Nonprofit Data Collection and Use: Could This Become A Legal Obligation One Day?

Like me, you all have probably noticed a big increase in the number of conversations on data measurement, collection and use by nonprofits. Personally, the more I’ve read about it  the more I start to wonder if we’ll see these conversations hop over from the best practice side onto the legal side.

I say this because one of the interesting things about a Board’s legal obligations is that so many of them are often dictated by what is standard for a “reasonable person.” In other words, what are other people doing? Particularly those who are in a similar situation?  Which means these types of standards allow for flux, can evolve significantly over time and possibly be dictated by current trends.

Really if you sit back and think about it, we’ve seen this happen with the role of  the Board itself.  As the scope, reach, size, and depth of exempt organizations has expanded so too has the role (and legal expectations) of the Board. Though a nonprofit Board may have historically been seen as pretty passive (perhaps even ceremonious?) that has certainly changed the last few years. Evolving to where the Board  is expected to be far more involved and has far more legal obligations in terms of oversight, governance, implementation and finances.

You could similarly say data measurement may have historically been seen as something that was good for organizations to have in their back pocket. But by all accounts, it seems to have shifted from a “kinda sorta nice” best practice to a “you really should be doing this” expectation; treated as  indispensable by many funders, donors, industry experts and government entities.

Circling back, the shift in focus on this topic, and increase in its inclusion in nonprofit management conversations, has been so large that I’ve begun to wonder if it will slowly become something else expected of Board Members. And when I talk about measurement, collection and use I mean for reasons aside from ensuring compliance with IRS regulations, state or other federal laws. What I’m thinking about takes it a step further; where data measurement, collection and use is required as a management tool.

Now, I don’t expect Board Members would be thrown into third world prisons for failing to use impact data.  BUT what if there’s a mis-step made, or action taken, by the Board that comes under scrutiny?  As more and more people come to expect organization’s to measure, collect and use data will doing so, or a failure to do so, become a factor courts and agencies use when making determinations?  In other words, could we start to see Boards penalized for not being versed in, and making decisions in consideration of, the organizations data?  Or penalized for making decisions with a lack of data?  After all, the Board is expected to stay apprised of what’s going on. What better way to achieve this then looking at data outputs and outcomes? The Board is also responsible for making really important decisions; what program to phase in or out, the creation and implementation of a strategic plan, development and outreach goals, etc. Should there be a threshold obligation to make these decisions educated by real-time information on how the organization is performing? Or at the very least, using data made available by third parties?

To me these are interesting questions (I know, I know….nerd). All hypothetical for now. But as we watch agencies increasingly crack down on exempt organizations, and politicians continue to scream about the lack of nonprofit oversight and accountability,  the possibility that we start to see some Board obligation to familiarize themselves with, and use, some type of data, or as some industry experts put it, that Boards be “data-informed”, doesn’t seem so far gone.

Of course if that were to happen, the different types of data (outcome data, mission related data, program outputs or outcomes, client outputs or outcomes, etc.) and reality that how they are measured, used and acted upon largely depends on the size, budget, staff, industry, mission and geographic location of an organization would require that any oversight or regulation be broad and deferential. Much like we’ve seen with other nonprofit concerns like governance and policies.  The fact that organizations are inundated with collecting so many different data sets already, and that the collection of data can be so expensive and time intensive on already stretched staffs, is something else that would have to be delicately addressed.

In the meanwhile, it should be interesting to see how organizations adopt, and adapt to, the trend. I’d be interested to hear what others think. Should the measurement, collection and use of data become more of an obligation than a best practice? Or would this be another example of over-regulation/paternalism in the nonprofit space?

By the way, if you haven’t already been keeping up with the data conversations, these are some really good places to start.

SXSW 2013: Measurement and Making Sense of Your Data

Bridging the Data Disconnect Between Nonprofits and Their Funders

The State of Nonprofit Data

 

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