“You can’t spend the same dollar twice.” Nonprofit organizations know the truth of this old saying all too well. In a world where need far outweighs resources, determining which programs are right for your non-profit can be a serious challenge. Understanding the impact that each program has on your organization as a whole is vital to making well-informed operating decisions.
Evaluating mission contribution is a qualitative approach that may result in a little organizational “soul searching.” How well does your program align with your organization’s mission? Does the “who and what” of the program makes sense based on the “who and what” of your organization? Feedback from your stakeholders and evaluation of program performance measurements can provide you with valuable information to help determine if your program is making a difference and achieving a desired level of impact.
Evaluating financial contribution, on the other hand, is a quantitative approach that considers the financial impact of each program individually. Do you know the true cost of operating each program? Nonprofits commonly assess the collective performance of the organization (e.g. whether total revenues are sufficient to cover total expenses) but spend little time determining the financial contribution (or drain) of an individual program. How does the program’s revenue compare to its expenses? Does the program financially contribute to the organization’s bottom line, or are you using other organizational dollars to supplement its operations?
You will generally find that your programs fall into one of four types:
1. Programs that contribute to your organization financially and are strongly aligned with your overall mission are great for your organization.
- ACTION: You should continue to operate these programs. Depending on your long-term goals, you might even consider evaluating these programs for potential expansion.
2. Programs that neither contribute to your organization financially nor align with your overall mission are a clear drain to your organization. You are likely spending valuable financial and non-financial resources on a program that does little to strengthen your organization.
- ACTION: If you cannot feasibly make changes to these programs to bring them within your overall goals, you should consider developing a program exit strategy.
3. Programs that are strongly aligned with your organization’s mission but have negative financial contribution will not be financially self-sustaining.
- ACTION: Your organization will need to allocate other resources to these programs in order for them to continue to operate. Consider whether more can be done to generate revenue from these programs.
4. Conversely, programs that are not aligned to your organization’s mission but contribute to it financially will be self-sustaining (and may even generate revenue for your organization overall) but will not have a clear link to your organization’s overall mission.
- ACTION: Deciding what to do with these programs can be tricky. Questions to ask yourself might be: Can we generate additional revenue to sustain a high mission program that is a net use of organizational resources? Should we widen the scope of our mission to include programs that contribute to the bottom line? Maybe…or maybe not – you could find it is not be practical to make the changes needed to bring these programs perfectly in line with your organization’s overall goals. You might decide to continue to subsidize a high mission program with a negative financial contribution, if the program is central to your overall mission. Likewise, you might find that the positive financial contribution from a program that is not aligned with your mission provides enough benefit that the lack of link to mission is not that important.
Success to a non-profit organization is more than just a strong financial bottom line. Program contribution analysis gives your organization a strategic process to evaluate multiple programs and understand the contribution that each program makes to the overall organization – information that is critical to making smart operating decisions.