Funders are increasingly focused on measurable results, and technology initiatives are not exempt from this expectation. To prove an investment is worthwhile, nonprofits must show that the net gain will be more than the cost. But in our attempts to calculate return on investment, nonprofit leaders have too often focused on the wrong numbers.
Search the internet for advice on calculating return on investment (ROI) for technology, and you’ll find equations based on cost savings and efficiency. The image in this blog post is an example we often use at Idealware.
I asked Janet Miller of the William S. Abell Foundation that question. “Time savings and faster access to the internet is certainly important,” she said. “In addition, funders are looking for efficiencies and good systems that can track and build reports on the grants that they make.”
But some funders aren’t persuaded by the efficiency argument on its own. For them, it’s not enough to say you’re going to save money by spending money. They want to know what you are going to do with that extra time and money, how you are going to make the world a better place.
In an article I wrote for NTEN Change in 2015, I explained how a modest productivity gain could have a multiplying effect on the organization’s revenue capacity:
“Efficiency by itself isn’t worth much — it is the increased output or decreased personnel cost that matters. One organization made the case that by freeing up two hours per week for the development director, she could personally contact enough donors to more than cover the cost of the investment in her efficiency.”
But I’ve long advocated for putting something different on the benefit side of the equation: expressing how technology directly benefits the people served. It’s worth repeating a few examples.
“Technology can also lead to…a broader reach of your services…In my technology capacity building work, video conferencing and document collaboration tools enabled us to provide remote consulting to clients in an underserved rural area. At another organization, a CRM investment…[improved] the quality of services by providing visibility into the client’s full history and relationship with the agency.”
It can be difficult to assign a numeric value to these benefits, both because there is little agreement on how to measure social return, and because it’s tough to isolate the technology as a contributing factor. All ROI calculations rely in part on estimating or educated guesses. But it’s not impossible to come up with plausible ROI analysis that takes mission return into account.
Don’t let your ROI analysis fall short because it doesn’t fully capture the benefit side of the equation. Think about what your organization is trying to accomplish in the world, and how technology can help you do that. Then measure what matters.
KAREN GRAHAM is a sought-after speaker, trainer, writer, and consultant with expertise in technology leadership and innovation, nonprofit software, and digital strategy. As Idealware’s Executive Director she leads a team of researchers, presenters, and writers who create technology information resources designed to help nonprofit leaders put their vision into action.
You can learn more about funding technology at our upcoming webinar How To Find and Win Technology Funding on November 9, 2017, from 2:00 to 3:00pm ET. Idealware Expert Trainer Sarah Beaulieu will share her perspective and present wisdom gleaned from Idealware’s numerous expert interviews and more than a decade of observation of technology funding trends and best practices.
SARAH BEAULIEU has extensive experience in fundraising, communications, strategic partnerships and organizational strategy. She is currently Senior Advisor to the GreenLight Fund, and serves as a coach, consultant, and trainer to leaders and nonprofits. Previously, Sarah was the Senior Advisor to the Opportunity Nation campaign, leading on strategic partnerships and developing, supporting and executing the campaign’s key priorities.