Author’s Note: This is the 7th in a series of 12 articles I’m writing on mistakes and learning in building our foundation since 1997.

Last month, I wrote about the foundation’s mistakes in enabling the charities we supported in our fledgling years. Called “Roots and Wings” I described how we shifted from investing increasingly more each year into our non-profit partners to a strategy of “moving in, and moving out” over a five year period.

This month, as a follow up, it seems appropriate to speak of how we have learned to measure impact.

In a word: Leverage.

In our early efforts, we measured our impact on the organizations we served by keeping track of the amount of money and time we put in. Our intent was to build the organization’s staffing and financial commitments.

Simply put, building an organization is no measure. Instead of adding impact, we added people and grants. Our early days were focused on operations. In 2009, we decided to target the ratio of operations-to-grants and found, dollar for dollar, we invested almost 2:1 in administration versus grants!

So we decided to target a 1:1 ratio for our ops/grants ratio and today, only two years later, we’ve achieved our first milestone. In 2012 we plan to continue our progress with a 1:2 ratio. The chart below summarizes the point:

Leverage to me means “return on investment.” In the case of measuring ops money over grant money, it was fairly easy. We no longer have lots of people and office space to make grants.

Our next task is tougher. In fact, the two most difficult words in social change are “impact and scale.”

Ultimately we’d like to see leverage of $5 returned for each $1 we invest. Although it will never be fully scientific, we believe it to be a noble goal. And while we’re just getting started on our overall measurement system, Revenue University provides a good example of what we’re after now.

Revenue U. is a pilot with a few partners we are starting in the first quarter of 2012. BVU: The Center for Nonprofit Excellence and Nancy Osgood of The Osgood Group have attracted 11 major organizations who serve the poor of Northeast Ohio to take a three month course in building revenue streams. Identifying and building revenue streams is work we've done consistently over the years since it's a universally needed element to building and maintaining a great mission. But we have only been able to do this work one organization at a time.

Enter RevU@BVU.

Here’s how it works:

1. Organizations will take a retrospective look at their own revenue mix.

2. They will learn how to develop ideas that leverage their organization’s assets.

3. They will create a customized set of evaluation criteria to determine which revenue stream best serves their organization’s mission and financial needs.

4. Organizations will leave with a set of next steps toward monetizing their idea.

So, now 11 organizations will receive in three months what usually takes us even longer to provide just one organization.

That’s leverage. And here’s the kicker.

We intend to enlist the graduates in a network where they will report quarterly on progress and plans in the programs developed so they can continue to build more revenue over time. Perhaps this will someday build into a network of organizations who serve the poor who can count on ongoing revenue building training.

It would certainly be easier to just review proposals and donate money, as most foundations do.

But in our foundation, we are seeking impact and change through leverage and scale.

Therefore, we’re learning that “you can’t change what you can’t measure.”

Peace,

Tim McCarthy