Impact-Based Philanthropy: Reporting Project Impact to Help Raise Dollars

November 2008 By Troy Stremler

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Create a project plan
4. Impact-based analysis: A nonprofit defines its project plan using impact-based analysis (a process based on the widely used Logic Model). The donor verifies that key milestones are monitored and evaluated along the way.

Develop a capacity plan
5. Financial responsibility: Attaining financial responsibility requires the nonprofit to outline a capacity plan for the right budgets, systems, resources, people and guiding principles. The donor must realize that where a nonprofit spends its funds is not nearly as telling as analyzing how it spends its funds and, most importantly, to what end.

Demonstrate accountability
6. Workflow: To hold itself accountable, a nonprofit must employ workflow (with checks and balances) to help ensure people adhere to the project and capacity plans. Internal workflow also creates a form of nonprofit self-governance; when well executed, such governance aides in uncovering what projects and processes are working and which are unsuccessful. During this step, the donor can validate that the correct processes are in place for reviewing/approving project information and metrics.

Communicate outcomes and distribute reports
7. Report: As an overarching component of the previous steps, the nonprofit must communicate progress and outcomes throughout the project’s lifetime. Donors should receive frequent, honest reports about their supported projects — helping to keep them engaged and informed about the program’s mission and successes.

Upon implementation, ongoing review and completion of steps one through seven, the nonprofit will reach the ultimate goal of impact. But with the industry-wide emphasis on “impact” achievement, we must first take a step back and define what it is we’re trying to achieve.

All eyes and ears on impact
Impact. It’s become a buzzword in the philanthropy industry, at the core of nonprofit goals and mission statements, essential to fundraising and donor communication, and key to project monitoring and evaluation — but what exactly does it mean?

Some within the marketplace classify philanthropic impact as “the process by which a philanthropist makes the biggest difference possible, given the amount of capital invested.” Other people boil down the definition to “getting the most bang for your philanthropic buck.” Others stand by the notion of impact representing the “fundamental measure of any philanthropic investment, assessed by social change and cost” — also often referred to as the “social return on investment” (SRI).

And yet with the pool of descriptions and muddied interpretations of impact-based philanthropy, one all-encompassing definition exists: Philanthropic impact is a long-term, significant, discernible difference in the condition of people, society or environment as a result of charitable work.

If this seems like a robust, complex definition, it’s because it is. Improving lives is complicated work and needs to be approached, measured and supported as such. But it is only by defining impact that nonprofits can figure out how to achieve it, and donors and foundations can figure out which organizations are best suited for their support.

With the advent of this information-driven, impact-based philanthropy, the fundraising world will become a much more efficient and successful space. Nonprofits will communicate the outcomes and information that donors care about most, leading to satisfied grantors providing more money and resources, and ultimately resulting in the most significant impact for the causes and people who need it most.

Troy Stremler is the CEO of Newdea, which provides online tools for nonprofits to manage programs and report impact to donors.