Currently, there are at least 1.425 million nonprofits in the United States. These nonprofits (including charities and foundations) spend nearly $2 trillion annually….that’s 12 zeros. If you stacked $100 bills on top of each other, $1 Million would reach 3.3ft. That means $2 Trillion in $100 bills would reach 1,262 miles into space (it only takes about 62 miles until you leave Earth’s atmosphere entirely and enter suborbital space). Out of this astronomical amount, around $826 billion is spent on salaries, benefits, and payroll taxes. That means administrative costs constitute almost half of the total nonprofit expenditure. It’s no wonder why funders and donors increasingly demand data transparency and financial accountability. 

Nonprofits, government agencies, and public sector organizations also find themselves in a pivotal moment time (and space). COVID-19 continues to force many organizations and businesses into a “state of emergency.” Budgets are being cut, and funds are being reallocated to focus on mitigation and recovery (two critical tasks). With these budget cuts trending upwards, effective data-based decision-making is more critical than ever. When individual donors produce 87% of charitable giving and at least 41% of them tye giving to nonprofit effectiveness, we cannot cut transparency and results-accountability.

The key to making it through this crisis will be making better decisions on investments and then clearly communicating the effect of those decisions to individual donors, funders, and the public. This means striving to achieve the greatest impact with existing resources (or even less). It means engaging in disciplined performance management and cross-sector collaboration to analyze the effect of strategies on population outcomes. By engaging in effective decision-making and budgeting, organizations can continue to provide the services they know work, fix the ones that don’t, reallocate funds appropriately, and improve the relationship between funding and impact. 

In the world of COVID-19 and post-COVID-19 recovery, how do we know if there is any return on social sector investments by governments, foundations, and private donors? Here are a few tips on what I have learned establishing performance management and reporting systems for clients across the globe:

  1. Align with a larger common agenda. Not all programs will neatly align, but having a set of population results and indicators or performance measures for the service system that the investment seeks to improve will help create a sense of purpose and be a guidestar for action.
  2. Remember, less is more. Fewer but more powerful measures that speak to impact are important. Avoid a laundry list of measures that aren’t useful for decision-making and planning.
  3. Disaggregate by race and gender. Start small by collecting and disaggregating data by race for at least one of the impact measures. Then, expand this effort once you have built up your muscles in this area. This will inform strategy, target resources towards those most affected, help ensure equity in your service delivery, and create greater impact for everyone combined.
  4. Be consistent and flexible. Establishing standard measures across like programs can help you compare the effectiveness of different investments. You can also aggregate data to tell a comprehensive story of impact. Note: grantees should still be allowed to pick measures that are unique and useful to them. You can learn more about measuring performance and outcomes across funding streams here.
  5. Never report on data without the “story.” Data without the story is meaningless. The story constitutes contributing and limiting factors that determine the context behind the data (or the qualitative factors influencing the quantitative factors). Ensure all reported data pieces have an accompanying analysis of the trend and a series of actions for improvements over a specified time.
  6. Use the data and corresponding analysis for meaningful dialogue. Program and grant leaders will not just think it is a paper exercise if the data, story, and plan are the basis for a regular conversation with their boss or funder.
  7. Share the performance reports publicly. Both the funder and grantee should be encouraged to share the reports on their websites. Transparency creates trust, and trust leads to more funding.

By implementing these tips as part of your performance reporting system, you will have better data to share with leadership, funders, donors, and other stakeholders. If you have grantees, they will have put more thought into their performance and improvement plans, and they will build their capacity to demonstrate social ROI and attract more funding. Ultimately, and throughout every industry, data-based decision-making and funding will help us all get by with less as we persevere through these socially, politically, and economically unprecedented times. Most importantly, we can achieve better outcomes for the children, families, and communities we collectively serve.