01/08/2013 03:37 pm ET Updated Mar 10, 2013

Is Your Nonprofit Making an Impact? Prove It!: Part 1, Why Social Entrepreneurs Must Take Research Seriously, and How to Do So

To read Part 2, click here.

If you're running a social enterprise and you want to raise money to fund it, you will need to design a data-collection and research strategy to show donors and peers that you're actually achieving your goals. The majority of funders of nonprofits are hard-nosed businesspeople, and they will expect a quantifiable return on their investments.

As someone who has been working in the nonprofit arena for three decades, I can tell you that I learned this lesson the hard way. One of my early experiences was with a top philanthropist in New York City, and an early supporter of my foundation -- the Network for Teaching Entrepreneurship (NFTE) -- which brings entrepreneurial skills to at-risk youth). After two years, she abruptly stopped funding us. After several brush-offs, I finally managed to secure a meeting. When I asked why she stopped her donations to NFTE, she became annoyed, and asked: "Where's your research? Where are your numbers?" She shook an investment report in front of my face. "Like this! You need numbers to prove your outcomes! You can't just evaluate your own programs. And you need something ongoing." Completely rattled, I asked her what the numbers on the paper she was waving in front of me meant. "This is our investment report The numbers mean that we're getting a return on our investment."

I had stumbled upon the power of entrepreneurship education for youth by accident, in a classroom in 1982, when I was a frustrated special education teacher in a high school in the Bedford-Stuyvesant area of Brooklyn. The behavior of many of the 56 students in my remedial math class was dreadful. They were wild and completely ignored me. One day, desperate to get their attention, I took off my watch, held it up, and asked, "How much would you pay for this? How much would it cost?" The class went completely silent. They became riveted as I launched into an impromptu lesson on the difference between retail and wholesale costs, and the concepts of profit and return on investment.

It turned out that learning about business fascinated and motivated my inner-city students. Not only did they start behaving better, but they also became more focused and better able to complete basic math and writing assignments. From that moment on, whenever I taught math, I would tie the lesson to an aspect of business. I came to believe -- and still do today -- that thinking about business stimulates our brains. It's natural for us to ask ourselves how much something is worth and to think about markets and other people's needs. This is the essence of being an entrepreneur.

In the mid-1980s, while I was teaching at Jane Addams Vocational High School in the Bronx, I would videotape my students the first day they came to class, and again on their last day. My principal, Pat Black, was astounded at the difference in attitudes and behaviors that the students displayed in their before-and-after videos. Before studying entrepreneurship and the concept of ownership, they were mostly disengaged and uninterested in anything but disrupting the classroom. They viewed the basic traditional subjects of reading, writing and math as boring and irrelevant. But once they connected them as necessary skills for running a small business, I could see the light bulbs go off above their heads. Suddenly, what they were learning in school had a purpose in the real world. They paid attention. I also noticed an improvement in their behavior toward their fellow students and adults, as everyone now was a potential customer.

But how could I prove that my students were gaining knowledge and skills from the entrepreneurship program I designed, and that the program was also changing their attitudes, beliefs, and behaviors? In 1985, I created my first simple research project, using the eleven girls in my after-school class for pregnant teens at Jane Addams. I wanted to see if their understanding of how much money it takes to raise a baby for one year would change after being exposed to entrepreneurship education.

Nine girls completed both the pre- and post-class survey. Their average estimates for the cost of raising a baby for one year rose from $300 at the beginning of the (two-semester) course to a more realistic $7,000 by the end of it. This was a hugely significant finding, as it demonstrated that an entrepreneurship class could make young women more conscious of the financial cost of having a child and, therefore, hopefully more likely to take precautions to avoid getting pregnant again. I repeated the study at Jane Addams in 1987, with similar results.

None of my amateur research projects, however, had successfully demonstrated that our programs had measurable effects on school grades or graduation rates. Yes, we had witnessed positive changes in hundreds of our students. They were more engaged in school, they became better behaved, and their aspirations and confidence in the future changed for the better as they made their first sales, opened bank accounts, and wrote business plans. But, as I discovered later, in the '90s, this type of gain in entrepreneurial knowledge was not a compelling outcome for funders.

I had to make donors see that learning entrepreneurship skills in the short term was as valuable as entrepreneurial behavior was as a long-term outcome. My former funder was berating me about exactly that in her office one day, as I was explaining that I agreed that we needed to be able to prove the good that I knew NFTE was doing, and quantify it. I asked her if she would fund the research that NFTE desperately needed, but she declined. I left feeling hopeless, frustrated, and dejected, wondering if perhaps I should close NFTE and seek another career.

To my surprise, the next day an envelope arrived from this individual with a $15,000 check enclosed. Although this was a kind gesture that I greatly appreciated, I still felt discouraged. I knew that we needed a lot more money than that to hire professional researchers to design a study that could quantify the positive outcomes that my NFTE teachers and I were observing in our students. Our former funder had been 100 percent right on the importance of data and research. It wasn't enough to gather anecdotal evidence of the positive things we were accomplishing. If we were going to ask donors to fund NFTE to the tune of thousands, even millions, of dollars, we would need statistics demonstrating that we were a worthwhile investment. Otherwise, the money would (and should!) flow to other social enterprises that could show they were achieving their aims.

I realized that we had to develop a theory of change for NFTE, to understand the intended outcomes of our programs, and begin collecting data on those outcomes by putting a long-term research strategy in place. (I recommend that if you are running a social enterprise, you do the same. At the end of this section of the article, I will share with you some tips I've discovered during three decades of trying to do just that.) I had no idea where to begin. What type of research should we conduct? How would we obtain the money to hire a research team to design a study -- as quality research is expensive and time-consuming. How would we collect and save the data? These were major issues I was not sure how to solve.

Once having discovered the profound, positive changes in the lives and futures of children when they were exposed to entrepreneurship education, I made it my life's work. Now, I realized this work would be endangered if I couldn't prove to others what I had observed. In 1992, our executive director, Mike Caslin, and I took a meeting with the head of a major New York foundation that funded multiple organizations. Like my former benefactor, she was committed to empirical research. She told us that she would no longer fund any fledgling nonprofit until it had conducted ideally a state-of-the-art study, with control and experimental groups that were assigned randomly; random assignment was the gold standard of research. She also said that if random assignment was not possible for various reasons she would be interested in a comparison group design as a stepping stone to the more rigorous random assignment design later.

Mike and I knew it would cost hundreds of thousands of dollars -- essentially use up our entire reserve fund -- to conduct a study like that, but the writing was on the wall. The attitude from the philanthropic community was clear: the way that for-profit companies had to prove to their investors that they would receive a good return on investments also applied to nonprofit social enterprises.

We decided that if we were going to spend NFTE's reserve fund, then we wanted to work with the best researcher in the field. We knew Professor Andrew Hahn from Brandeis University's Heller Graduate School and its Center for Youth and Communities. Hahn was one of the country's foremost experts on evaluating strategies for youth employment, training, and education. His team of researchers had a wide range of experience in determining the effectiveness of programs, using rigorous techniques. I met with Professor Hahn in Boston. He agreed to conduct a comparison group study as well as a random-assignment pilot study that would entail having a computer program randomly assign half of a group of students to a NFTE program and half to a control group at two NFTE sites along with a broader data collection effort with most sites in the NFTE network. At the end of the pilot course, the control group would be compared on similar outcomes to the children who had gone through the NFTE program, to see if the program had had a quantifiable impact. Now we had random assignment; we were excited.

The Brandeis/NFTE partnership lasted from 1993 to 1997. It was expensive and required a lot of work, but the results were encouraging. The group of NFTE students outperformed the control group on several key outcomes, including business-formation rates and entrepreneurial knowledge. This study established us as leaders and experts in entrepreneurship education for at-risk youth. The pilot study had a small sample size, but nonetheless it showed that NFTE's work had a positive impact on the young people it served, improving both business knowledge and business formation. Interestingly, their participation in volunteerism increased, as well, demonstrating that they were more socially conscious. To the best of my knowledge, it was the first random assignment study done on business education. The Brandeis study established our reputation as a serious nonprofit, and helped in securing funding.

We have continued to make research central to our mission and have conducted a series of further studies, including one with the Koch Foundation in 1998, on business formation and attitudes toward business among NFTE students; a Harvard Graduate School of Education study in 2001-2002, of NFTE students in two Boston public high schools; a 2006 Brandeis University and Harvard University multi-site evaluation of NFTE students; and a 2009-2010 study at a Chicago public high school. For details and results, please visit

Although we have a long way to go to fully demonstrate the effectiveness of our programs, our research findings have supported the proposition that our mission is sound and there is value in our work. More importantly, they have convinced funders to support our goals. As a result, we have become a highly replicated program.

If you are working in social enterprise, I can't recommend strongly enough that you incorporate ongoing assessment into your organization. To do this you must first identify the anticipated outcomes of your program and design research that can empirically demonstrate that your enterprise is worthy of investment -- that it is truly a force for social good. And in the interest of advancing your field, I hope you will choose to share your findings with the public, even if they are disappointing. Remember, research provides invaluable feedback that can help you steer your organization and improve it. It also allows you to share your insights and techniques with others. Research allows you to identify (and report on) what you are doing well and where you need to improve. Even disappointing results can be valuable. Share the good and the bad.

And don't forget the value of data in and of itself. Always collect and save data and share it with others. Data will give you clues to insights that can lead to major breakthroughs in your field. In the 1980s, I methodically collected five items of information: the student's name and business-plan concept; the type of program (in school, afterschool); if the basic math on the "economics of one unit" in the business plan was done correctly; and which field trips had been taken. Now at NFTE we collect over 20 different items monthly, enabling us to track much more accurately how our programs are doing.

Perhaps most important is that occasionally you will discover something that you were not expecting, or a finding seemingly inconsistent with the norms in your field. This too can be a contribution. For example, a major discovery in the Hahn research was that fewer kids wanted to go into business after taking our program than before. At first I was devastated, but then I realized that it was a compliment to our curriculum -- the students learned how demanding starting a small business was!