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The biggest challenge facing non-profits is measuring impact. For-profit businesses have it easy, put the bottom line in the context of employee, customer, and community satisfaction and you can pretty much identify the short-term winners, long-term winners, and the struggling.

For the non-profits industry, its not that easy. There are increasing complaints about a lack of transparency, a lack of measurement of basic things, but I feel those complaints run the risk of over-simplifying and exacerbating the problem.

As you all know, i.c.stars does a great deal of measurement of the easy things: earnings before to after the program, graduation rate, placement rate, retention rate, salary increases over time, total cost of the program vs. total increased wages, etc.

The problem is that when it comes to measuring non-profits, the whole is not the sum of its parts. The easily measurable figures above do not say anything about the vision and mission of i.c.stars. They say nothing about leadership.

McKinsey has created 3 categories of non-profit metrics: capacity metrics (e.g. number of applicants), activity metrics (number of placements, salary increases), and impact metrics. Unfortunately, the impact metrics part of their article gets theoretical and doesn’t provide a lot of guidance. That’s where the challenge lies. All the transparency issues discussed in the wsj and elsewhere are focused on the donor community desire to compare non-profits and put their money where the greatest impact is occurring. Unfortunately, the metrics we can actually measure are all capacity and activity based, which say little about mission impact.

This is where the danger is. I predict articles will be written 5-10 years from now about how so-and-so non-profit that had amazing capacity and activity metrics, grew a massive donor base, and ultimately was called to the mat by two undergrads who “discovered” they had no actual impact.

The desire for metrics is about efficiently allocating a limited supply of donations to the organizations that will produce the most social good, the best return on investment (ROI for the i.c.stars CFO’s :-).

Sandee and I have been noodling on this for many years. We are in the fortunate position of having solid capacity and activity metrics, but recognize that does not mean we are marching toward 1,000 community leaders. We can all point to grads working 60K+ jobs and doing nothing to make a difference. We don’t invest 3,000 hours per year each to achieve activity metrics. We (and the entire non-profit sector) do those kinds of hours to achieve impact.

A big insight about 2 years ago, was the refinement of our definition of leadership as “making opportunities for others”. We thought, brilliant, we can easily measure opportunities right? Not exactly. Opportunities span from the micro-transaction (a great introduction for someone hoping to work at a company) to the macro-transaction (creating a chamber of commerce).

Macro-transactions are great for anecdotal stories that appear in annual reports and grants, but they are no where near granular enough to analyze the quarter over quarter performance of an organization the way for-profits can measure sales, expenses and profits.

How in the world do you efficiently and reliably measure leadership micro-transactions?

We are planning to test such a concept here. Adapting the idea that ebay has self-regulated a seller quality point system from a scoring aggregation of many, many small transactions, we believe the same is possible in the subjective domain of Leadership.

Soon, Hector and I will be adding the ability to create MOPS on the vault. MOPS are making opportunity points. When someone makes an opportunity, no matter how small, we will all have the ability to log it here. The community will ‘score it’ 1-5 on impact. Fast forward and find a ranking over many years of alums who have amassed thousands of points, each one auditable down to a simple tea introduction. How do we define community leadership? The sum of 1,000’s of actions to make opportunities for others.

Comments welcome.