Nonprofit organizations are stewards of donations that serve as investments in our community. Those monetary contributions or volunteer labor are used to provide human services, cultural offerings or conservation efforts intended to make this a better place for all of us to live.
However, every organization takes a different approach to designing its services and measuring the impact. Fundamentally, that’s because nonprofits work at the intersections of complex social issues, so there isn’t a single “bottom-line” metric like profitability. That landscape can make it challenging for investors, whether individual donors or grantmaking institutions, to determine where to give for the greatest good.
Even after 20 years working with hundreds of nonprofits, the variation still amazes me. Services range from providing tangible goods, like food or housing, to advocacy efforts that inform public policymakers. Those are offered by volunteers and/or professionals, working under the governance of a board that may be more or less hands-on. Furthermore, the resources needed to do the work are secured in a variety of ways, from fundraising events to earned revenues such as charging fees for services. Given all those factors, it’s evident why no two organizations are alike, even when they have very similar missions.
In light of the vast differences across the nonprofit sector, perhaps the most surprising thing I’ve learned from working with so many organizations is how common some of their challenges are. While I was fortunate to study public administration in graduate school at UNCW, most of that education was about best practices for how organizations could operate. I quickly learned from being on the front lines that things are never as simple as they seem in the textbooks. In recent years, I’ve also been working with grantmaking institutions in private philanthropy and local government. Leaders in those spaces are keenly aware of how incomparable nonprofits are because it’s a constant barrier to making strategic decisions. Furthermore, funders’ own diversity and widely different approaches also contribute to the complexity, making it difficult for them to formulate collective investment strategies.
Institutional philanthropy has tremendous ability to influence any organization that depends on grants to sustain its work. As an illustration, consider a nonprofit program that is funded by several grants, which is very common. Each of those grant applications opens at a different time of year with unique conditions and expectations for how the funds will be used. When it comes time to make an annual budget for that program, some grant funds have been received while others haven’t yet been applied for. When funds from one grant end, the organization can’t scale back or discontinue the program because other funders are also invested and still expect the same results. While that is a symptom of the disconnection between grantmakers, there are a variety of ways philanthropic institutions can individually and collectively wield their influence to shape a more data-driven nonprofit sector.
In order to make any kind of apples-to-apples comparison across nonprofits, one critical need is tools that make services more efficient and measurable. The majority of organizations I work with, especially ones founded locally, don’t have comprehensive, integrated systems for communication, project management, document storage and data management. Instead, they tend to use a variety of services or software, which change over time depending on individual preferences. The lack of durable systems that can be sustained over leadership changes creates inefficiency every time institutional knowledge is lost. That kind of environment leads to a reliance on processes that live in someone’s head, which results in interpersonal dynamics driven by personalities rather than standard operating procedures.
When nonprofits do have administrative systems in place, project management skills are crucial to using them effectively. Those include the ability to train new users, provide oversight to ensure consistency, and adapt systems as needed. However, despite the critical importance of those skills, many funders shy away from investing in overhead expenses like personnel costs and professional development. Nonprofits are often expected to tap into volunteer labor or pro bono services, even though we would never expect a business to operate that way. While all-volunteer organizations can be very impactful, they generally aren’t tracking their labor, so can’t quantify their true cost of operation. (Unpaid labor is an in-kind contribution that subsidizes the cost of providing a service.)
Across all kinds of nonprofits, the most common refrain I hear from leaders is they need investments that allow them to provide competitive compensation so they can retain skilled employees.
Like private businesses, nonprofits should be empowered with the resources and stability they need to offer evidence-based services and capture data to validate their results. A nonprofit’s ability to measure and evaluate success is crucial to ensuring a contribution is truly an investment and not just a bet. When funders and service providers operate in that way, it becomes possible to develop collective approaches to creating transformational change.
S. Fletcher Daniels is the director of QENO (Quality Enhancement for Nonprofit Organizations), a community engagement program of the University of North Carolina Wilmington
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