ROI for Nonprofit Organizations

Today I’ll be discussing the calculating of the return on investment (ROI) of social technologies in organizations, but with a twist. I’ll be discussing this in relation to the famous nonprofit organization called WWF just because I can’t get enough of them. I’ve been wondering just how nonprofit organizations approach ROI calculations because they don’t make profit obviously. As I see it, there are two different types of ROI calculations when it comes to nonprofits. Firstly there is the typical ROI calculation because the organizations still need to make money and the effort to make this money needs to be less than the overall profit achieved, simple stuff. But it’s what these organizations do with the profits that differ them for regular organizations and deciding what to spend these hard earned profits on also requires a ROI calculation but not will just numbers and that’s what I will be discussing today. With the tough economy it’s particularly tough for nonprofit organizations because people have less money to give and simple donations from individuals generally represent a huge portion of funding for these organizations. Image Therefore, nonprofit organizations must adapt to stay alive in the harsh jungle that is business. In my previous blog posts I have discussed many ways that WWF have embraced social technology so I’ll discuss a different WWF imitative, Earth Hour, and how they calculated the ROI. WWF is a big promoter of earth hour and they have managed to cut the costs of doing this and increase the awareness yield by embracing social media. They used YouTube (free), Facebook (Free) and Twitter (Free). Of course the whole campaign cannot be free as there are other factors such as staff costs and maintenance to consider. Unfortunately for us, these figures haven’t been released to the public to we will have to make an educated guess of $2 million. The yield of the campaign can’t be measured in a dollar value because WWF is a nonprofit organization and therefore making a profit wasn’t the objective, increasing awareness was. Earth hour 2012 had the biggest increase in participants since 2009 due to this campaign. Their YouTube channel was the 9th most subscribed nonprofit organization and when their video was uploaded it was viewed every 4 seconds. Their Earth hour message appeared 56.1 million times in Google over 24 hours and the Earth hour hashtag (#Earthhour) was one of the top three twitter trends. Their Canadian Facebook group received 100,000 participants and they all at a faction of the cost compared to the use of paid media. Now we have a cost and a general profit, now we can do an ROI. Usually an ROI calculation is as follows : Image We can use this calculation though because the profit isn’t a number. This is the second type of ROI that I briefly described at the beginning of this post. WWF didn’t make any money, in fact they spent $2 million according to my estimation. So how can we do an ROI? Do we need to do an ROI? I believe we do.

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If you look at this graph of the earth hour’s results (you will have to zoom in) we can easily determine that it was a success. That  amount of energy reduction for $2 million (could be completely wrong but you get the point) is defiantly justified. Although, in other cases this might not be an easy decision. What if the situation was $500,000 to save an elephant? Some might say it’s justified others would not. This is a major weakness of calculating ROI for nonprofit organizations in this way. Which begs the question, Who should decides what the WWF’s actions are worth? The Executives or the general consensus of the public who make donations which make up the vast majority of WWF’s funds? If you have an idea about this moral conundrum, please post it in the comments?

 

http://barnraisersllc.com/2012/09/social-media-case-studies-prove-roi-for-nonprofits/

http://www.redbirdonline.com/blog/demonstrating-roi-your-non-profit-program-donors

http://www.ms.unimelb.edu.au/resources/safety/index.php?page_ref_id=50

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