December 1, 2003
Every foundation wants to maximize its investment returns and achieve social impact with the leanest possible organization. Many standard metrics exist -- such as portfolio returns and operating cost ratios -- to help community foundations compare themselves to their peers and set appropriate performance targets. But community foundations also need to raise money from donors, and finding meaningful ways to measure this crucial aspect of their performance is much more complicated.It's easy enough to measure how much money comes in the door, but merely comparing the total contributions received by different community foundations doesn't take into account important variations in size and location. If community foundations are to learn from each other's success, they must find ways to cancel out these distortions and create truly comparable performance data. None of the measures community foundations currently use to gauge the success of their fundraising yet achieves this goal:Total ContributionsComparing total gifts received requires a rigorously-defined peer group to be meaningful. And given the substantial diversity in population and wealth within the areas served by community foundations, identifying a meaningful peer group is very difficult.Past PerformanceComparing this year's gifts with those received in prior years eliminates the challenge of peer group selection, but it doesn't permit foundations to learn from each other. Lower performing foundations will miss opportunities to improve and, of course, one or two large gifts in any year can make year-to-year comparisons meaningless.New funds establishedUsing the aggregate number of new funds established to serve as a proxy for the foundation's penetration of potential donors in its service area is also susceptible to the low expectations trap: It is difficult to measure performance or to set objectives effectively without a sense of the region's potential for giving.Our experience suggests that a new measure -- per capita giving within the foundation's service area -- combined with a new goal setting process can enable community foundations to better understand their own performance and highlight successful strategies.