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The Truth About Nonprofit Outcomes Measurement: Trying to run when you cannot yet walk

28 Dec

Outcomes measurement at nonprofit organizations will never gain widespread traction until at least one fundamental problem is solved.

Much has been written about the potential benefits of outcomes measurement.  Who can argue that knowing the effectiveness of a nonprofit’s programs is anything but a good thing?  Donors and nonprofits alike should want to know the effectiveness of their grantmaking so that they can fix what is broken or redirect funds to what works.

I’ve written separately about the futility of attempting to find a single measure of effectiveness (see “In Search of the Holy Grail of the Nonprofit World” ).  Yet, though often difficult and expensive, measuring effectiveness can be very beneficial.

But there is an underlying problem, typically overlooked in the outcomes measurement debate, which prevents most* nonprofits from being able to measure their outcomes: most organizations cannot effectively measure, report on, and analyze their basic finances.  How can these organizations, who cannot adequately and timely report on their financial operations, be expected to move to the next level of measuring, reporting, and analyzing their outcomes?

* My assertion that “most” nonprofits cannot do a proper job of reporting the basics of their financial operations is based on my experience over the last 20 years working with and visiting hundreds of nonprofits.  (I exempt our accounting clients from this troubled group: our clients have strong financial reporting systems!)

The uncomfortable truth is that asking a nonprofit organization to perform relatively sophisticated outcomes measurement when they cannot properly perform basic accounting and financial reporting functions is like asking a child to run who cannot yet walk.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC
The NONPROFIT accounting specialists

In Search of the Holy Grail of the Nonprofit World

31 Jul

The single metric that will tell us how effectively a nonprofit delivers on its mission does not now and likely never will exist.

Despite our desire to measure impact, there are many things that simply cannot be measured, or are too costly or impractical to measure.

Quite frankly, even when outcomes can be measured, reasonable people can disagree about the interpretation of the data.

Take for example Peter Singer.

Mr. Singer’s Wikipedia entry describes him as “an Australian moral philosopher. He is currently the Ira W. DeCamp Professor of Bioethics at Princeton University and a Laureate Professor at the Centre for Applied Philosophy and Public Ethics at the University of Melbourne.”

In a recent TED Talk recorded in March 2013, Mr. Singer said that some charities are hundreds or thousands of times more effective than others.

To illustrate his point, he posed the following facts about blindness.

He says that it costs about $40,000 to train a guide dog and to train the recipient in how to work together.  However, it only costs somewhere between $20 and $50 to cure a blind person of blindness in a developing country if he has trachoma.

In other words, Mr. Singer says that you can “provide one guide dog for one blind American [emphasis added] or you can cure between 400 and 2,000 people of blindness.”

He adds “Providing a guide dog for a blind person is a good thing to do, but you have to think what else you could do with the resources…I think it is clear what the better thing is to do.”

If I were a blind person in America, I might have a serious disagreement about Mr. Singer’s interpretation of the data and his resulting conclusion.

His comparison itself is flawed as it poses a binary set of options: choose one, which is wasteful, or choose the other, which is hundreds of times more effective.

The comparison is further flawed as it compares apples to oranges: assisting a blind person by giving her a guide dog is not the same issue as curing blindness.

The several hundred blind people who receive guide dogs every year, as well as the hundreds, if not thousands, of people who donate to the nonprofits that make this happen, will have a sharply different opinion from Mr. Singer about the effectiveness of their philanthropy.

photo

[This graphic, taken from a TED Talk given by Mr. Peter Singer in March 2013, attempts to equate the relative effectiveness of providing guide dogs to blind people versus curing blindness caused by trachoma.]

The point is this: If a distinguished moral ethicist like Mr. Singer can make this mistake, what does this portend for the ability of the rest of us to come up with an objective metric, or series of objective metrics, to measure the effectiveness of a nonprofit, even when we have the data?

Like the Holy Grail, we are unlikely to find it.

PS  Make no mistake, I am not a nihilist.  As an accountant who makes a living helping nonprofit organizations, I believe in the power of timely, accurate financial and non-financial information, once analyzed and interpreted, to help power an organization toward superior results.  I just do not believe there is any single metric, or set of metrics, that will somehow make it possible to rate or compare nonprofits to each other in terms of their effectiveness.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC

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