Source: RSM US LLP.   

ARTICLE | January 20, 2021

Nonprofits typically manage large volumes of information, but often do not leverage that data to its full potential for greater efficiency and decision-making. Disparate tools, disconnected systems, and manual data collection and management strategies can limit effectiveness for many organizations. However, making adjustments to processes and tools can help significantly improve program efforts, enhance contact with constituents and increase focus on mission initiatives.

All organizations are on different stages of the maturity continuum. This continuum demonstrates organizations’ evolution from a grass-roots startup of energized volunteers all the way to an optimized operation of professionals with defined processes and integrated technology.

However, no matter where an organization is on that continuum, the amount and nature of information that every nonprofit must manage are significant. In fact, multiple types of data must be collected and stored within every organization, such as:

  • Grants management: Internal approvals, external approvals, necessary guidelines to obtain a grant, reporting for the grantor to document the effective and compliant application of funding
  • Donor and gift management: Donor data, whether gifts came from a drive or the website, how often donations are solicited, how much donors are giving, whether gifts are lump sum or in installments, how engaged donors are and how best to develop further engagement
  • Volunteer management: How much time volunteers spend at the facility, what they are doing, what their interests are, documentation of availability and needs, how to deepen and enhance their connection with the organization   

These are just examples, as each nonprofit organization is different and has unique data demands. However, the data flow within organizations continues to grow, and many strategies and tools may be outdated or not fully optimized. Additionally, the nonprofit industry continues to evolve and becomes more competitive for resources, which makes the ability to effectively use data and information in advancement of the mission is increasingly important and complex.

For greater efficiency, many nonprofits are transitioning to manage their data more like for-profit businesses. Currently, many organizations are using multiple systems and manual processes that are not in alignment with each other. 

For example, an organization can have a volunteer who comes in regularly and is invested in the mission, but that person is never asked for a donation because those two data sources are managed independently, and no analytics are in place to connect the dots. When we expand this specific example across an entire organization or across broader process areas, the missed opportunities are significant.

Evaluating, integrating, and optimizing current data systems and strategies can have big benefits. An effective strategy can be a vehicle to find new donors, become more effective with marketing campaigns and streamline required reporting to focus energy on mission-related efforts.

Before implementing a new data strategy, your organization should take a step back and determine your end goals. Focus on what you want to accomplish, and be specific—“increase average grant size by at least 15 percent” is a much more measurable goal than “do better at managing our grants.”

Begin with the end in mind and work backward to determine what it means to reach those goals. From there, you can identify the components that can help you reach your desired outcome. Setting that standard is important, as many organizations (especially those with multiple locations and in multiple geographies) struggle to define exactly what needs to be measured, and sometimes even to clearly define and communicate what “success” looks like in the first place.

That being said, when implementing tools and developing a new data strategy, it’s important to not overmeasure. Organizations risk entering “analysis paralysis” mode by overanalyzing and not making progress toward any of those goals. You must determine what is truly important to your organization and measure that information, with fewer and meaningful data points and easy to understand concepts. Creating actionable data and insights is a sign that your organization is managing data effectively.

Take the example of grants management above. If the organizational goal is to increase average grant size, you will first need to determine the current average grant size. Even if this data point is common knowledge, we recommend conducting a review of how it is determined, and what data source(s) it is being pulled from, in order to validate that the number is current and accurate.

If the data sources include several years of history, your organization can quickly determine the historical trend: is grant size going up or down? Are sharp rises or drops correlated to any internal or external factors? What conditions existed when grant size increased, and could those be replicated?

Using the data to drive decisions requires an upfront investment in actually gathering and analyzing the data, and this is a common barrier to entry for nonprofits. But new technology makes this effort easier and can potentially automate pieces that were very labor-intensive in the past. And our experience tells us that nonprofits that elect to put forth this initial investment almost always see a greater return on it.

Once the foundation is in place, and the methodology for using data to measure performance and set goals becomes a part of the organizational culture, nonprofits typically begin to realize additional benefits and can plan for more advanced analytics such as key performance indicators (KPIs) and dashboards. For more advanced analytics capabilities, business intelligence (BI) tools, including Microsoft Power BI, can align with an ERP solution to summarize and filter data even further to provide a stronger vision into your organization’s performance and mission drivers.

Implementing a BI platform can impact an organization in several significant ways. From a donor management perspective, a BI initiative can help organizations better understand donor behavior, determine which donors are most aligned with their mission and how to drive continuous giving, and provide insight into how effective marketing campaigns truly are.

As an example, a community college implemented a BI solution that significantly strengthened student insight and performance. The platform provided increased visibility into student, faculty and course data and generated key metrics and accurate, actionable data for more informed decision-making. Ultimately, the enhanced insight helped the school reverse a trend of falling enrollment, improve student performance scores at an unprecedented rate, and post the highest graduation rate in recorded history.      

Organizations should always aim for continuous improvement. Data is a critical, and often underused tool to reach that goal. If you take action based on your defined measures, you can measure those goals again in the next period and see improvement. If you do not observe improvement, or you have concerns about your performance or efficiency, you may require adjustments to your measures, data-management tools or strategies to drive the organization forward.

This article was written by Steve Mermelstein and originally appeared on Jan 20, 2021.
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