When Dollars Don’t Tell the Whole Story: The Value of Nonprofit Mission Metrics

Abstract

Measuring nonprofit performance has been a perennial challenge. While current mandated reports require financial information about dollars received and spent, donors and regulators encourage voluntary disclosures of mission activities. Because there are few common measures across different types of nonprofit organizations and no designated reporting mechanism, studying the information value of mission performance has been difficult. We use a database of nonprofit impact-based performance indicators recently made available through GuideStar to investigate the usefulness of information contained in measures we call “mission metrics.” Examining two distinct stakeholders—donors and directors—and controlling for financial and governance factors, we find that donations and executive bonus compensation are positively associated with any improvement in mission metrics. Bonuses, but not donations, are lower in years after all reported metrics decline. These results confirm the value relevance of nonprofit mission metrics.