07/25/2012 11:58 am ET | Updated Sep 24, 2012

The Imperfect Storm: Nonprofits Need to Be Data-Driven (Series Post 5)

In our initial blog post, we identified five key shifts affecting the environment for nonprofits that have co-mingled with the economy to create the potential for continued rough times. The last post covered Shift #3: Nonprofits need to ride for their brand. In this post, we'll explore the importance of data-driven organizations.

Shift #4: Nonprofits need to use data to both improve their stories and to tell them

Traditionally, nonprofits collect information to report back to funders, regulators and other stakeholders. Although they may say and think they do, these same organizations rarely use the information they collect to make better decisions that improve outcomes -- especially in the real time of someone who receives whatever service is being provided.

The key is not data; it is meaning that comes from the data. Technology companies working with nonprofits achieve their highest value not by helping groups report on how much money was raised but instead by helping them use data trends and patterns to increase how much money is coming in. This work involves making sense of data and the results of statistical modeling to define what new steps the nonprofit can take to best increase revenue. Many nonprofits used to look at technology companies as being about the database they provided (the house the data lived in). Now, enlightened nonprofits understand that the experts who help understand what their data are saying add a layer of value to their technology investment that cannot be matched. These partners help nonprofits find the gold.

A brief example shows the power of this approach. When donors move from one place to another, most are lost for years until the nonprofit catches up with a change of address. In a few cases, however, the donor takes the time to tell the nonprofit that she is moving and to provide a new address. The donor's high level of engagement that prompted the call tells us that she is highly likely to give more than she does now, if the interest and engagement is reciprocated. Call this person -- from a regional or local affiliate or office if you have one and, if not, from headquarters. Welcome her to the neighborhood, and remind her that you are there as well, doing the great stuff that their money makes possible. This is money in the bank. Sadly, these kinds of donors get lost more than you think.

On the nonprofit programs side, analytics now look at early benchmarks that suggest that earlier intervention helps participants more quickly achieve success. Historically, for example, teachers waited until several months of school elapsed or many tests were taken before they offered to help students at risk of failing a course. But when you ask teachers how soon they can know which students are at risk, most of them say they can tell within two weeks. They see early signs, many of them pointing to how engaged the kid is in the classroom. Early identification as a data point can lead to intervention at a moment when it is both less costly and far more likely to work.

The effective use of data is paramount in nonprofit operations and in the way they tell their story to you, the supporter. Have you heard a good story lately? Chances are, it had good data backing it up.

In our next post, we'll introduce Shift #5: Nonprofits need to start and end with customers.