socially marketing

A recent post thread at Tactical Philanthropy on the topic of measuring nonprofit effectiveness caught my attention. It discusses the issues related to recent (and possibly over-enthusiastic) efforts to apply scientific measurement techniques to help evaluate the work of nonprofits. I could not resisting throwing in my $0.02, which is reproduced below (and can also be found in the originating post here):

It seems to me a recurring theme of the ‘metrics mania’ debate is that it involves both art and science. If the ‘art’ position is that non-profit value defies objective analysis, and the ’science’ is that non-profit worth can be reduced to equations of input and output, I expect I’m somewhere in the middle.

This is surprising, since in the interest of full disclosure, I should say that I am co-founder of socialmarkets.org, where donors “invest” in nonprofit projects based on their SROI (Social Return On Investment.) This sounds like pretty hard science, but there is actually quite a lot of room for art to soften the edges.

The stock market analogy already seen in this thread is spot on. Apple’s stock price is influenced rather than defined by the financial science that slices and dices its cash flows. The beauty of a market is the marvelous job it does boiling down a large, complex set of valuation inputs into a single output called “price”. This number is useful on both an absolute scale and relative to other offerings in the market.

In a testament to the wisdom (or lunacy) of crowds, Apple’s stock price reflects the collective opinion of financial analysts, status-conscious teens and everyone in between. The potential to harness the same power to “price” The Red Cross or your local community foundation seems both possible and useful to me.

There are plenty of donors looking for a “best-bang-for-the-buck” (i.e. maximum SROI) approach to non-profit investment, and right now there is not much useful data out there for them. The success of sites like Charity Navigator are a testament to the need for metrics, but they only tell potential donors about what nonprofits spend, rather than what they accomplish. Surely we can do better than that.

Those with a less scientific approach may not find metrics like SROI as compelling, but still potentially useful. Consider Albert Ruesga’s story of the high-risk, low-return homelessness project that he presents as an argument against metrics. This is where the difference between the sectors becomes significant.

For starters, unlike the for-profit model, there are often donors willing to invest in hard-luck nonprofit cases - as they ultimately did in Mr. Ruesga’s example. More importantly, since nonprofit metrics is still a new field, we can - and should - redefine the notion of return to more accurately capture the total social value being added. That seems to be the most constructive cross-product of art and science in this space: a more artistic approach to the science of metrics.