Measuring and assessing social impact creates an opportunity for charities and foundations to identify organisational strengths and weakness and to improve the quality of their work. With increasing competition for limited funds and demands for more transparency from donors and funders, many organisations are seeking better ways to measure and demonstrate their impact. In order to do this, the organisation needs to have a clear framework that links inputs, outputs and outcomes, and to develop the right tools and systems to gather and analyse information.

An increasing focus on impact measurement

In the past, many charities demonstrated impact through evocative, qualitative case studies presented in annual reports and donation drives as emblematic of the quality of their work. Measuring impact in a more comprehensive way presented challenges that made the process expensive and time consuming. These included:

  • Difficulty in measuring outcomes: Many organisations aim to create transformative changes in the lives of beneficiaries, such as improving quality of life or providing education; results are often intangibles that are difficult to measure.
  • Longer time-scales for change: Some initiatives cannot be measured in the short-term. An environmental charity, for example, might generate an impact that is not discernible for decades.
  • Lack of resources to test and implement impact measurement tools: Limited by grant stipulations, restricted funds, and the demands of donors, some charities struggle to find the revenue necessary to invest in impact measurement initiatives.

Despite these challenges, impact measurement has become a key part of most charitable organisations’ strategies. In the wake of the financial crisis, more and more charities are merging or shutting down. Those who continue to operate find themselves competing fiercely for dwindling funds, trying to deliver a greater volume of services on tighter budgets. In order to remain competitive, they need better models to measure and demonstrate the quality of their impact.

Increased competition has been coupled with an increased demand for organisations to offer greater accountability and transparency to stakeholders, donors and staff – instead of relying on isolated narratives to illustrate successes through anecdotal evidence, success needs to be demonstrated through impact metrics and concrete evidence. Moreover, some funders are providing financial incentives for positive outcomes, such as Social Impact Bonds and “Payment by Results.”[1]

While this shift challenges organisations to expand their own capabilities, it also enables them to truly look at their own performance and find areas for improvement. Feedback from beneficiaries and operational staff can become more visible as management develop a clear understanding about which practices work. To ensure that impact measurement becomes a positive tool for change, rather than a time-consuming yet ineffective process, organisations should take several steps to position themselves for better impact measurement.

Some strategic changes that will make impact measurement more effective

Impact measurement requires a clear link between inputs, outputs, and the impact or outcomes of your work. A critical first step for any organisation is to establish a clear and coherent framework that demonstrates not only what desired outcomes are, but which actions and initiatives will contribute towards them.

This example from the London Benchmarking Group shows how one can outline the flow from different inputs to the ultimate social impact:

Source: LBG, 2013

Establishing a simple framework enables organisations to be clear about what they want to achieve, and to communicate and engage with stakeholders. There is a growing collection of tools and methodologies available; for example, many have begun to use a Theory of Change to create a roadmap for impact, by linking activities into a flow that leads to the desired outcomes.

Whichever tool or format is chosen, it must be clear and explicit about the connections between different elements; this will allow organisations to link appropriate measurements to different activities. Additionally, while standard tools can provide a strong foundation, it is important to adapt each one to the specific needs of an individual organisation.

Other steps that charities and foundations should take:

  • Make sure your mission is clear and shared. More transparency can increase demands from funders and donors to spend funds in a specific way, with the organisation feeling pressure to compromise in order to secure more funding. Having a clear mission that is deeply embedded in both the overall strategy and everyday operations helps prevent mission drift.
  • Recalibrate management information systems. Decision-makers in the charitable sector are often faced with an information gap, with limited quantitative information and unstructured qualitative information. Improved management information systems can take time to design and implement, but having access to key information can improve planning and strategies, as well as demonstrate impact.
  • Consider partnerships and shared measurements. Developing the right impact measurement framework requires research expertise, time and resources that can stretch capabilities of both small and large organisations.[2] However, through partnerships and shared metrics, the burden of design and implementation can be shared and useful benchmarks can be created.
  • Make a long-term investment in impact. Developing an effective impact measurement model, that feeds back information and helps improve performance, takes time and testing. It is not a quick fix, but a viable, long-term solution.

Despite the challenges, impact measurement presents a significant opportunity to improve management information, transparency, and efficiency. More importantly, the learning from effective impact measurement has the potential to elevate the quality of work done across the charitable sector; it is worth the time, effort, and money it will take if it means that impact for beneficiaries could be even greater than it is today.

[1] ‘Funding Good Outcomes – Using social investment to support payment by results’, Charities Aid Foundation, September 2012
[2] ‘Let’s Be Realistic About Measuring Impact’, Harvard Business Review Blog (Alnoor Ebrahim), 13 March 2013