We talk a lot about capacity building at Brighter Strategies. That’s because our greatest passion is to grow a strong nonprofit sector. And we do so by developing capacity, or improving and enhancing your ability to achieve your mission and become financially sustainable. For more on sustainability, check out last month’s blog article, “The Year of Sustainability.”
This month, we’re focusing on capacity building as it relates to return on investment, or ROI. Many nonprofits struggle with increasing demand for their services while facing flat or decreased funding. As a nonprofit leader, you must show that the resources you are investing in your organization’s programs and services are reaping a tangible return. As deeply as you may care about the impact you’re making in the community, such missional devotion is not enough. Your funding sources, governing bodies, and regulatory agencies are more concerned about how profitable you are, and expect you to show evidence of such fiscal responsibility.
The good news is that when your organization is financially efficient, you have greater freedom to achieve your mission, therefore making a larger impact on the community, and achieving financial sustainable. It’s a positive cycle, and one that you want to get on!
So let’s get on it.
Return on investment: The basics
First, what is ROI, anyway? In its original definition, return on investment is the benefit to an investor resulting from an investment of some resource. A high ROI means investment gains compare favorably to investment cost. In these terms, ROI is one way of considering profits in relation to capital invested.
When we talk about ROI in the nonprofit sector, we’re looking beyond basic economics. ROI can be used to measure value in addition to finances, such as social value. It can be used by any entity to evaluate impact on stakeholders and identify ways to improve performance. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio. You can use the following formula to calculate the ROI of marketing campaigns, employee training and development initiatives, or agency programs.
ROI = (Gain from investment – Cost of investment)/Cost of investment
To cut through all of this complexity: In its simplest terms, return on investment is about efficiency. It is a measure of profitability that shows to what extent an organization is using its resources in an efficient manner.
Capacity building: Opportunities in 2016
So what does this have to do with capacity building? One of our goals at Brighter Strategies is to teach nonprofit leaders how to grow their organizations holistically so that their ROI is ever-increasing. When you can show a positive ROI year-over-year to your stakeholders, you will have no problem justifying a request for greater funding dollars, the need for more staff resources, or a plan for expanded service reach.
Are you ready to grow your organization’s capacity and increase your ROI? Our Nonprofit Capacity Conference will help you do just that. This year’s format, called an “unconference,” allows participants to dive deeper into capacity building content, while providing increased flexibility and affordability. Each of the four half-day workshops features a keynote address from a subject matter expert in the nonprofit management field, followed by a panel session with nonprofit leaders just like you. You can attend one or two workshops or purchase a full-conference pass for access to all four workshops, as well as networking opportunities throughout the year.
This year’s workshops will focus on building organization capacity in four focus areas: organization culture, using data, fundraising strategies, and lessons in leadership. The first workshop, titled “The Ultimate Culture Roadmap – How to Increase Your Nonprofit’s Impact,” takes place on March 8 in Arlington, Virginia. Keynote speaker Tim Kuppler, co-founder of Human Synergistics, has more than 40 years of experience in the field of workplace culture and leadership. This session will bring clarity to the elusive subject of culture by teaching culture fundamentals, uncovering nonprofit culture research, elevating audience engagement, and providing an action plan for change. Learn more at http://nonprofitcapacityconference.com/.
Whether you are responsible for your nonprofit’s transformation, leadership, growth, or performance, our capacity building programs provide you with knowledge, tools and strategies that you can use.