Back to Newsletter

By John Cooper, HoganTaylor Assurance Senior Manager

Each nonprofit organization will face scrutiny from donors in the years to come. The donors will be looking for nonprofits who separate themselves and provide the maximum amount of value to the communities they serve. Layer on the added challenge of recruiting and retaining top talent, nonprofit organizations need to focus on two key factors to distinguish them from other organizations.


The ability to communicate nonprofit efficiency is a constant challenge. One key ratio every nonprofit organization should embrace is the overhead ratio, a standard measure of efficiency that measures the ratio of the money spent directly on the organization’s cause to the money it raised from donations. This ratio is one-dimensional and can be manipulated by an organization’s cost cutting efforts, however these efforts could lead the organization down a path and not invest in the infrastructure needed in order to support the organization’s needs, thus accomplishing its long-term goals would be unobtainable.

A different path to success with efficiency is a variety of outcome metrics. Outcome metrics include all measures that reflect organization performance and impact. These can include:

  • Performance (e.g., program efficiency)
  • Outcomes (e.g., children placed)
  • Capacity (e.g., membership growth)
  • Financial (e.g., budget to actual)
  • Sustainability (e.g., investment growth)

If you report solely financial-based metrics, your potential funders won’t know whether you are successful in your mission and in meeting your stated goals.


Each nonprofit organization should strive to overcome the limitations of quantitative efficiency measures by providing qualitative information about the success and programs of the nonprofit. Most nonprofit organizations understand the importance of telling stories about how their work has benefited specific individuals or communities. These types of stories are more compelling and memorable than the numbers. The bottom line is, you need to capture those potential donors from the onset of being introduced to your organization.

These two factors will allow for nonprofit organizations to continue to improve its donor relations and maximize the amount of assistance provided to those in need.

Back to Newsletter