to demonstrate true impact. Organizations need to show not only what they spent, and how much they were able to do with that money, but also how much it mattered.
Consider how Habitat for Humanity Canada uses data. The organization helps families build a home, and can tell potential donors how many homes they built. Being able to give a family a home is important, but what happens to that family after moving in? Are they able to maintain their home? Is the quality of their lives any better?
With the help of outside organizations and data analytics, Habitat for Humanity revealed their effect on beneficiary families and the community at large. Data from a Canada Mortgage and Housing Corporation study showed 86 percent of Habitat residents felt happier in their new home, 70 percent said their health improved, and their children were more involved with extracurricular activities like sports and music. It seems the Habitat for Humanity families not only had physical shelter but also enjoyed happier lives.
In another study by a consulting firm, Habitat for Humanity Canada went even further by demonstrating $175,000 worth of benefits to the local community from each new home. Data included the increased number of children going on to college, more taxes paid after an increase in income, and money saved through reduced use of social housing and food banks. Overall, the report showed that for every $1 donated, society received $4 in benefits, an impressive return on investment.
With this expanded data, Habitat for Humanity Canada can show their donors, and potential donors, that they really are making a difference in the world. Arbitrary numbers like overhead seem less important to donors when an organization is turning $1 into $4.
“Organizations that can exhibit a clear return on investment are at a significant competitive advantage when it comes to obtaining external funding.” – Grant Thornton LLP
How can data aid decision making?
Data is not only important for demonstrating impact, it helps organizations discover the degree of their impact, and where they are best placed to direct their efforts. Even when a not-for-profit organization thinks they are making a difference, sometimes data indicates ways they can do even better.
One example is Christopher House, which helps at-risk children with their education. They were happy to see 62 percent of students in their college and prep program maintaining a 3.0 grade point average (GPA) or increasing their GPA. That is, until they looked at data from similar organizations and saw their own students were actually performing below average. The not-for-profit organization realized they could have an even greater impact on their students’ lives.
Christopher House looked at a top-performing organization and implemented a similar one-on-one mentorship program, helping 74 percent of their students maintain a 3.0 GPA or improve their score. In this case, data analytics enabled the organization to take a deeper look, aiding a decision that delivered an even greater impact than in the past.
The Nature Conservancy is another organization who used data to reshape their strategy. For many years, the conservation NFP measured bucks-and-acres: the number of dollars spent and the number of acres purchased. Twelve million acres protected in the U.S. alone certainly sounds impressive, and many organizations use a similar basic statistic to demonstrate their impact.
This ratio, however, did not demonstrate The Nature Conservancy’s success in fulfilling their mission: preserving Earth’s diversity. Despite many millions of protected acres of land worldwide, biologists said species were still going extinct at a rate as high as when dinosaurs were wiped out.
The group realized they had to do more than just protect parcels of land. In a protected area in Massachusetts for example, the bog turtle population was still shrinking. The organization realized poor water quality was to blame, with outside pressures affecting the habitat.
Now, instead of simply preserving a parcel of land, the organization looks at preventing pollution and soil erosion and improving economic development nearby. They replaced their simple bucks-and-acres metric with 98 different metrics that better reflect their true impact on species health, comparing health in their protected areas to independent scientific data on expected species health.
In these cases, delving deeper into data helped organizations reshape their strategy to reap even more social dividends from every donated dollar.
Is data analytics a good investment for nonprofits?
UK-based political advocacy not-for-profit 38 Degrees has adopted a culture of experimentation. They constantly test hypotheses to drive membership growth, measuring data and analyzing results from their small tests, then use this information to help shape their strategy. Not every experiment is successful, but the more they learn, the better the organization can focus their efforts on what works best.
According to an IBM study, the most data-focused nonprofits reported better performance in fulfilling their mission and greater staff productivity. It can be challenging for NFPs to invest in data analytics tools when they are making the most of their limited resources and facing pressure to keep overhead low. However, finding the right data and choosing and using the right tools can help organizations reshape their strategy and demonstrate their value, streamlining their efforts and increasing donations by proving impact.
Jen Bokoff, Director of Knowledge Services at Foundation Center, an NFP that aids other organizations in the U.S., knows the value of data analytics.
“The best way to advocate for and deliver on mission is with facts and examples,” she says. “Data tied to issues—qualitative and quantitative—strengthens an organization’s point of view.”
This article is part of a series that explores how not-for-profit organizations can benefit from digital transformation. It has been published as a guest posting on the Keela blog and co-published on Aluance Digital’s Acuity blog.