Assessing the mission impact factor
Tuesday, November 29, 2016
In strategic decision-making for your organization, the question of return on investment typically arises. But how many times do we ask ourselves, "What is the return on mission?"
In a financial sense, a return on investment speaks to what we can expect if we invest dollars in a stock, a business venture, etc. A return on mission, then, needs to focus decision-making on advancing the purpose or reason for existence of an organization.
Return on investment — impacts only finances
An article in Forbes, entitled "Analyze The ROI Of Your Innovation Idea, Step By Step," defines ROI as: (net profit / invested resources) x 100
Using this analysis, let's say your organization invests $100,000 annually (staffing and other resources) in a service to members that yields an annual net profit of $10,000. This is a fairly simplistic calculation showing a net profit of 10 percent annually based upon that investment.
If we focus just on ROI, in a financial sense, the question might be, "Why are we dedicating $100,000 in resources annually to net only $10,000?" It makes sense to then sunset or repurpose the program and direct resources to other areas.
Return on mission — impacts both finances and mission
As we then take this last scenario and think about mission impact in addition to a financial return, we can then adjust this to both a real return on investment plus perceived value.
The actual dollar amount is now really a number that puts a value on that service rather than just a pure dollar return. The "mission impact factor" (MIF) is an additional value that is placed on a particular program given its importance to overall members.
For example, let's look at a certification program that is similar to our other example. $100,000 in annual resource expense generates an annual net profit of $10,000. In order to fully understand the return to mission and the overall value, an organization needs to say on a scale of 1-100, this is the impact factor to our mission given this service.
In this case, we can say the certification is the "golden handcuff" resource that drives member retention. Bob Harris, CAE and President of the Nonprofit Center, defines a golden handcuff as "a benefit so valuable members are eager to join and renew."
In this example, let's say the certification helped to increase membership retention from 80 to 90 percent in your organization. This should score a high MIF. For our purposes, let's give it a score of 75. Again, you can decide the MIF for each of your programs.
Return on mission = (net profit / invested resources) x (100 + MIF)
If we use the equation above, the certification would provide a Return on Mission of 17.5 percent — (10,000 / 100,000) x (100 + 75).
This is one example of how we can use some weighting in an organization's analysis that rises above the pure return on investment and factors in other weighted measures that better evaluate how the program, benefit or service is performing beyond just financial but contribution to the mission.
One of the questions in creating a mission impact factor is, "How does my organization assign these numbers to programs?" This is the part where you have to dig into your data and understand member satisfaction around each program and how that program impacts membership, the awareness of the organization, the financial impact, etc.
Identifying some key metrics for each program and then ranking them will help in assigning this MIF number. You may also want to consider a negative MIF as well for programs that are not performing outside of their pure return on investment.
In nonprofit organizations, it is not just about the profits but also about the overall relevance and value it provides to the profession and industry it serves. Assigning a value to how your programs impact your mission is one way to not only evaluate them but also, when creating them, this can be assigned from the onset and be used as one more metric to evaluate the program's success.
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