Program Contribution Analysis

4 mins |

Summary

Analyzing the contribution each program makes to accomplishing a nonprofit's mission, and the financial contribution it makes (break-even, net contributor, or net user).

Program contribution analysis helps nonprofits with multiple programs to understand the contribution each program makes to both the mission and the financial health of the organization. A useful way to display the results is to plot all programs on a 2x2 matrix with mission contribution on one axis and financial contribution on the other. Simultaneously considering both dimensions can powerfully inform portfolio management decisions.

How it's used

Programs can contribute to the health and work of a nonprofit in two critical but fundamentally distinct ways: by advancing the mission of the organization (e.g., by addressing key needs of program recipients) and by generating funds that support its work. Rigorously assessing each program for its effectiveness on these two dimensions helps nonprofits make informed decisions about their program portfolio. These decisions can include which programs to prioritize for growth, where to focus efforts to improve program economics or fit with impact goals, and where to limit investment or consider exiting. Program contribution analysis is particularly useful for multiservice organizations seeking to grow, define a new strategy, or address a budgetary shortfall.

Methodology

Program contribution analysis typically involves an existing program portfolio, but it is also relevant for programs in the planning stage, as long as financial projections are available. There are five steps to assessing program contribution:

  1. Assess financial contributions: Conduct a full cost analysis to determine the total cost of operating each program, including both direct and indirect costs. Calculate how much dedicated revenue each program brings in. Then, subtract each program's costs from its revenue to determine its net financial contribution. If a program's revenues exactly equal its costs, it breaks even. If revenues are greater than costs, then the program is a net financial contributor to the organization as a whole. If costs are greater than revenues, it's a net user of the nonprofit's unrestricted revenues.
  2. Assess mission contributions: Determine how well each program aligns with the organization's intended impact and theory of change. It's often useful to begin by gathering relevant data to inform this assessment, such performance measurement and program evaluation results, beneficiary feedback and other available data. Next, senior leaders should rank the programs in order of greatest to least mission contribution, usually through group discussion or a survey.
  3. Plot the matrix: Place each program into one of the four quadrants of the matrix based on the financial and mission contribution calculated in the previous steps. The relative size of each program can be shown using larger or smaller circles. (See sample matrix above.)
  4. Evaluate and prioritize: Assess the entire portfolio of programs in the matrix. Any programs in the upper right—strong mission and strong financial contributors—are "clear winners," and could be good candidates for expansion. Those in the lower left ("potential distractions") are relatively weaker, and might be candidates to spin off, contract, or modify to improve mission fit and/or financial performance. Programs in the upper left ("investments") require financial subsidy from unrestricted funding but contribute strongly to the mission. Those in the lower right ("income opportunities") are financial contributors but less aligned with the mission. For both investments" and "income opportunities," seek ways to move them towards the upper right.
  5. Implement and assess: Begin making the changes identified, and track the mission and financial contributions to assess progress.

Related topics

Additional resources

Managing in Tough Times
Tough times require trade-offs. Making good trade-offs requires clarity about the results an organization intends to deliver and about the resources it will need to succeed.

Costs Are Cool: The Strategic Value of Economic Clarity
To make decisions intelligently, nonprofit leaders need to have a clear picture of the full costs of operating their programs and services, as well as the contribution that each program makes to the organization's mission and financial bottom line.

Examples and case studies

The Association for the Advancement of Mexican Americans: Focusing for Impact
The Association for the Advancement of Mexican Americans used program/mission alignment to assess each of their programs for alignment with the organization's intended impact and financial health to determine which of its 30 programs were most worth expanding.

Harlem Children's Zone: Learning to Grow with Purpose
To refine its intended impact and chart a clear growth plan, Harlem Children's Zone used true-cost analysis to bring economic clarity to its 16 programs.

Expeditionary Learning Schools/Outward Bound: Staying True to Mission
Expeditionary Learning Schools used true-cost analysis as part of an effort to compare financial health and mission advancement across its 126 schools to decide what to prioritize.

VolunteerMatch: Balancing Mission and Margin
VolunteerMatch had developed two revenue-generating business units, and the management team believed there were other possibilities worth pursuing. But neither of the existing operations was profitable, and many on the VolunteerMatch staff feared that some of the new options might make the organization too commercial. Were there ways to improve the performance of existing ventures? And which of the potential new activities, if any, could contribute to the organization's margin without compromising its mission?

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