Which metrics should charities measure?

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For charities, measurement forms the basis of everything, from how they communicate with donors to how they deliver services. Without measurement, charities cannot monitor progress and cannot communicate it to audiences who want to be informed of the impact their chosen organisation is making. 

Check out the Outcome Metrics e-book

Donors are invested from the minute they click on a charity’s website. They want to know more about where their money might go to, the people it might help, and how many. They also want to know about overall efficiency and to trust that charities will be responsible with their donation. 

That means charities need to be transparent. They need to put numbers front and centre – how many countries do they work in? How many services have they delivered? What will £10 contribute for their beneficiaries? Knowing all this information will build trust between donors and charities, the rewards of which charities will be able to benefit from in years to come – if only they keep demonstrating their progress. 

Progress cannot be demonstrated without benchmarking. How well are charities performing in 2021 compared to 2019 for instance? COVID-19 may have meant that 2020 was an odd year for donations and events, but measurement identifies areas where organisations saw improvement – did the necessary shift towards virtual events cause a boom in fundraising? And is it still doing so now, as we move forwards into the New Year? 

You cannot plan where you’re going unless you first measure where you’ve been. In this article, we want to look at the best outcome metrics that charities should be measuring and what it can tell them about their strategy going forward.

What are outcome metrics? 

According to Sage Intacct’s e-book, Outcome metrics: measuring what matters in the nonprofit world, outcome metrics are “powerful, essential tools for demonstrating accountability and transparency”. They measure both financial and non-financial criteria, from money raised to social media followers, to show how an organisation is performing year-on-year, month-on-month, or even week by week, if needed.  

Outcome metrics are important for charities if they want to keep improving and innovating. The fundraising landscape has changed dramatically over the last few years with a multitude of different payment options, different event options, and different platforms, from social media to third parties like JustGiving.

To keep abreast of all that change, it’s important to look at the outcomes – you don’t have to be on every social media site, for instance, if it’s getting you no gains.  

Outcome metrics also strengthen your credibility when talking about either your cause or the strategy you’re employing to address it. If you’re talking about the importance of what your charity does to potential donors, backing that up with metrics that show the impact you’ve had only consolidate your point.  

On the other hand, if you’re talking about a particular marketing approach, and need to get senior buy-in, then being able to show how they’ve helped you with firm statistics will get results quicker than simply trying to persuade them without any data.

What are the top five metrics charities should be aware of? 

• Retention rates 
  Retention rates monitor how many people keep coming back to you. Regular donations are vital for charities to continue having impact and to plan their strategy for the future, based on the income they are likely to receive.  
   
  If people are returning to you to donate, you know that your post-donation communications are working. If your retention rate is low, you need further analysis to diagnose the problem. 
   
  
  
• Programme efficiency 
  This one is perhaps the most important metric for charities. It shows donors, board members, trustees, and evaluators where the money is going, what is being used for overhead costs, such as office space and salaries, and what is being used to make progress for your cause.  
   
  There needs to be a good balance between the two and this metric provides an opportunity to show donors what they’re fundraising for. Transparency is everything. 
   
  
  
• Growth of services  
  Along with efficiency, donors and other charity stakeholders want to know that their organisation is improving and innovating with the best of them. Ways of delivering services and fundraising methods become very quickly outdated in the charity sector.  
   
  Showing signs of growth demonstrates that organisations are not resting on any laurels and are committed to delivering their services better than they did the year before.
  
  
  
• Revenue per donor
  Membership-based organisations that rely heavily on membership dues and programme fees can gauge how much revenue is being generated from their membership by working out the average per member. 
  
  Nonprofit organisations can do the same with their donors, to see how much is being given per person on average, and use this to adapt how they communicate with their audience, whether it’s moving onto new platforms for wider reach or asking for larger donations altogether.  

• Fundraising efficiency 
  This looks at how much money goes into raising a single pound for your charity. This is important for keeping an eye on budgets and return on investment. If charities are spending lots of money on marketing, but not getting a good return, that means they need to change tactic.  
   
  Throwing money at fundraising isn’t always going to get you results – charities need to think strategically. Sometimes the cheapest option gets more bang for your buck and this metric can show you where best to place your bets. 

Websites such as Charity Clarity and Giving What We Can also evaluate charities and their performance for donors who want to give to causes that deliver the most impact. It is worth looking at their criteria too, in order to see what donors care about and what would help these sites lead them to you.  

Charity Clarity looks at the financial health of a charity – including if they submit their accounts on time –and whether it provides clear and accessible information, including contact details and information on trustees. 

Giving What We Can, on the other hand, uses a three-pronged framework to determine the impact of a charity or cause, based on scale, tractability, and need for more funding. A cause area large in scale will have a big impact because it helps more people; a tractable cause shows signs of progress, that the problem can be solved; and a cause in need of more funding is one that the site deems as not currently getting the support and attention it deserves.

What formulas do charities need to use? 

Okay, so you know what metrics you need to make your impact known – what about the actual maths part?  

Here are the basic formulas, set out by Sage Intacct, to help you manage three of the above five metrics: 

1. Programme efficiency = programme service expenses divided by total expenses 
   
   
2. Average revenue by donor = revenue divided by number of donors  
   
   
3. Fundraising efficiency = unrestricted fundraising expenses divided by unrestricted funds raised 

Once charities have nailed down the metrics that will best help inform their strategy – and help them adjust it if necessary – the next step is to develop a process for monitoring them regularly. Organisations can only spot problems in their fundraising tactics if they are looking for them.  

And remember, charities should not be keeping any of this measurement to themselves, both in terms of transparency and accountability, but also in order to demonstrate their impact. No one else is going to know your cause like you do, and no one will be your bigger champion – if you’ve got the stats, flaunt them.