What can a charity, membership organization, union, or any other nonprofit organization learn from the Sabermetric/Moneyball movement in baseball? A surprising amount. As we enter free agency 2017-18 in the MLB and giving season in the nonprofit world, we’d like to discuss exactly what these two things have in common, as well as the role these two movements have in shifting the mindset on metrics and measures.
Moneyball: The Art of Winning an Unfair Game
If you haven’t read the book or watched the movie, Moneyball is the story of the 2002 Oakland Athletics, a team that needed to operate on one of the smallest budgets in the MLB. After losing three of their best players to free agency, Athletics General Manager Billy Beane needed to fill these gaps without spending large swaths of money on a superstar.
Beane did this by embracing an alternative, then-unheard-of concept—Sabermetrics—that explored different measures of player success. Rather than focusing on traditionalist vanity metrics like stolen bases, runs batted in, pitcher wins, or batting average, Beane found that things like on-base percentage and slugging percentage were better predictors of future success. Beane used the mix of statistics to find undervalued players in the market, filling roster holes with players who allowed the team to operate as a cohesive unit en route to a 103-59 season.
Nonprofit “Sabermetrics:” What Do Pitcher Wins Have in Common with Overhead?
One of the biggest points of the Sabermetrics movement is the concept of overrated and underrated statistics—used to find and exploit “market inefficiencies.” Much like the 2002 Oakland Athletics, it’s likely that you’re running on a shoestring budget. However, if you focus on metrics that matter, you can put together a series of wins that brings you closer to accomplishing your mission.
The rise of Sabermetrics has changed the way that players, managers, and front offices look at the game, and it all stemmed from the idea that “traditional” measures of success don’t work. Below, we would like to look at two statistics—one in baseball, one in the nonprofit world—that fail to communicate success.
In baseball, one of the most glaring of these is the pitcher win. A completely useless, overused statistic that doesn’t communicate actual success on the mound, the pitcher win is the absolute definition of a “vanity metric.” In 1992, Jim Abbott started 29 games for the California Angels, posting a 2.77 ERA (143 ERA+, 5th in the AL), good for 5.8 wins above replacement (7th in the AL). The same year, Jack Morris posted a 4.04 ERA (101 ERA+), good for 2.9 wins above replacement.
One of those pitchers went 21-6, finishing in the top 5 for the Cy Young Award and 13th in MVP voting. the other went 7-15.
Unfortunately for Jim Abbott, the Angels put up anemic run support (3.5 runs per game) on route to a 72-90 season and a Disney movie built on the premise that the team needed divine intervention. Jack Morris, on the other hand, played for a Toronto Blue Jays team that put up the second most runs per game (4.8) on the way to a 91-71 record and a World Series ring.
This isn’t saying that Jack Morris didn’t have a good year (his fielding independent pitching stats show that a lot of the earned runs were just bad luck). It’s saying that just like the following metric used in nonprofits, the pitcher win does nothing in comparing the two seasons.
As free agency begins, teams will look at a wide range of statistics to compare potential signings. Around this time, donors are getting ready to make their annual tax-deductible donations as the year winds down. While it’s unlikely that MLB teams will select a pitcher on how many wins he put up, your donors may unfortunately make their decisions on a statistic nearly as useless as the pitcher win: Overhead.
The concept of using overhead as a way to compare charities and nonprofits is flawed and has been debunked, and the three leading nonprofit comparison entities—GuideStar, Charity Navigator, and The Better Business Bureau Wise Giving Alliance wrote an open letter titled “Letter to the Donors of America” in order to combat the Overhead Myth that exists. Summed up, the article points out the following:
- The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—is a poor measure of a charity’s performance.
- The most important factors you should look at are transparency, governance, leadership, and results.
- Spending money is often the best way for these entities to ensure sustainability: Overhead costs include investments in training, planning, evaluation, and internal systems—as well as their efforts to raise money so they can operate their programs.
Focusing on Numbers That Matter: The Push Toward Outcome Measures
Just as statistics like stolen bases, batting average, and pitcher wins gave way to on base percentage, slugging percentage, and fielding independent pitching, donors are increasingly focused on seeing metrics that point not only to past success, but future successes as well.
Sabermetrics changed the game of baseball, and following the successes of the 2002 Oakland Athletics, teams began to embrace these new metrics. The same thing is happening in the nonprofit space with outcome metrics—measures that can display transparency, credibility, and effectiveness to donors.
Helping donors recognize the importance of outcomes is a two step process. First, you need to promote the idea that outcomes matter more than overhead. Second, you need to communicate how well you are doing with respect to these outcomes.
When baseball teams joined the Sabermetrics movement, leaders knew that they needed the right people, processes, and technologies to measure statistics and select talent. Nonprofits turning to outcome measures will need to do the same, getting away from traditional measures and paper- or spreadsheet-based processes to calculate and communicate successes.
The Outcome Measures Era: Finding Success in a Changing Nonprofit World
This is why we would like to invite you to an upcoming event that will discuss the importance of outcome measures: their role in explaining past successes and pointing toward future ones. On November 15, Wipfli will present a free webcast for nonprofits looking to make the most of their communications, accurately sharing the most important details to donors, grantors, regulators, and more. This highly important webcast will share with attendees the basics behind outcome measures, the reasons you need to include them in your communications, and the most logical steps to learn more.
This webcast will feature Shereen Mahoney, Partner at Wipfli, one of the top 20 accounting firms in the US, and Joan Benson, Industry Marketing Executive — Nonprofit, at Sage Intacct, who will discuss how nonprofits are finding transparency, accountability, and measurable results.
In this webinar, you will learn about:
- Why Outcome and Impact Metrics matter for your organization
- How to utilize outcome measures
- A balanced approach
Click here to register or learn more.