Nonprofits have traditionally relied on donors giving money upfront based on promises of impact. But according to Juan Somavia, head of innovation at UNICEF, that model is changing. Donors today want to see measurable results for their contributions. They are demanding evidence that their donations are achieving real outcomes.
This shift to “pay for results” models is challenging nonprofits to fundamentally rethink how they operate. Simply sharing heartwarming stories and anecdotes of change is no longer enough.
Nonprofits must get better at quantifying and communicating the impact of donor dollars in a transparent, data-driven way.
Some nonprofits are experimenting with impact bonds, where private funders provide upfront capital and then get repaid based on the organization achieving predefined outcomes. For example, a nonprofit focused on youth employment might issue a bond to fund job training programs. If they are able to place a targeted number of youth into jobs, the funders get their money back. If they exceed the targets, funders may earn an additional return on their investment. If outcomes fall short, funders lose their money.
While potentially risky, impact bonds align incentives and give nonprofits more flexibility to innovate. They also appeal to data-driven donors who want to fund what works. To explore this model, nonprofits should first identify programs that have a proven, quantifiable impact and solid evidence base. They can then work with partners to determine outcomes that balance ambition and realism.
Impact bonds are not for every nonprofit or program, but they signal a broader trend that is here to stay. Nonprofits must get better at articulating their “impact value proposition” in qualitative and quantitative ways. Fundraising appeals and campaigns should prominently feature key metrics and goals, not just stories. And nonprofit leaders must build a culture of continuous improvement and learning to truly understand what moves the needle. The future is paying for results. Nonprofits need to put impact at the center of their work if they want to attract the next generation of donors.
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