Article

Trend: not-for-profit financial transparency proves challenging

Aug. 1, 2022

Successful not-for-profit organizations have implemented outcome metrics to provide not-for-profit financial transparency, measure, and report on their performance. Outcome metrics not only show funders and constituents how the organization is performing; they also help pave the way for sustainable growth and greater efficiency. 

Increased scrutiny is trending

The increasing demand for transparency and accountability from donors is compelling today’s not-for-profits to seek ways to both produce and demonstrate successful outcomes. A recent survey showed that more than 25% of not-for-profits struggle with heightened expectations and increasing scrutiny from several sources — including ever more savvy funders looking for financial management techniques and controls employed commonly by for-profit businesses.

What are outcome metrics?

Outcome metrics are powerful, essential measurements for demonstrating accountability and transparency. They measure financial and nonfinancial criteria that reflect your efficacy at the organization, program, or initiative level. They’re derived by carefully defining outcome indicators, data-collection methods, and analytical techniques that collectively tell a comprehensive story of organizational performance.

These outcome metrics may go by many names and fit in countless categories. Many not-for-profits obtain their best results by measuring across multiple dimensions for blended scorecards that detail activities, capacities, and financial results. Ultimately, well-defined outcome measures help organizations to continuously adapt and improve.

Why outcome metrics matter

The importance of outcome metrics can be seen from a variety of perspectives and functions within the v organization, including:

• Funding — In an ever-increasingly competitive environment, the ability to measure, monitor, and report the metrics that demonstrate success can encourage new and additional funding from donors, foundations, and other benefactors. For example, demonstrating achievement of your key milestones can unlock subsequent rounds of multiyear grants.
• Accountability — Donors are increasingly tying their support to strict accountability. They want to see where their funds are going and the results that are achieved–whether it’s organizational growth and new locations or more not-for-profit partnerships and matching funds. Not-for-profits must provide increased transparency into the organization’s outcome metrics, controls, and reporting.