Return on Investment (ROI)
Shreveport Times Editorial: Returning the community's investment
March 25, 2008
By the numbers
The Community Foundation analyzed several 2007 statistics in determining Providence House would receive the first Return on Investment Award.
59,129 nights of shelter provided
242 families participated in the program
23 families graduated from the program
$4.3 million more in wages earned by adults than before staying in the shelter
$3.2 million in food stamps avoided because of the program
$2.3 million annual budget
Source: Community Foundation of Shreveport-Bossier
One Shreveport organization took a budget of $2.3 million and turned it into an economic impact of $23 million.
It wasn't a small business or major industry, but a nonprofit agency: Providence House.
The Community Foundation of Shreveport-Bossier calculated the homeless shelter's economic impact as part of a new award it will present at its annual meeting today.
They hope the Return on Investment Award encourages nonprofits to begin tracking their results to show donors their money isn't just spent, it is invested and makes the community a better place.
"You value what you measure," Executive Director Paula Hickman said. "It's like taking your temperature. It won't cure you but it tells you if you're getting well."
The award was based on a new book "ROI for Nonprofits" by Tom Ralser. It applies business principles to nonprofits, encouraging them to look at their donors as investors who want to see their money multiplied.
Calculating that impact is the hard part. How do you measure a changed life?
For Providence House, one measure of the program was the income of families and single women who graduated from the program this year. When they came to the shelter, the adults were earning an average of $3.25 per hour. Upon graduation they were earning an average of $7.78 an hour.
In terms of society's expenses, taxpayers were no longer providing nearly $6 million in food and housing subsidies or substance abuse treatment for the graduate families.
The Community Foundation also examined the impact of the organization itself in terms of its expenditures and as an employer.
All together those amounted to a $23 million economic impact or a 10-to-1 return on investment for one year. And that number doesn't include the decrease cost of health care or future raises for the graduates.
Part of what makes the organization successful, are the long-term measurements they keep, a supportive board and a willingness to take risks and admit when a program doesn't work, Hickman said.
The foundation realizes this award means a change in culture for many nonprofits. It requires a more business-like approach which doesn't always mesh with the emotion and passion that characterize most nonprofit — especially social service agencies.
Some agencies have outcomes that are difficult to measure. Arts organizations don't have an obvious economic impact beyond supporting artists. Their contribution is more to the intellectual and cultural life of the community — how do you put a dollar figure on that? Gauging the success of truly innovative programs may need measurements that are tailored to them.
With the pressure to show measurable results, nonprofits can't forget they are dealing with the intangibles of bettering resident's lives. Providence House Executive Director Simone Hennessee constantly balances head and heart when she talks about her organization.
"This program from the beginning was about changing people's lives," she said. "Those numbers are people's lives changed."
But the central idea of thinking of donations as community investments should be encouraged. Examining results tells us whether a program needs to change or be eliminated. Measurements can also make a case for expansion or collaboration. And the numbers tells donors that their dollars are making a difference, making them more likely to contribute.
Liz LaBorde, director of community programs for the foundation, put it simply.
"If we spent $2.3 million providing services and conditions didn't change, then what have we done?"