Return on Investment (ROI) for Volunteer Programs

We assume that volunteer programs enhance the capacity of nonprofit organizations by supplementing and extending the work of paid staff.  But by how much?  Certainly volunteers bring intangible benefits to good causes, but how to quantify these can be a challenge to say the least.

And yet, we’re often asked to defend our programs and justify our (often meager) basic budget and support needs.  To make the case for greater investment in volunteer leadership, The National Council on Aging released a report in 2010 -- The Boomer Solution: Skilled Talent to Meet Nonprofit Needs -- that concluded that for every $1 invested, the organizations they studied realized an average of $8 in return, as a result of the work of older volunteers in leadership roles.  Powerful stuff.

So, maybe it’s time for the rest of us to really get down to the business of calculating our volunteer program ROI.  After all, shouldn’t our organizations know what our programs bring to the the table in dollars and cents?  

And, since most of you don’t have the funding to launch and expensive longitudinal study, I thought I’d recommend some easy ways you can do it in house.  (PS If you don’t have time, delegate this task to a team of volunteers who are good at analytics and math; I’m pretty sure they’ll get a kick out of what they find.)

How to Figure Your Volunteer Program ROI
Here are a few suggestions on how you can figure, from simple to complex.  I’ve also included references to others who are doing thoughtful work in this area.  The basic formula is ROI = (volunteer value - program cost) / program cost.

 First, start with your overall annual program cost...  

This includes staff salaries (if they work part-time managing volunteers pro-rate their time), volunteer stipends, travel reimbursements, the costs of marketing materials, recognition activities, facilities expenses and anything else you can think of.

 Annual program cost example (yours may be different):
Staff (25% of their time on volunteers, $35,000/year x .25) $8,750
Benefits (25% of salary) $2,188
Advertising (newspaper ads, online posting, radio spots) $1,500 
Recognition (awards, annual luncheon, etc.) $1,000
Training (in-service for staff and volunteers, conferences) $3,000
Travel (mileage, flights, meals, accommodations, etc.) $5,000 
Office supplies (paper, copying, postage, pens, files, etc.) $500
Technology (software licenses, upgrades, maintenance) $500
Sub Total $22,438
Overhead (10% of overall budget to cover facilities costs) $2,243.80
Annual Program Cost $24,641.80

Then calculate the volunteer wage value…

The total number of hours your volunteers contributed last year multiplied by the estimated value per hour of volunteer time (nationally it is $21.36 per hour).  For example, $21.36 x (20 volunteers x 120 hours per year each) =  $51,264.  To find the value for your state check out The Independent Sector’s website.  They update their values every year.

So, what’s the ROI?  ($51,264 - $24,641) / $24,641 = $1.08  For every $1 invested in the volunteer program, $1.08 is returned to the community.

To get more precise...

Instead of calculating the estimated value of a volunteer’s time, calculate the retail value of services your volunteers provide (i.e., value of counseling hour by volunteer Medicare insurance counselors x total hours or value of data entry x total hours, etc.) from the annual program cost.  For example, the average cost for a certified financial planner is $100/hour x (20 volunteers x 120 hours per year each) = $240,000.

So, what’s the ROI?  ($240,000 - $24,641) / $24,641 = $8.74  For every $1 invested in the volunteer program, $8.74 is returned to the community.

To get even more precise...

Add any volunteer cash and in-kind donations made to your organization over the last year to their wage value.  On average, volunteers donate 10 times that of non-volunteers.  Fidelity Charitable Gift Fund published a recent study about this.  For example, $240,000 (the volunteer wage value above) + $2,500 in annual donations = $242,500.

So, what’s the ROI?  ($242,500 - $24,641) / $24,641 = $8.84  For every $1 invested in the volunteer program, $8.84 is returned to the community.

Finally, to get even more precise...

Calculate the volunteer value by adding their wage value, their charitable donations, and the community benefit (i.e., money saved clients, taxpayers, etc.).  Tracking and calculating community benefit isn’t easy.  It requires you to track money saved clients, which takes discipline on the part of your team.  If you can do it, try.  If not, let it go. Figuring dollars saved taxpayers is even harder.  If someone has an easy way to do it, let me know. 

For a simple example, $240,000 (the volunteer wage value above) + $2,500 in annual donations + $20,000 (the total annual amount clients receiving volunteer Medicare insurance counseling services saved in insurance premiums and other costs because they were eligible for public programs that covered their costs) = $262,500. If you want more detailed info, Tony Goodrow, of the volunteer management software group Volunteer Squared, has some excellent work estimating ROI.  Check out his ROI calculator.

So, what’s the ROI?  ($262,500 - $24,641) / $24,641 = $9.65  For every $1 invested in the volunteer program, $9.65 is returned to the community.  Right on!!

So, you can see how calculating a return on investment might be helpful in garnering more support for what you do.  Why not invest in something that generates more value than it costs to operate?  

Also, moving beyond just the simple calculation of the average estimated value of a volunteer’s time can give you a more accurate picture of the tangible benefits your team brings to the table.

Do you already estimate your ROI?  How do you do it?  What are the benefits and pitfalls?  We'd love to hear your thoughts, so add them to the comments.

 

Comments

[RobJConsulting]

Some cautionary tales about using such a methodology can be found at http://www.coyotecommunications.com/volunteer/value.shtml.

[Tobi@tobijohnson.com]

Indeed, Rob. Great point and resource.

Jayne Cravens' post brings up some good points about relying solely on the equivalent wage value of volunteers to establish their worth. It tends to downplay all of the other benefits volunteers bring (i.e., cash donations, in-kind resources, increased community awareness, etc.). And, it can have dire consequences for paid staff (and program sustainability) in a troubled economy, when folks think they can replace paid staff directly with "free" volunteer labor.

All the more reason to be as precise as we can by including as many of the benefits as possible (above and beyond simple wage replacement value) into the calculation, while at the same time acknowledging the resources necessary to effectively engage community members in service. The challenge remains as to how to quantify those intangibles, such as community "good will," etc. It can be tough without a research budget.

I'm not ready to give up on trying to calculate ROI yet, but I recognize it's an imperfect system thus far. Thanks for keeping the conversation going. :)