Just as a map and a compass are useful tools to help you navigate to a new place, so data and evidence can help you steer your organisation. You can run on instinct and feedback but it will probably be quicker, less costly and smoother if you make use of the data your organisation produces in the day-to-day running of operations.
In this resource, our expert Sarah Thelwall, founder and Director of MyCake, explores what the benefits of data-informed decision making can be. She suggests where you are likely to find your internal data and offers ways to compare and contrast your organisation’s approach to that of your peers.
Why should you use data to inform decision making?
Using data and evidence to inform decision making is considered to be a best practice since it demonstrates clarity and transparency in reporting and promotes confidence in outcomes. It enables others to follow and to check the reasoning and methodology used in the decision-making process and can be a powerful tool for measuring targets, and strengths and weaknesses in your organisation’s performance and activities.
What types of decision making can data inform?
Data and evidence are essential elements of any organisation – from its accounting methods to its interactions with customers, volunteers, suppliers, staff and audiences. Much of this data is generated in the normal course of running an organisation. This is often referred to as administration data. How you use gather and use this data – in strategic planning, developing your business model, reporting to your funders, marketing and engaging with audiences – is a key part of running efficient and effective organisational management processes.
To think about how to gather your data, consider what purposes you want it for and what decisions you are using it to inform. These could include:
- Current performance – how is your organisation performing this month/year in terms of audiences, income, web traffic, expenditure?
- Future strategy – how do you imagine your organisation will change over the next three to five years? Do you want to grow it? Do you want to broaden the range of products and services you deliver?
- Your business model – where does money come from today? What mix of earned income, grants and donations do you achieve? How might these change over the next few years given the external conditions you are operating in?
- Opportunities for growth and development – sometimes you need to spend money to make money. Where are the places in your business model where this might be true? How could you learn from others in your sector to see how they do it? What are the norms for both income and expenditure when it comes to trading activities such as running a café, a shop or room hire? How does the pricing of your products and services connect to the types of customers and audiences you are seeking?
- Risks and risk management – if you are going to try a new product or service what are the costs of ‘pump priming’ the activity? Who else in the sector is great at this and is someone you can learn from? (Remember that the annual accounts of all charities are freely available to download from the Charity Commission website). Is there an ‘opportunity cost’ to consider here – if you spend money in one area does it prevent you from spending it somewhere else? Have you weighed up the likely return on investment for several opportunities and worked out what the best balance of risk and return it?
- Resilience and sustainability – is cash always scarce or do you have enough to work with? If your income dried up suddenly (think beginning of the pandemic) what costs would you need to keep covering and how long could you last? How soon would you need to reduce your labour costs? How soon would your building become a liability?
- Customers and audiences – what are the patterns by month, demography, spend, stay times, educational activities?
What types of data do you need?
First, become familiar with data your own organisation produces internally. You want to understand:
- What data is collected
- How often it is collected
- Who is in charge of acquiring and managing it
- What the data means – the definitions of things
- How different data points are interconnected, such as the relationship between pricing of tickets and sales levels.
There are many internal data sources, but the main ones to be familiar with are:
- End of year report and management accounts
- Data you’ve submitted to grant funding organisations
- Audience and box office data
- Online and social media data.
What are the benefits?
The benefits of data- and evidence-informed decision making using your internal data as a start point include:
- Pragmatic and realistic goal setting
- Clarity on your performance against your targets
- Comparison of your organisation’s performance against other similar ones
- Transparency of the decision-making process.
To do this thoroughly, you need to compare your organisation’s data to others in your sector. This means engaging in benchmarking and accessing external sources of data.
The value of benchmarking
Benchmarking is a type of comparative analysis – allowing an organisation to test its data against that of others to understand how it is performing over a set of criteria. It is widely used to test where an organisation is performing against ‘best in class’ or averages. This can highlight achievements and reveal key areas for improvement. You could benchmark a range of areas – volunteers, finance, HR, fundraising, audiences, website and communications are all examples. For this resource, we will focus on financial benchmarking and its benefits.
Just how different would your senior management team and board meetings be if instead of saying ‘we need to win more grant applications’ or ‘we need to do something about raising donations and sponsorship’, you could start with ‘the average percentage of income achieved from trusts and foundations for an organisation of our size, sector and profile is 15% of turnover. We are currently achieving 5% from these sources – can we discuss how we get from 5% to 15% in the next one to two years?’
The latter approach comes across as far more confident, focused and in control of the factors affecting the success or failure of the organisation. This is the crux of the matter. Benchmarking your organisation helps you to become clearer not just about what your strengths and weaknesses are (you probably know these intuitively) but their scale and thus the size of the mountain to be climbed. This helps you prioritise your activities better as you have a quantitative understanding of the difference between make-or-break activities versus nice-to-haves.
In summary, the internal uses of benchmarking and comparative data are:
- A quantitative understanding of your strengths and weaknesses (compared to your peers)
- A way to identify areas to improve and clearly define the scale of the desired change
- Informing plans to diversify income, manage costs and develop audiences
- Helping to set goals that are based on progress towards best in class.
External data sources
Finding case studies of the ‘best in class’ is usually pretty straightforward. It’s the sort of success story funders and programme managers love to tell. In our view however it is more useful to understand what ‘middle of the road’ looks like. Not because you should limit your ambition to being mediocre, but because understanding the average gives you a much more accurate understanding of what ‘normal’ looks like.
You have a greater chance of achieving the average than you do of being best in class. In particular, when it comes to building income streams for your organisation, they need to be financially sustainable when you are simply moderately good at something. It’s not realistic to expect to be (or need to be) best in class in every area of your business model.
There are two types of external data sources. The first is reports and analysis which have gathered together a series of pieces of data, aggregated them where appropriate and written up a set of findings for you to digest. The Cause4 Arts & Culture Fundraising Benchmark is an example of this. In order to make this relevant to you and your organisation, you will need to work out which of the sections of data is most comparable to your situation. You will need to pick the turnover band you fit into, see which art form fits best and consider whether the geographical location of your activities makes a difference.
An example of the second type of external data source is the publication by Arts Council England of the raw data from their annual survey. This is the source of the raw data that goes into the Cause4 benchmark each year. You’ll notice that this is ‘public data’ which means that government requires that it be made publicly available. However, while it is available, it is not necessarily very accessible in that you need a higher level of data analysis skills to make use of this than you do to access the Cause4 report and benchmark.
So you have a choice when it comes to external data sources – do you want to use the pre-analysed version and work out how you fit into the data slices presented or do you want to build your own analysis from scratch? The former will be quicker but the latter offers more flexibility.
Useful sources of data
The raw data external equivalents to the internal data types and sources listed above are:
- Annual accounts data – you can access both income/expenditure data and information on the buildings and other assets held by organisations via the yearly reported data here.
- Annual financial and audience data – Arts Council England NPO data. You’ll also find other public data on the ACE site from various grant funding programmes. It’s all in the same section of data publication.
- Reporting of grant funds awarded – 360Giving aggregates data from many of the large grant funding bodies.
Some pre-analysed sources of information which are also equivalents to the internal data types above include:
- Centre for Cultural Value – see their publications list for reports and analysis of both qualitative an quantitative data on the culture sector.
- Third Sector Research Centre – this set of academics has a long track record in analysing administrative data on the wider third sector.
- Policy & Evidence Centre – the slant here is a combination of the cultural and the creative industries including the commercial end of the spectrum (games, cinema etc)
- The Audience Agency – there are various products and services here which aggregate and offer analysis of audience data. The most well known is Audience Finder.
- NCVO almanac – an annual summary of the state of the charity sector.
- Arts Fundraising & Philanthropy, Heritage Compass Insight Guides – a series of pieces of analysis of elements of heritage business models.
- MyCake – an ongoing source of benchmarking analysis on non-profits in the UK.
- Institute for Community Studies – a library of research reports on topics such as volunteering, business models etc. which combines both qualitative and quantitative analysis.
- Power to Change and their partners – a wide range of reports including work on investment in community businesses, the role of community shares and a series of Success Guides.
- Evaluation of grant funding programmes (the nearest you are likely to get to the information submitted to funders either in applications or in reports on funded activities – you’ll find these published periodically by grant funders such as Paul Hamlyn Foundation.
If you’re looking for a book to extend your learning in this area we recommend Data Driven Non-Profits.
3. A simple guide to using data to inform decision making
Below is a checklist to assist planning for data- and evidence-informed decision making:
1. What is the context and purpose of the decision you need to make?
2. What are the top three pieces of data that would inform this decision?
3. What data source do you need access to that will contain this information?
4. Have you got the data you need or do you need to collect it?
5. How will you interpret and communicate the data – tables, chars, maps, case studies?
6. How will using this data inform the decision-making process?
Benchmarking will add an extra dimension by comparing your organisation to your peers:
1. What external data source holds the equivalent information for other organisations?
2. Are the data points published in the same format and to the same definitions as your internal data? Are they directly equivalent?
3. How many comparisons do you need to make to get a sense of what ‘normal’ looks like?
4. When you contrast your internal data to external examples how does this change your perspective?
5. Can you now quantify what ‘good’ or ‘normal’ looks like across your sector?
6. What new targets will you now set?
Finally, you need to make yourself aware of data protection laws that you need to abide by when holding data. The resources listed above will help you develop your understanding of how to store and manage your data.
Please attribute as: "Data-informed decision making (2022) by Sarah Thelwall supported by The Heritage Fund, licensed under CC BY 4.0