How to Measure Cause and Effect
What is Financial Measurement?
Financial measurement is any measurement involving dollars. Think of financial measurement as the cause in the equation cause and effect. Examples include: a) revenue trends, b) expense trends, and 3) department cost.
What is Impact Measurement?
Impact measurement is any measurement involving attendance. Similarly, think of impact measurement as the effect in the equation cause and effect. Examples include: a) worship service attendance, 2) pre-K attendance, and 3) high school ministry attendance.
The insight and clarity one achieves when one combines these two measurements can be astounding!
Hypothetical Case Study
Let’s suppose your church wants to invest time and money in the high school ministry with the intention of evaluating results at the end of a 12-month period. The church hires a part-time youth minister for $24,000 and invests $26,000 toward enhancing the high school auditorium.
As a result, the expense account, High School Ministry, shows an increase of $50,000 from the prior year expense total. This is what we refer to as financial measurement.
During this 12-month period, the high school youth minister is instructed to maintain a spreadsheet recording the weekly attendance for both the 9:00 a.m. and 11:00 a.m. Sunday high school classes. These attendance measurements are what we refer to as impact measurements.
Scenario 1: Let’s suppose that the average monthly attendance, between the first and twelfth month, increased by 25 new high school students. Now, take your $50,000 investment and divide this number by the 25 new high school students, and you suddenly realize that it cost your church $2,000 to obtain each new high school student. This looks to be a very good investment by your church.
Scenario 2: Let’s suppose that the average monthly attendance, between the first and twelfth month, actually increased by just two new high school students. Now, take your $50,000 investment and divide this number by the two new high school students, and you suddenly realize that it cost your church $25,000 to obtain both high school students. This scenario doesn’t look to be a good investment by your church.
These per cost insights, taken alone, are not significantly valuable to you. The key take away, however, needs to be the realization that these insights will become more useful to you as you make high school expense allocation decisions in the future. The next time you spend $25,000 on your high school ministry, you will be able to compare the cause and effect of your new endeavor to your previous endeavor, thus enabling you clearly determine which endeavor is more effective!
In business school jargon, this is called cost / benefit analysis. These types of analysis are usually quite easy to do and the MinistryCFO team is happy to assist you in making these computations.
Your church needs a CFO on a part-time basis. Let the MinistryCFO team equip you in knowing what, when and how to measure so that you can clearly evaluate your investment decisions.