Performance measurement has long been difficult for nonprofit organizations: Social outcomes are notoriously difficult to measure. For grantmaking foundations, the challenge is greater still. Typically, grantmaking foundations accomplish much of their work indirectly, by funding nonprofit organizations that seek to affect social change. A lack of accessible data compounds the challenge. Evaluations that seek to assess the impact of specific grants or programs are frequently less than timely and can be difficult to aggregate into overall foundation performance.

Thus, foundations often rely on metrics such as administrative expense ratios or investment performance. These are important measures, but they do not offer sufficient insight into the overall performance of a foundation against its social impact goals – nor do they answer the simple but elusive question, “How are we doing?”

Our first major research initiative, the Foundation Performance Metrics Pilot Study, funded by The Atlantic Philanthropies, The David and Lucile Packard Foundation, and Surdna Foundation, addressed the issue of overall foundation performance assessment through in-depth research on both current practice and opportunities for new methods of assessment. The study resulted in two reports, Toward a Common Language: Listening to Foundation CEOs and Other Experts Talk About Performance Measurement in Philanthropy (2002), and Indicators of Effectiveness: Understanding and Improving Foundation Performance (2002).

Indicators of Effectiveness: Understanding and Improving Foundation Performance contains a framework for assessing performance, which suggests that foundations ought to track indicators that inform their understanding of the social benefit they have created relative to the resources they have invested.

We also continually seek to highlight practices of individual foundations that we believe may prove instructive to other foundations. See our case study, Assessing Performance at the Robert Wood Johnson Foundation: A Case Study (2004).