16
Mar
11

Outcome reporting and Failure Reports

Is the future of non-profit reporting changing?

Historically, non-profit reporting made available to the public includes among other requirements: a mix of financial results; significant accounting assumptions and disclosures; governance and accountability; and program outputs. Non-profit watchdogs and accountability organizations like the BBB and the IRS typically have their own reporting requirements. However, these requirements tend to focus on financial results rather than outcome reporting.

Outcomes differ from outputs in that outputs represent products or services produced. Outcomes are the achievements or effects and changes resulting from the outputs. For example, a child’s attendance at school is the output of an education program. Children learning reading skills are the outcome which results from school attendance.

More and more, I hear discussions about how non-profits should be assessing and reporting outcomes. Charity Navigator is implementing several phases to revise its charity rating system (CN 2.0). The last phase expects charities to disclose information about their results. Not their financial results, but their programmatic results. In this video Ken Berger talks about the continuum charities are on, the evolutionary process that makes for high impact organizations. The sense that I get is that it’s not about being perfect; rather it’s about moving past yesterday’s errors and learning from past shortcomings.

Taken a step further, I’ve recently seen several non-profit organizations preparing “failure” reports. These reports openly describe a few instances when an organization has not done well on a project, or even failed at it, as well as lessons learned from these experiences. These reports go as far as identifying several changes to be made in the future.

Both Engineers without Borders Canada and the Robert Wood Johnson Foundation publish “failure” reports. Even though it exposes some of their failures, I come away believing their next dollar raised will be used even better because they have learned from their mistakes. They are moving down a continuum to not only gather data and assess outcomes, but also incorporate their outcome assessments into their next strategy.

Are failure reports the latest trend in non-profit reporting or a useful tool for meaningful learning and innovation? If failure reports are not done with the right motivation, in the right way, they could have negative effects. Here are several opportunities, advantages pitfalls and disadvantages to consider about whether or not to prepare a failure report:

Opportunities/Advantages
• The biggest opportunity is to learn, then invest, then develop new programs which are more successful long-term. Improvements and innovation can become part of routine assessments instead of incidental happenstance.
• Reflection, a process so often overlooked in the tyranny of the urgent, is instead prioritized. Resources are invested to intentionally assess and evaluate outcomes and failures.
• Organizations have an opportunity to learn from each other’s mistakes through increased visibility of past failures and lessons learned.
• Organizations have a better opportunity to avoid recurring failures.
• Donors have an opportunity to see which organizations are making improvements and moving down a positive continuum.
• Publishing failures and planned changes creates a public accountability partner to push an organization to prioritize the necessary follow-through.

Pitfalls/Disadvantages
• If the report is created out of the wrong motivation, it may be easy to fall in the trap of surface level, cleansed, or “PR friendly” assessments. (kind of like in a job interview when you say your biggest weakness is working too much…)
• Donors who can not maturely accept failure or who do not see enough improvement may not give to the charity again.
• Current donor perception is often driven solely by financial results. In order for failure reports to be successful, the public perception of charities and their values must be changed to value innovation and effectiveness.
• Many non-profit industries are typically expected to spend all of their donated funds immediately. This expectation must be bucked to allow time for innovation and investment in newer, more successful project models.

It’s always been important for donors to get assurance about financial results, but the interest in reports on organizational programmatic effectiveness, or its lack thereof, is increasing. If we can’t honestly measure, report and analyze program effectiveness, we won’t gain the important lessons that provide for the greatest success.

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