Poverty, homelessness, crime, unemployment etc. persist today in even the wealthiest of countries. But just imagine if we could build on the existing efforts of social sector organizations, leverage trillions in private capital, and bring the same level of focus and entrepreneurship for improved schools, employment opportunities, better public services, and safer streets.
It is already happening, and it is called impact investing!
What is Impact Investment?
This is the emerging trend of investing in companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Looking at the very definition, it is placing a much-needed focus on impact measurement for both internal decision-making and external transparency.
Foundations are shifting their philanthropic strategies to a more targeted approach, as well. As an example, recent changes at the Ford Foundation, The Robin Hood Foundation in New York, and Tipping Point in San Francisco are now adopting outcome and impact measurement to ensure the success of the programs they fund. Many foundations are reducing their grant portfolio size and focusing on fewer grants but with larger unrestricted funding. The overall result of this behavior is a higher engagement of all involved stakeholders.
Still Working Out The Kinks
Current approaches to impact measurement are often time-consuming, limited to financial output, or inconsistent at their data collection process. As a result, the level of impact may be diminished, as well as the social mission and efforts of the organization.
The survival and growth of the social sector depend on organizations’ ability to demonstrate impact. Nevertheless, there is a lack of efficient data collection and common measurement language to put funders and investees/grantees in a collaborative context, which reduces the impact visibility to funders.
Good impact measurement strategy has two major elements:
- Selecting collaborative metrics to learn collective impact
- Selecting an impact measurement system that simplifies the use of the different standards, frameworks, and tools that we have available nowadays
Selecting Collaborative Metrics for Collective Impact
Collective impact is when organizations from different sectors agree to solve a specific social problem using a common agenda—aligning their efforts and using common measures of success as collaborative metrics. Collaborative metrics can:
- Improve data quality
- Track progress toward a shared goal
- Enable coordination and collaboration
- Learn and course correct
- Catalyze action
Though metrics have been spoken of since Program Related Investment—restricted funding towards a specific program—and even before we started to evaluate program results. The state of current standards, frameworks, and tools is too confusing for most people. Funders can take months or even years to define core metrics and program/beneficiary organizations.
Where to Start?
The challenge of metrics collaboration is where to start.
There are many impact reporting and sustainability reporting standards available today. Innovative community foundations, like Robin Hood Foundation and Tipping Point, have built internal metrics to measure outcomes from key programs that they support. There are some catalogs and online services available, such as Global Value Exchange, which provide a decent aggregation of metrics. Even with such systems, we see hundreds of foundations, development agencies, and nonprofits spending months just to pick metrics that meet their program goals. The main reason for this delay is that the common language for impact measurement framework differs between program/beneficiary organizations and impact aggregators, such as funders and international development agencies.
The most successful standards—such as IRIS, the catalog of generally accepted performance metrics; GRI; Global Real Estate Sustainability Benchmark (GRESB); CDP; and SASB (commonly used for sustainability reporting to investors and other stakeholders)—are still being used at the top-of-pyramid level.
New Generation of Measurement Tools and System
Collective impact and impact evidence are the keys to revolutionizing the social sector. To carry them out, we need a new generation of measurement approaches with the following key ingredients:
- The possibility to build metrics from standards and goals, and adapt them to the program’s context
- The ease to batch common metrics based on certain goal or type of program
- The option to roll up and roll down goals without losing context
- A collection of the hundreds of already existing metrics
- An open API to build a collaborative metrics pool
Program agencies are typically responsible for collecting program and beneficiary data for both external reporting and internal operations. A large number of them still collect data on Excel spreadsheets or even paper. Many have been trying to access to custom apps or software packages, but most struggle to allocate the budget for technology. Even having the budget, the execution of these projects requires technical skills and knowledge that are not always found on staff. Hence, many projects fail with a significant waste of funds.
Refining the Wheel
We envision a new social impact operating system ready to plug and play like a “hardware bus.” To clarify, we are not talking about massive funding to build such an operating system; quite the contrary, we need to take advantage of very affordable technology that already exists today.
A social impact operating system would dramatically reduce time and cost on managing different activities that are key to program agencies, such as:
- Beneficiary management
- Program outcome management
- Project management (including financial and human resources)
Agencies do have an important function in grants and donations management, but that is mainly relevant to their internal needs.
Fortunately, there has been a revolution in cloud-based applications during the last 2-3 years, providing the social sector with hundreds of service-oriented solutions available at significantly lower costs compared to traditional IT applications. This trend specially benefits resource-constrained organizations, such as small- to mid-size nonprofits and social enterprises.
Airtable, for example, is a cloud-based online database tool that provides powerful yet simple app development, that any non-IT person with basic spreadsheet skills can use. Within hours, users can easily build applications to manage beneficiaries and program outcomes. More importantly, this tool can serve as a quick data collection system through mobile and online forms.
If the organization grows further, all the development done in-house can serve as a baseline for a matured IT application. For example, we worked with a nonprofit called Friends Of Future, which has more than 15 different program objectives. We were able to build an individual beneficiary and program management system within days. Basic volunteer and donation management are now part of a system that everyone could start using from day one. Each organization can summarize year-end outcome data and send it to the parent organization for a better social impact demonstration and reporting.
We also have the example of SmartSheet for project management, Silk for visualization and social media story building, Plot.ly, Looker, Import.io, etc. I am just mentioning these few as a representation of the hundreds that can be found out there.
Democratization of Tools
This tremendous democratization of tools allow many organizations to build their own internal IT capacity without significant investment. More importantly, these tools grant the organization immediate access to the information that can be used to improve their performance and communicate their results to the funders. Besides, once the right tools are identified, the organization’s ability to track, collaborate and share outcome data becomes higher.
Some organizations decided to build custom applications with a rather large budget and long implementation. A few succeeded, but this solution is not always transferrable to other organizations.
Major funding and program development organizations increasingly see that a structural change in the social sector will happen when like-minded players start working collaboratively with the help of new generation tools and systems.
Also, most of the investees/grantees consider impact measurement an overhead issue, without realizing that technology has dramatically shifted this conception in their favor.
The Social Sector has hundreds of tools, frameworks and standards. Unless we build a system that is simplified, integrated (with all above) and comprehensive with a powerful user experience, we cannot move a needle!
Unmesh Sheth, Author, Founder SoPact.com