We track the progress of those things that matter most to us.
I read with great interest, for example, the quarterly reports that I receive from the mutual funds in which I have investments. I pay attention to the accumulation of my funds and their performance trends over the period. If, alternatively, fund managers were to send me photos of their new office remodel or highlights from their annual employee retreat, I am sure that those reports would move from envelope to trash can in record speed.
Agents of the social economy—be they nonprofit or a social enterprise—are notoriously bad at giving their donors/investors reports that are consistently timely or worthy of interest. Because of this failure, they risk losing those investors at the next station. Investors in the social economy have every right to an informative and relevant quarterly statement. If I entrust finances to an enterprise, it matters to me how those funds have performed. I am more likely to continue wiring funds when I can see the most recent impact of my investments and their potential multiplying effect.
The team that runs the impact reporting at Not For Sale, the nonprofit I co-founded to fight human trafficking, provides an excellent model for quarterly statements. Check out the 2012 Q3 report, and pay particular attention to the four elements that should be constant and essential in any enterprise's quarterly statement:
First, the number one priority is to demonstrate tangible impact, and that is best done through select data. No one wants to drink out of a firehose, so choose only the data that is central to framing your narrative. If possible, identify the range of activities your organization undertook during the period and provide a brief explanation about what problem those activities seek to resolve. In other words, help your investor comprehend your agency's strategy and the progress you made toward that end.
Second, tell your unique story. A bit of a caveat comes with that guidance given that social enterprises tend to bludgeon their investors with anecdotes. Be vigilant that you do not use stories as the shiny objects that will distract the investor from noticing your lack of real data or tangible impact. In the Not For Sale Q3 report, a single girl's story gives a face to the data that has just been reported; several noteworthy achievements reached during the quarter also give character to the numbers. Anecdotes should be treated as illustrations, not the main attraction.
Third, provide an overview of the important trends that emerged during the quarter. There is an art to choosing these trend indicators for your enterprise. Download the Methodology Report available at the bottom of Not For Sale's Q3 statement, and you’ll see that my team selected six trends that they would chart across the year; the Q3 report offers an infographic on three of them. Your investors should be able to get a window into how your organization is getting smarter and learning from the aggregated data that you are collecting. If your enterprise needs to pivot in strategy, the trend data should offer the rationale for your strategic shift.
Finally, think like an investment fund manager—everyone wants to track their money. You can pursue a variety of tactics. A simple cost-revenue model enables your investors to see how their funds fit into the big picture—even better if you can demonstrate enhanced value that you have created over the quarter due to their investment. Old charity models considered donations as fuel in the tank—it would take the vehicle as far as it could possibly go, then organizations would pursue new funds to refuel the tank. Spent fuel was lost fuel. Social economy companies, on the other hand, want to demonstrate the short-term and long-term value that accrues from the deployment of invested funds. That value may not always be a financial accumulation; it could be an equity accumulation that resulted from the expenditure of funds.
Keep in mind that you have four opportunities to report your progress over the course of a year. Avoid making a template wherein you pour updated data wholesale each quarter. There will be financial and impact data that remain constant, of course. But aim to rotate trends, introduce interesting and instructive infographics, and tell stories that reflect how your enterprise evolves in response to new challenges.
Final word of advice: Words are far overrated in reporting. Your investors most likely are overwhelmed, so be parsimonious with words. Make your quarterly report one of the more fun and engaging items to come across your investors’ computer screen that day.