Can Nonprofits get more bang for their buck? Robert Serle podcasts about how nonprofits can leverage experience in the same way that for profit companies do. Serle uses an example of buying a flat screen TV. Many have not bought yet as we all know that the price will come down and quality will improve as the companies that produce them get better at what they do.
Economy of scale accounts for some of this but Serle postulates that the experience curve also plays a role, and that is what nonprofits can use to do more with less, or if not less, with the same amount.
He goes on to define outputs as things like number of counselling session and outcomes as the benefits that arise out of the work that we do i.e changes in client's mental health. It is the outcome that is the unit of value that needs to be captured.
Serle goes on to describe a study he and his organization did involving three nonprofit, single, direct service agencies. The results of the research highlight four key practices that lowered the cost of the outcome or in other words increased the value of the service.
The first was that these successful nonprofits standardized their best practices. They looked at what was working and applied those practices across their programs.
Second, they invested in their staff. "Paying more, costs less". All of the nonprofits in the study found that by increasing pay they reduced staff turnover. Putting resources into recruiting and training also increased outcomes over the long term.
Aggressive cost management was noted throughout by all the nonprofits studied. Finally measuring the outcomes. Setting standards of measurement for outcomes and setting (disciplined) goals each year figured prominently. It was this disciplined goal setting that drove innovation in several instances.
Generalizing this Serle presents an equation or a cost per outcome metric. The cost per output is your activity measure. Success rate is based on number of outputs accumulated for each outcome.
In many cases the cost per output has to increase initially in order for the cost per outcome to be driven down.
He wraps up by saying that economies of scale happen pretty much automatically while economies of experience have to be planned for and worked on. Nonprofits must track and manage costs per outcome. This means changing what is reported and how it is reported. It requires clearly defining and measuring outcomes instead of outputs.
I know in the area I work in all we report to our funder is outputs. How many, how often, not how well. Funders no doubt agonize over the lag in ROI when it comes to outcomes and choose to only ask for/pay for output measurments.
In listening to this podcast I am hopeful the initiatives like Scott Millers MyOutcomes will take more of a hold. If funders aren't asking for outcome measures we in the nonprofit sector need to step up to the plate and do them anyway.
I believe we also need to find a way to capture and report on what is not being done, who is not recieving services, what gaps exist, in short our failures need to be recognized and addressed also.