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The Power of Data in Nonprofit Decision-Making: A Guide

Sunday, September 22, 2024

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From balancing your budget to managing sensitive client information, data plays a key role in almost every part of your nonprofit’s operations. With a strong data collection, management, and assessment policy, your nonprofit can make data-driven decisions that drive the best outcomes for clients and program participants.

To help your nonprofit understand the power of nonprofit data, this guide will explore two key types of nonprofit data before walking through how to measure data maturity.

Types of nonprofit data

Fundraising

Most nonprofits will gather fundraising-related data through their fundraising and donor management software. For example, a few relevant data points to track include:

  • Total annual fundraising
  • Average donation size
  • Number of donors
  • Donor retention rate
  • Donor lapse rate
  • Average major donation size
  • Marketing metrics, such as email open rate, website traffic, bounce rate, engagement rate, and conversion rate

This information can help you make key decisions about what fundraisers to host, how much to ask for in your fundraising appeals, and what fundraising strategies are likely to succeed.

Be sure to also track fundraising revenue outside of individual donations. For instance, if your nonprofit receives grant funding, you will likely need to follow several requirements for using that funding. Most grants are restricted funds that can only be spent on select projects, and many grantmakers require nonprofits to provide follow-up reports that document how the grant was spent.

Program management

Managing your fundraising and financial data ensures your nonprofit can stay afloat and fulfill your mission, but it’s equally important to ensure your programs are putting your funds to good use by tracking data related to your programs and initiatives.

While most nonprofits generally focus on similar fundraising data points, program data depends heavily on your nonprofit’s mission. While the specifics can vary wildly, your organization should collect data relevant to your programs, such as the number of beneficiaries helped and whether said beneficiaries are people, animals, environments, or anything else. Of course, some nonprofits also lack beneficiaries in the traditional sense.

For example, an animal shelter might measure the number of animals they intake every year and what percent are placed in permanent homes. In contrast, a nonprofit that advocates for accessibility accommodations may have rough estimates of the number of people impacted in their community but primarily measure results based on the number and quality of accommodations implemented.

Though metrics vary from nonprofit to nonprofit, all organizations should collect data related to their programs. This information allows your organization to make data-driven decisions, identify initiatives that are successful and ones that need improvement, and present your data to funders to make a case for support.

Additionally, nonprofits in the healthcare or human services sectors may be required to provide program data in order to maintain federal reporting compliance. Case management software can help these organizations run their programs and file these reports.

How to measure data maturity

Fundraising and program management data are essential to making both everyday and major decisions at your nonprofit. However, whether your nonprofit’s data is currently in a place where it can help you make decisions depends on its maturity level.

Data maturity measures how robust, sophisticated, and effective an organization’s data management and analysis practices are. In a traditional data maturity model, there are four levels of data maturity:

Stages of the data maturity model

1. Committed

Nonprofits at the lowest level of data maturity appreciate the idea of sophisticated data management and analysis but currently lack the processes or tools needed to improve.

For example, this might include nonprofits that use paper forms and file cabinets rather than data management software. While these systems keep the nonprofit afloat, they make data analysis difficult, and it’s easy to lose important reports and forms.

These organizations collect data but lack the capacity to make strong use of it, leading to an inability to present their impact to stakeholders, track budgets accurately, or make evidence-based decisions.

If your nonprofit is at this stage, begin having serious conversations with leadership about implementing structured processes for collecting and managing data so you can move on to the next stage of data maturity.

2. Counting outputs

Outputs are the quantifiable services your nonprofit delivers. For example, a nonprofit dedicated to environmental restoration might count the number of trees planted or pieces of trash picked up.

Nonprofits at this stage usually have some data collection tools implemented, such as:

  • Surveys and questionnaires. If gathering qualitative feedback from clients or program participants is relevant to your nonprofit, be sure to invest in survey software. For example, a youth readiness program might ask participants to fill out a questionnaire before entering and after leaving the program to assess the skills they’ve gained.
  • Marketing platforms. Most marketing tools have analysis features that help nonprofits gauge the success of their outreach efforts. For example, an email messaging platform might provide reports on what percentage of people opened your emails and how many clicked on links within them.
  • Financial management systems. Basic bookkeeping tools can help you keep track of how much revenue your nonprofit takes in and how much you spend.

At this stage, nonprofits understand their impact somewhat but still lack the data needed to assess long-term outcomes, understand cause and effects, and make meaningful decisions about the direction of their organization.

3. Measuring outcomes

To understand this stage, we first need to discuss the difference between outputs and outcomes. Outputs are individual data points related to your nonprofit’s programs, whereas outcomes are an analysis of the short- and long-term results of that data.

For example, let’s go back to the nonprofit that focuses on ecosystem restoration by planting trees and picking up trash. Each tree planted and piece of trash picked up is an output. A 10% decrease in pollutants in a river is an outcome.

Nonprofits that progress to measuring outcomes can finally put their data to use in making strategic decisions. These organizations have the proper data collection protocols and tools in place to understand how each of their programs performs and what impact those programs have.

On the financial side, this is the stage where nonprofits can perform fundraising assessments. Fundraising assessments are audits of your nonprofit’s fundraising practices to identify strengths and weaknesses in your approach. Organizations that measure outcomes have the ability to analyze their fundraising metrics and dig deeper into the why behind their results, laying the groundwork for assessing their outreach and marketing practices.

4. Managing outcomes

In the final stage, your nonprofit collects and manages data optimally, allowing you to not only track outcomes but also make strategic decisions quickly and confidently about how to improve them.

To maintain your data at this level, be sure to:

  • Keep your data clean. Practice regular data hygiene to ensure your data stays organized, accurate, and usable. Perform routine maintenance by scanning your database for duplicate, incomplete, and unnecessary data.
  • Assess your technology routinely. While changing your software too frequently can cause confusion and consistency issues, be aware of developments in nonprofit software and assess whether your current tools still meet your needs. This will help you determine when it is time for an upgrade and make the data migration process as smooth as possible.
  • Hire external services. To maintain a professional level of quality for certain types of data management, consider working with professionals. For example, you might hire an external bookkeeping and accounting firm to manage your finances.

At this level, your nonprofit will have a strong command of your data, allowing you to identify trends and make decisions in real time to react to challenges and opportunities alike.

Nearly every part of your nonprofit generates data, and how you manage that data impacts your ability to make strategic decisions. Stay on top of your data by implementing the practices, investing in the software, and hiring the experts you need to not just collect individual data points but manage your nonprofit’s impact.