Alex Neuhoff and Robert Searle

This article appeared in the Spring 2008 edition of the Stanford Social Innovation Review (SSIR).

Can nonprofit organizations become more efficient without sacrificing quality?

As the experiences of Teach for America, Jumpstart, and Year Up attest, such productivity gains can happen. But they don’t just happen. To achieve meaningful economies, these three organizations standardized their best practices, invested in essential people and processes, managed their costs, and measured their progress.

Doing so is not easy because of the nature of nonprofits’ work. For example, tracking cost per output (say, one youth served) might be relatively straightforward, but tracking cost per outcome (a youth who achieves the results targeted by the organization) is a much more complex endeavor. Prevailing funding practices can also raise barriers, among them: lack of funding for non-program expenses such as building the organizational capacity to enable growth, lack of external pressure to assess productivity, and funding commitments that are too short to sustain a given program long enough to decrease its costs and/or improve its success rate.

Done right, however, reducing cost per outcome will lead to more bang for the nonprofit buck – a greater impact across the whole range of issues that nonprofits grapple with on society’s behalf.

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