It is real: if you want to be a good decision maker, you must understand numbers well. Alas, I hear your sighs. If you are a fundraiser, or a program manager, or a writer for a nonprofit organization, you are by nature excellent in verbal and written communications and most likely, deep in the bones, you are a logophile, a lover of words. By contrast, you might not find in your heart that same profound, natural fondness for things that do not seem to be as creative and malleable as words, things that are dry and restrictive like, say, numbers. Yet, the discipline of numbers, statistics or simply metrics, is a great tool for strategic planning. It informs you about the performance and conditions of your organization and, if applied in a right way, will lead to a better organizational decision-making process. Love it or hate it, you need to, as we all do, understand some basic functions of numbers in business and fundraising management in order to plan your work strategically.
What can numbers do precisely? First and foremost, numbers help you set goals. Not any goals, but SMART goals, defined as in a typical project management textbook: a good goal is Specific, Measurable, Attainable, Relevant, and Timely (or time-bound). For example, as opposed to saying that “the goal is to expand the membership”, a more specific and measurable goal is to “expand the membership by 20% in a year.” Then, in order to ascertain whether the 20% growth in a year is attainable and relevant, we need to look into the rates of membership growth from the previous years as reference, or to figure out the actual size of the prospective member pool for future projection. In any case, knowing the relevant numbers is essential for creating the SMART goal.
Numbers are also indispensable for assessing your work performance. As fully committed to the mission of your organization, you want to make sure that your work is both efficient and effective. Is that easier to say than to do? Well, with a customized metrics system, you actually could keep a good eye on your work progress so as to avoid procrastination or waste of energy and resources. While your metrics system could be simple or sophisticated, it will eventually reflect two types of results in your work: a) the cost per project that measures efficiency and, b) the return on investment (ROI) that measures effectiveness. In the field of fundraising, for example, the cost per project is translated into the cost per dollar raised (CDR), while ROI implies the percent revenue generated from a certain amount of expenses. It is a relatively common practice for nonprofit managers to account the organizational fundraising performance by referring to these two basic ratios. As to the areas other than fundraising, the cost per project might be conceivable as monetary expenses or hours of human labors (say, by volunteers); and the return on investment might be the number of people benefited from the project or the overall rating of the project by its major stakeholders. Because of the precise nature of numbers, metrics improve the vigorousness of performance evaluation.
Essentially, numbers tell a story about your work and your organization. That is where descriptive statistics come in handy. The above-mentioned ratios, cost per project and ROI, are examples of descriptive statistics. Furthermore, numbers can also be visionary, showing the potentials of your work or your organization’s programs. That is where inferential statistics would be useful. Statistical analysis is often a sophisticated method of organizing and interpreting your organization’s data. It is commonly acknowledged as a useful tool in marketing. In the last ten years or so, statistics has also been increasingly applied in nonprofit fundraising. A couple of books, such as Fundraising Analytics (Joshua Birkholz, 2008) and Data Mining for Fundraisers (Peter Wylie, 2004), are good introductory reading on how to use statistical analysis to advance the understanding of philanthropy directed to a specific nonprofit organization.
That is a lot about numbers, yet, it is only a start. If you are interested in learning more about how to use numbers to improve your strategic planning process, you may want to check the programs at several professional societies, in addition to YNPN Chicago. APRA (and its Illinois chapter), AFP (and its Chicago chapter), CASE (and its District V conference) and AASP all are well-known providers of nonprofit educational programs. Finally, all that being said, the last thing I would like to point out is rather a sort of “caveat”: While it is a great analytical tool, numbers could also be subject to manipulation and misleading if not applied wisely. That risk, however, is only one more reason for which we have to understand numbers, so as not to be fooled by numbers, but to become a wise decision maker.
Fundraising Analytics: http://www.amazon.com/Fundraising-Analytics-Using-Strategy-Development/dp/047016557X
Data Mining for Fund Raisers: http://www.case.org/publications_and_products/case_store/data_mining_for_fund_raisers.html
AFP Chicago: http://www.afpchicago.org
Jie Pan has worked in the development and institutional advancement for higher education field for five years and is currently associate director of research at the Office of Institutional Advancement, Illinois Institute of Technology. Jie is also a board member at YNPN Chicago.