Are you a nonprofit leader who wants to measure the value of your work beyond dollars and cents? If so, you need to know how to calculate Return on Investment (ROI) in a way that captures the full impact of your organization.
In this post, I’ll share 𝟰 𝗮𝗹𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝘃𝗲 𝗥𝗢𝗜 𝗺𝗲𝘁𝗿𝗶𝗰𝘀 that can help you do that.
But first, let me explain why the standard ROI formula is not enough for nonprofits.
The standard ROI formula compares the financial gain from an expense or investment to the cost of that expense or investment. This makes sense for businesses that aim to maximize profit.
But nonprofits have a different goal: to create positive change in the world. That’s why they also need to consider the mission impact of their expenses or investments. However, measuring mission impact can be challenging, especially if you don’t have enough data or a clear way to track outcomes.
That’s why you need more than just financial and mission impact measures. You also need to consider other factors that affect your organization’s success, such as:
The time and resources required to pursue an opportunity, partnership, or activity
The effect on your staff, reputation, effectiveness, and community
The learning and improvement opportunities that come from trying something new
The trust, equity, and relationships that you build or strengthen along the way
These factors are often overlooked or undervalued, but they can make a big difference in your long-term sustainability and influence.
So how can you measure them?
Here are 4 alternative ROI metrics that can help you evaluate your work from a broader perspective:
→ 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗜𝗱𝗲𝗻𝘁𝗶𝘁𝘆 - this metric assesses how well an opportunity, partnership, or activity aligns with your organization’s core purpose and expertise. Does it reinforce who you are and what you do best? Or does it confuse or dilute your identity and value proposition?
→ 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 (𝗧𝗶𝗺𝗲) 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 - this metric evaluates the efficiency and effectiveness of your use of staff time. Are you getting enough benefit for the amount of time you spend on something? Or are you wasting time on low-priority or low-impact tasks?
→ 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗜𝗺𝗽𝗿𝗼𝘃𝗲𝗺𝗲𝗻t - this metric measures the learning and growth opportunities that come from an opportunity, partnership, or activity. Does it help you develop new skills, knowledge, or capabilities? Or does it keep you stuck in old habits and patterns?
→ 𝗥𝗲ẗ̤ṳ̈r̤̈n̤̈ ö̤n̤̈ Ï̤n̤̈ẗ̤ë̤g̤̈r̤̈ï̤ẗ̤y & Ï̤n̤̈f̤̈l̤̈ṳ̈ë̤n̤̈c̤̈e - this metric gauges the impact of an opportunity, partnership, or activity on your internal and external relationships. Does it help you build trust, equity, and collaboration with others? Or does it erode or damage those bonds?
By tracking these 4 alternative ROI metrics, you can get a more holistic and accurate picture of the value of your work. You can also use them to make better decisions about where to invest your time, money, and energy.
What do you think of these metrics? How do you measure ROI in your organization?
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