What If We Measured Nonprofits Like Investments?

This is a guest post from Adam Braun, founder and CEO of Pencils of Promise.

A few years ago, I found myself at a rooftop party for a large media company surrounded by venture capitalists, media journalists, investors, and business executives. When I told someone that I ran a nonprofit organization, his disinterest in continuing the conversation was palpable. In that moment, I realized that while I knew that our organization was run with business efficiency and accountability at its core, the language I was using to describe my industry implied otherwise.

We need to reinvent the word, "nonprofit."

The idea of "the business of charities" in which social entrepreneurs blend the values and idealism of nonprofits with the business acumen of the for-profit space, meshing into what I like to call a "for-purpose" organization, allows us to succeed in working toward our mission according to rigorous corporate standards. And my hope is that not only will others follow this approach, but the entire space will be measured as investments in philanthropy, rather than just "charitable giving" where a thank you card and warm fuzzy feeling is enough.

For context, Pencils of Promise is an education organization that builds schools, programs, and global communities around the common goal of education for all. Through our four main interventions: School Builds, Student Scholarships, Teacher Training, and Health Education, we are focused on increasing literacy, numeracy, and progression for children in some of the most underdeveloped parts of the world.

We are a recognized 501(c)3 non-profit, but our culture is greatly focused on results. We believe that we can change the way in which non-profits operate, by maximizing the return on investment from every dollar we receive and by rigorously measuring our impact.

In 2012, 85% of our budget went directly toward programmatic uses, and 100% of the donations made online went directly toward our programs. Historically, this equates to every dollar invested into our operations producing $5 of impact toward programmatic uses. Through foundation funding, corporate partnerships, and peer-to-peer fundraising during our annual campaigns, we are finding new ways to reach our donors and garner more support for global education.

We are also greatly focused on monitoring and evaluating our programs, much like a business. We use a mixed methodology of both quantitative and qualitative results to conduct our evaluations, beginning by identifying need in our communities and creating short- and long-term goals to meet this need. We then create a measurement system that allows us to measure our progress against objective indicators, and monitor this progress in real time. If our program does not meet our aspirations, we're able to adjust the program accordingly, and we also compare our outcome results against control groups to evaluate the measurable impact of the intervention.

Pencils of Promise began in 2008 with just $25, but it has grown rapidly since then. In just five years, we've raised more than $10 million for the global education crisis and are currently breaking ground on a new school every 90 hours.

And we're not stopping there. We are constantly working to identify other interventions we can develop that may have an impact to improve test scores and progression rates in the communities in which we work, as well as improving our impact measurement practices to better analyze our results from the field.

By the end of 2015, Pencils of Promise will support 50,000 primary school age children living in communities with high need for investment in education. Our ambitions are bold and unique for the non-profit space, but our for-purpose approach allows us to dream big like our for-profit counterparts. And fortunately, we're able to provide our investors with a tax deduction and knowledge of their social impact at year end.

What Kind of Fool Pays $50,000 for a Pencil? (A Caring One)
Did you know that the average child in Guatemala only completes 4 years of school? This year for our Foolanthropy campaign we're partnering with Pencils of Promise, in support of their mission to provide access to a quality education for all children. Our goal is to raise $50,000 to fund the construction of two schools in Guatemala as part of their Season of Promise drive. Consider donating at www.fool.com/give and learn more about the organization at www.PencilsofPromise.org.