At their best, systems for monitoring and measuring nonprofit performance illuminate what an organization is accomplishing, where its resources are going, and how that organization might address weaknesses and build on successes. At their worst, such systems become an expensive compliance exercise, diverting resources from program delivery without returning a greater understanding of how to achieve an organization’s goals.

Donors and nonprofits alike are deeply invested in creating the change they seek, as efficiently and effectively as possible. There are difficulties in communication and expectations, but the central questions are the same: Did I do what I set out to do? Is it making the difference I seek? How can I do it better? The many available measurement tools and resources can add to the noise by speaking to different audiences or addressing single questions without a clear linkage to the broader goals of measurement.

We see several ways for funders to use measurement to learn and improve, rather than as a compliance exercise. Broadly, we suggest that funders and grantees clarify their measurement goals. A funder must have reasonable expectations about what they can learn from the measurement effort they support. Is measurement going to provide new information, or is the existing evidence strong enough to make it redundant? Is it going to improve the organization’s performance? Measurement decisions should be made openly and clearly, with an eye to what is truly useful.

There are many opportunities for funders and grantees to improve communication around measurement goals. In facilitating these conversations, we suggest that donors be guided by the following questions and recommendations:

Not all nonprofits can or should measure to their ultimate, longer-term impact. A gut “reasonability test” would consider which outcomes are clearly and reasonably related to a non-profit’s activities and its role within a broader theory of change. The non-profit would then be responsible for reporting on only those outcomes. For example, a food pantry can report on the food it distributes and the nutritional value of each item, but there is no way to estimate how its provision of food has affected its clients’ life expectancy. Even asking the organization to make a “best guess” requires them to make estimates beyond the “common sense” limit.

Smaller nonprofits, which may have low annual budgets and a heavy reliance on volunteers, will often have especially limited capacity for data collection and management. The challenge is exacerbated when different funders each require a different set of outcomes measures. For small nonprofits, the work of reporting different measures to multiple funders often wastes resources and distracts from effective execution of mission.

Recommendation: Assess what is reasonable to measure as a direct result of an organization’s work, rather than forcing organizations to develop potentially empty measurements of final outcomes. If an impact assessment is of interest to you and the organization, provide additional support to enable it. In cases where capacity is a concern, consider using metrics the nonprofit already collects to measure the effects of your donation, and look to match your requests with those of other funders, when possible.

When the field’s knowledge about what works or doesn’t work is incomplete, supporting an impact assessment — rather than simply performance management — can increase the effectiveness of multiple organizations working within that sector. Impact assessment can come from within the organization providing the services, from intermediaries such as academics or consultants, or even from partnerships between intermediaries and nonprofits. The most common approach is for individual non- profits to bear responsibility for impact measurement as they work to meet the requirements of individual grants.

Measuring results from within an organization can have advantages; those on the ground will often have the best understanding of their work and the populations they serve, particularly if they are implementing an innovative or unique approach. In either case, if an impact assessment effort is conducted at the organizational level, there must be adequate, dedicated support for those activities, in addition to the funds used for program implementation. Some nonprofits have internal expertise in evaluation and may have dedicated support for that work; these tend to be established and highly sophisticated organizations. Smaller organizations may also be able conduct rigorous evaluation studies, but they will usually require dedicated funding and capacity to do so — and some organizations may not be structured to conduct an impact assessment, even with additional funding.

For evaluations that go beyond a single organization, intermediaries are well positioned to identify gaps and synthesize information for the field. This high-level work can also contribute to consensus-building around what works and how it works, which can help multiple parties clarify where and how they can add value. Working through intermediaries can also reduce the inefficiencies that occur when multiple organizations put resources towards ultimately over-lapping measurement efforts — this is particularly relevant for donors who are funding multiple organizations in a single sector, and perhaps paying for those inefficiencies.

Recommendation: Do not assume that an organization can conduct an impact assessment without dedicated resources. If the organization has the capacity to manage an appropriately funded impact assessment, or if they are implementing a unique or innovative model which they are best positioned to evaluate, consider supporting assessment from within the organization. If the organization is not set up to manage an impact assessment — even with additional funding — or if there is a need for a broader evaluation that goes beyond a single organization’s approach, consider supporting an intermediary to conduct a sector-level evaluation.