Data analytics has been the rage among for-profits for some time, and nonprofits are now starting to follow suit. With all eyes on performance outcomes these days, it’s only logical: Data analytics provides a welcome way to demonstrate achievement.

But it doesn’t stop there. Data analytics also can help an organization make better decisions and accomplish more in a variety of areas, including strategic planning, membership recruitment, programming, fundraising and constituent outreach.

What’s data analytics?

Data analytics is the science of collecting and analyzing sets of data to develop useful insights, connections and patterns that can lead to more informed decision making. It produces metrics — for example, program efficacy, outcomes vs. efforts, and membership renewal — that can reflect past and current performance and, in turn, predict and guide future performance. The process incorporates statistics, computer programming and operations research.

The data can come from both internal and external sources. Internal sources include an organization’s databases of detailed information on donors, beneficiaries or members. External data may be obtained from government databases, social media and other organizations, both nonprofit and for-profit. Organizations that serve the homeless, for instance, could gather government data on eviction, welfare benefits and the use of shelters to plan how to deploy their resources.

What’s to gain?

The potential advantages of data analytics for not-for-profits, which often operate with limited resources, are numerous. Data analytics can help your organization validate trends, uncover root causes and take a holistic view of its performance. Done right, it can allow the management team to home in on your organization’s primary objectives and improve performance in a cost-efficient way.

For example, data analytics can serve a double-barreled purpose when it comes to fundraising. On the one hand, analysis of certain data may make it easier to target those individuals most likely to contribute. On the other, it may provide a way for not-for-profits to illustrate accomplishments to potential donors who demand evidence of program effectiveness.

Initiatives to streamline operations or cut costs can stir up political or emotional waters, but data analytics facilitates fact-based discussions and planning. The ability to predict outcomes, for example, can support sensitive programming decisions by considering data on a wide range of factors, such as at-risk populations, funding restrictions, past financial and operational performance, offerings available from other organizations and grant maker priorities.

Where to start?

Excited about data analytics? If so, it’s important not to put the cart before the horse by purchasing costly data analytics software and then trying to decide how to use the information it produces.

While new technology may be a good idea, your organization’s informational needs should dictate what you buy. Thousands of potential performance metrics can be produced. That means you must take the time to determine which financial and operational metrics you want to track, now and down the road. Which of your nonprofit’s programs are the most important? Which metrics matter most to stakeholders and can truly drive decisions? How can you use the information?

You also need to ensure that the technology solution you choose complies with any applicable privacy and security regulations, as well as your organization’s ethical standards. Security considerations are particularly important if you opt for a solution that resides in “the cloud,” rather than installed software.

You also should determine how well the technology solutions you’re considering can integrate with other applications and data. If software can’t access or process vital data, it will make a poor match for your needs.

Analyze this

With today’s reduced costs for data storage, data analytics makes more sense than ever for nonprofits. But before you dip your toes in the water, take the time to strategize. The benefits are real, but, without proper planning, you could end up with a data analysis solution that’s no solution at all.

Sidebar: Don’t overlook the human factor

The term “data analytics” frequently brings to mind the technology involved, but the human element plays an equally important role. You can have the most cutting-edge software and comprehensive data resources, but, if your staff and leadership aren’t on board, data analytics can prove to be a pricey boondoggle.

The introduction of data analytics often requires a shift in your organization’s existing culture, which you’ll need to manage carefully to achieve buy-in. Employees need to understand why their commitment to the organization’s mission should extend to a commitment to data analytics.

In addition, you’ll need to hire or develop qualified staff to conduct data analytics and convert the results into actionable intelligence. Such intelligence requires knowledge of not just the nuts and bolts of data analytics but also the organization, its mission and values, and its capabilities— financial and otherwise. Without that insight, the organization could end up with irrelevant, and thus useless, information.

And follow-through is essential. Even highly relevant information will be of little use if the board of directors and management don’t act on it.

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