Why Data Is Critical to Your Nonprofit

Big data is being used to supercharge some of the world’s most high-performing organizations. Google, Toyota, and many top-performing nonprofits use data analytics to grow sales, reduce costs, increase giving, and drive results. And companies like Peter Thiel’s Palantir are now leveraging big data to provide innovative, data-driven solutions to the world’s toughest problems.

Making decisions at a nonprofit organization using your “heart” or intuition can be effective at times. Still, your results are always amplified when you’re able to leverage data to provide clear, actionable, and factual insights. In fact, for your nonprofit to truly maximize its results, you must begin to leverage the data-rich, technology-driven landscape that’s available.

Data-driven nonprofits find greater success and efficiency

A recent study found that “the majority of nonprofits that have embraced digital accelerators such as…data and analytics tools report a substantial increase in organizational capacity and efficiency.” Of the nonprofits that cited using analytics in their organizations, 82 percent of leaders said it’s increased their capacity by more than 10 percent, and 83 percent of team members believe it has made them more efficient. Furthermore, Lloyd Banks research revealed that “digitally mature” nonprofits are 28 percent more likely to increase funding than those that are not.

There are a lot of numbers to take in, sure, but what it shows are the deep, expansive benefits that come when nonprofits begin to tap into data (and the right data, for that matter). By doing so, your organization can better inform decisions and strengthen relationships, thus moving the organization forward.

At Virtuous, we spend a lot of time thinking about how data analytics can be used to create personal connections with donors and grow global generosity. We believe a robust, data-driven understanding of donors has the ability to dramatically grow giving, sustainability, and overall results.

The connection between data and relatedness

When nonprofit leaders, especially those who lead primarily by the heart, are asked to begin collecting and using data—there’s often resistance. Nonprofit execs worry embracing analytics is going to alienate donors or cause the organization to become more scientific and less passion-driven. But the truth is data can actually create the opposite effects.

Sociology tells us a donor rep can realistically only maintain 100 real donor relationships at one time. This is a problem because most donors (even those at the bottom of your file) are compelled to give based on their relational connection to your cause. If your nonprofit taps into its data about its loyal supporters, you can use the information gathered to form a bond, build rapport, and even tailor your giving requests with your entire donor file…not just the top 100. If anything, the right data can bring you closer to the rank-and-file fans that you want to reach and nurture.

As author Jennifer McCrea states in her book The Generosity Network, “…resources will tend to flow naturally toward you when you focus on the most important aspect of the fundraising process: creating human connections.” Data can fuel these connections, which can then encourage more fundraising success.

So, why aren’t more nonprofits using data?

Despite the clear benefits of tapping into the data available to them (specifically donor data), research shows adoption rates of digital tools by nonprofits are still under 50 percent. Typically, there are a few challenges that get in the way, including:

• Cultural resistance to tech adoption across the organization—team members may view the change in processes that digital tools and data usage may require as too steep of a hurdle.
• Confusion around digital tools and corresponding knowledge—the team may feel behind the curve with technology and fear they won’t be able to get caught up properly.
• ‘Dirty’ data that isn’t updated or uniform, and therefore not useful—in this case, the organization has collected data and has tried to use it but hasn’t kept it ‘clean,’ so it hasn’t had positive results.
• Too few resources—the organization is already lean, and leaders believe there isn’t enough time or money to spend creating data-based processes and analyses.

Where to start

If any of the scenarios above sound familiar, you’re not alone. But rather than give up on data entirely, remember the power it can have in streamlining your organization and increasing fundraising. The fact remains that the vast majority of for-profit organizations are strategically collecting and using data to their advantage, and other nonprofits are starting to, too. If you fail to adapt to this shift, you could be left behind.

Getting started with data collection need not be a big undertaking. First, review the data you do have access to (whether it’s within a software system or sprinkled among various spreadsheets).

Then, ask the following questions:

1. Does your data measure your success in mobilizing your resources?
2. Does it measure the staff’s effectiveness on the job?
3. Does it measure progress in fulfilling your mission and report results to donors?
4. Does it help you relate to and build personal relationships with your donors?
5. Does it help shorten the distance between your donors and the work you are doing?
6. Does it help you raise more funds?

If your answers are primarily ‘no’s, you may have more of an upward climb. However, most nonprofits do have this information—they just may not realize it. If you’re missing any of those elements, simply by incorporating data collection and analysis into your daily workflow, it will gradually become ingrained in your culture. As you start your journey, we recommend the following steps in moving toward a more data-driven organization.

1. Define the key metrics that define success for your organization. These metrics may include items like (project completion rate, children fed, dogs saved per month, donor attrition rate, percentage of donations coming for donors under $1000/year, etc).
2. Ensure that the underlying data in your CRM or other data sources is clean and optimized to report on these metrics. By the way, accessing this data shouldn’t require a call to an IT person or outside agency.
3. Make sure that you have the reporting tools, analytics, and dashboarding in place to keep your key metrics front and center in your organization.
4. Whenever possible, assign a person on your staff (in the program and fundraising departments) with the responsibility of analyzing your data and providing insights to your executive team.

The shift to adopting digital tools and putting processes in place to collect and use data can take some time, but it will always be worth it for the longevity and success of your organization in the long run. It will empower you to do more good, for more time.