Reframing KPIs to Save Impact Investing

Sep 10 · 17 min read

Insights from Yoxi Executive Director, Kaz Brecher

In our Secret Sauce series, we attempt to open access to the essence of our observations even as we are still connecting dots across complex, interconnected systems. Our insights are gleaned from our examinations of the work being done by Yoxi explorers in the field. We seek to understand which of their solutions rely on specific contexts and which are more portable or adaptable to other geographies and industries. Overall, we aim to share our learnings and inspire further experimentation with potentially transformative ideas and interventions.

Measuring What Really Matters

At Yoxi, we fund questions in service of creating more meaningful impact in the world. And our evolving investment theses themselves have been consistently subjected to deep questioning, as we aim to more intentionally channel resources towards what is proving effective given our mission. Now, after years of analyzing our portfolio and explorers, along with a few exits to influence our reflections, we have decided to take a closer look at how we understand and measure impact, so that we might better calibrate and connect with other investors who could learn from and inform our experiments.

By stepping back to consider how our assumptions and belief systems shape our imagination and risk tolerance, we hope to uncover what it could mean if we reframed Key Performance Indicators (KPIs) to be more powerful levers when humility and curiosity become the North Star. Let’s begin with a current framing on measurement in the “social impact” realm, wildly variable as it may be. According to the Global Impact Investing Network (GIIN), “impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals.”

You can find a new study on this trend almost weekly, underscoring the importance of social responsibility, as with insights from this BNP Paribas report: “Today’s successful entrepreneurs are not easily satisfied with monetary returns, viewing economic contributions and profit as necessary to a business rather than what defines their success. Instead, they seek to examine the significance of their business activities in terms of impact on the environment and society…Among Millennipreneurs (entrepreneurs aged 35 and under), the percentage of those who consider social impact a metric of business success is even higher — 46%. This is much higher than the 39% average across all Elite Entrepreneurs surveyed for our report.”

While the term is now becoming commonplace, it’s worth a brief look at the precursors to impact investing, since language itself and varied contexts shape our everyday understanding of KPIs. There’s effective altruism, a philosophy and social movement using evidence and reason to determine the most effective ways to do good, which still has its proponents. But it is really just a layer on top of traditional approaches for how to give money away in the hopes of creating public good without succumbing to the pressures of market-driven solutions. While charity typically delivers on the proverbial gift of giving a hungry person a fish, philanthropy focuses on root cause by funding ways to teach people how to fish for themselves.

Bold groups like Unorthodox Philanthropy are trying to improve upon traditional forms of giving by borrowing concepts from scaling theory, like funding “social impact ideas that have the potential to achieve outsized impact with a finite amount of philanthropic capital.” These few and far between efforts aim to address the conundrum that too many areas in need receive endless amounts of cash but see no meaningful improvement — like Vancouver’s downtown Eastside, which churns through almost $1 million dollars a day and still is the poorest postcode in Canada.

Another approach can be found in venture philanthropy, a term that was coined by John D. Rockefeller III in 1969, as “an adventurous approach to funding unpopular social causes.” In other words, it takes concepts and techniques from venture capital finance and business management and applies them to achieving philanthropic goals, but it peaked in popularity in the mid- to late-1990s. This may be due to the fact that the same challenges we’re seeing in venture capital got ported over to this form of investing — a lack of diversity and investment in women and minorities, a hard-driving timetable for exiting, and a sense that there should be a significant financial multiplier without really considering how “return” needs to differ in the context of social change. With philanthropy, the return is typically social, and the investor is seen as a patron. But how can we reconcile the investor in a venture context if we put a priority on positive impact? Even more pointedly, we find ourselves asking regularly at Yoxi why we assume without question that any investment must lead to return?

So, What Is Investing Actually About?

Our founder, Sharon Chang, has been iterating her way forward with how to make investments that meaningfully lead to real impact. Across its incarnations, Yoxi has supported Social Innovation Rockstars in the spirit of a talent investment effort and experimented with “creative philanthropy,” eschewing the standard metrics for even what giving might expect from how its resources are directed. One facet of Yoxi’s investigation has been around developing new language to introduce a bigger philosophical framing of what could be possible if we treated investments differently. And the choice to swap “creative” for “venture” in front of philanthropy was a provocation intended to see if we could put the focus on a different aspect of what guides what we measure. It was an attempt to re-orient philanthropy instead of replacing it, in the context of an artform with myriad expressions — not just one: return.

Ultimately, the question for any and every investor should be “why are you investing in the first place?” as every investment has impact, if we’re honest. And we need to dig into what that impact means to different people. To invest means to commit, to devote one’s time, energy or effort into something, often with the hope of a worthwhile result. But too frequently we ignore the personal relationship one actually has to the concept or desired outcome. We talk about social contracts at an individual level but rarely at a collective level. And in the investing arena, more often that not, investors are asking “what will people think?” rather than “what do I think?” in evaluating both the purpose of the investment externally and the experience over time for the investor.

As Sharon began to examine what it might mean to invest in a heart-led fashion, she realized that Yoxi would need to fundamentally challenge the notion of quantifiable return. In a musing about what she called her Love Investment Philosophy, she wrote, “[i]nvesting in impact is a risky business, but not so much in terms of fear of failure or financial loss. The biggest misstep is in assuming that we can quantify impact to match our investment, which limits our vision, impairs our judgment, and sends us running backwards to what we perceive as rational and safe. And that’s never where impact lives.”

In this spirit, Yoxi has continually focused on seed stage investments which emphasize what one might call emotional return over social or financial return. We see our investments in extraordinary leaders as humble yet heroic, arriving at a critical moment in time, and right-sized for what’s needed to deepen and extend meaningful inquiry. We very specifically liken our spirit to the Mars Rover, as our investments are designed to probe. And, while the investment in the Rover could be framed as a financial waste, as that very expensive apparatus will never come back to its creators, the data it returns is invaluable if put to use in informing the next investments.

“When we focus on the sustainability and scalability of ideas — but free ourselves from having to prescribe an exit point — we make space for big change. This approach requires a tremendous amount of time, patience, and courage.” Sharon Chang

What If and Why Not?

In applying the kind of imagination typically reserved for new products and services to reframing the concept of measurement, we find unlikely inspiration hiding in plain sight — take the industry-leader in Scotch Whisky, Macallan. Founded in 1824, this company has thrived by keeping a close eye not just on their popularity and growth but also on the very source materials on which their product depends. Since the water from the Spey River and the casks in which they age the “new make” spirits are the foundation of the quality of their whisky, they have become unlikely environmentalists who plan for success across decades not quarters. They literally consider their business one that spans from acorn to glass and “work closely with fully integrated ‘tree to finished seasoned cask’ companies — to identify and protect the oak trees in the forests of northern Spain, fell the trees, saw and air dry the oak staves before shipping them to meet the cooperage process.

Macallan have become stewards of the natural world, which requires an almost century-long investment strategy, on top of the years needed to age their spirit. The KPIs they use have to do with the quality of their bottled whisky as much as sustaining their dominance through the preservation of natural resources. Their mastery of the intergenerational transfer of knowledge is the sort of unintended consequence we wish to see more often. And, instead of measuring a deviation from an expected output as less than, like a variation in color or flavor, these become extremely expensive rare cask offerings. So, even here, they are able to push the bounds of how we typically quantify the value of a product, measured in relation to uniformity — something we are seeing in the rapid monetization of difference in the imperfect produce movement.

During Yoxi’s Social Innovation Rockstar era, Sharon offered a perspective on the unusual as valuable, which echoes the ethos in the previous examples: “Social innovators may not be business experts (although many are) — they’re a unique blend of artists, scientists, humanitarians and activists. Investing in them means celebrating their brilliance as well as accepting their flaws.” Reframing what we value opens new opportunities.

What if we put our focus on measuring how trust grows with our explorers rather than solely how the market value of their companies increases? What might we glean from a diversified but interrelated portfolio — especially if we take the long view in our assessment? Our evolving ideas around decentralized growth models, which we detailed in a piece on what we call Scaling Small, emerged directly from discussions with several of our portfolio founders and how they’re experiencing success in different but related ways.

For example, Chid Liberty, the founder of Uniform and the first explorer in whom we invested, shared his thoughts on where technology might make a difference in solving local logistics issues in Liberia within the clothing supply chain. Then, Usha Venkatachalam, another explorer in whom we have made repeated investments as she’s successfully made in-roads with agroecology and farmers’ quality of life in India, flagged the potential for blockchain in ensuring higher prices for organic cotton. Lightbulb: we suddenly have more confidence they’re highlighting signal in the noise of always-on global trend analysis because we have been in the trenches with them over the long haul.

And why not zoom out and place value on the macro-impact of shaping multiple fields with new perspectives, gleaned across and shared between a collection of companies? Rather than just tallying wins when our particular horse wins, could we consider it even a greater triumph if we are able to play a meaningful part in evolving the way the race is run? This has been top of mind for us, as we have four exceptional companies in our portfolio all working on what we named Regenerative Consumerism, looking at ways in which disrupting the very production of resources and goods could do more than just sustain the industry itself but also ensure the health and well-being of the ecosystem on which it relies.

Our close look at Matt Scanlan and his company Naadam in the context of Mongolia and its 1000-year old cashmere herding history, along with the two aforementioned portfolio explorers, helped sharpen our lens and attention on identifying patterns of partnership, cultivation of skills and economic participation, and production of affordable high-quality luxury products portable across regions and contexts. This then led to our investment in Sana Jardin in an effort to increase our learning around new models of interdependence. As the world’s first socially-conscious, luxury fragrance house, their founder, Amy Christiansen, created the company primarily as a vehicle for social change, driving impact through the economic empowerment of women through what they have called The Beyond Sustainability™ Movement. Starting with female flower harvesters in Morocco, who hand pick floral ingredients for Sana Jardin’s perfumes, this is yet another example of the Regenerative Consumerism trend we’ve been able to identify, by holding our measurement of impact at a more systemic rather than single company level.

San Jardin has been winning awards for sustainability since their launch, pioneering everything from the field to how consumers connect with the brand and the women behind its production.

We also have shifted our thinking on how to evaluate an exit. In the recent case of our explorer, Talia Frenkel, when P&G decided to purchase her company, This is L., we have cheered not just the financial return but more importantly, the role Talia will be able to play influencing the feminine care field from within. As more and more attention is paid to the critical role of intrapreneurs, the opportunity for a renegade entrepreneur to harness pole position as a megaphone is hard to quantify in traditional measures. She says it best when she describes her motivation, “[o]ur support has ranged from partnering with organizations to send period products to Native communities in South Dakota, to supplying pad-making machines to a women-led business in Tamil Nadu. Pairing our purpose with P&G’s expertise, scale and resources provides an extraordinary opportunity to contribute to a more equitable world.” In this case impact might include often unconsidered factors such as how large companies pay attention to non-technical and female founders as influencers; or the potential to shape mass market consumer awareness through authentic labelling.

The Danger of Trusting Data Without Reflection

As we consider factors like labeling, so much of investment is shaped through the data we use to tell stories of success. But how often do we stop to dig into what we actually mean by the terms “key,” “performance,” and “indicators” in earnest? As guides to a decision-making process where one prioritizes what an investor values, both “key” and “indicator” seem fair enough. But the word “performance” requires the most significant evaluation. Because, what exactly, in the context of an impact investment, does it mean to perform? And, on top of that, according to a recent cross-industry survey from MIT Sloan Management Review and Google, “most companies do not deploy KPIs rigorously for review or as drivers of change. In practice, KPIs are regarded as “key” in name only; the most prevalent attitude toward them seems to be one of compliance, not commitment. The responses suggest this perfunctory treatment reflects cultural and organizational inertia, not technical or operational limitations. In terms of perceived effect and influence, our survey finds that, ironically, most organizations are KPI underachievers. They get less value than they say they want.”

What if we followed the lead of organizations who have replaced performance with other valued attributes? Early in the development of the Downtown Project in Las Vegas, Zappos founder, Tony Hsieh, decided to track “return on collisions” as a way to shine a spotlight on serendipitous encounters, following studies which have shown that such random encounters increase innovation and productivity. What set the vision apart from other urban renewal efforts was, according to Hsieh, “rather than maximizing short-term return on investment, we maximize long-term return on community.” And the decision to track collisions as a primary metric guided decisions to focus on bicycles and car-sharing over mobility planning as well as the creation of more open public programming. While the current state of the Downtown Project leaves much to be re-examined, we can learn from their focused experimentation.

Similarly, larger lines in the sand, like the Social Progress Index or the World Happiness Report, endeavor to guide how policy and investment shape other facets of our daily lives. By giving decision-makers and everyday citizens access to the very best data on the social and environmental health of societies, people are better empowered to prioritize actions that accelerate overall social progress — defined as “the capacity of a society to meet the basic human needs of its citizens, establish the building blocks that allow citizens and communities to enhance and sustain the quality of their lives, and create the conditions for all individuals to reach their full potential.”

As one might suspect, setting out to improve quality of life is an enormously complex task, and too many efforts to measure impact and progress failed to capture the nuance necessary to frame what a successful society might look like (and for whom). So, the Social Progress Index moves past traditional measurements like income and investment and looks at 51 social and environmental indicators. It bypasses more subjective measures like happiness or life satisfaction and uses quantifiable data like access to shelter or nutrition as well as education and basic rights.

The World Happiness Report embraces more qualitative self-assessment and asserts that how we perceive our lives matters as much as the metrics others reflect back to us. This year’s World Happiness Report focuses on happiness and the community: how happiness has evolved over the past dozen years, with a focus on the technologies, social norms, conflicts and government policies that have driven those changes. Starting with a report released in 2012 in support of a UN High level meeting on “Wellbeing and Happiness: Defining a New Economic Paradigm,” these studies present the available global data on national happiness and review related evidence from the emerging science of happiness. There is sufficient evidence to show that the quality of people’s lives can be coherently, reliably, and validly assessed by a variety of subjective well-being measures, collectively referred to then and in subsequent reports as “happiness.”

A large analysis published in the journal Nature Human Behavior in 2018 used data from the Gallup World Poll, a survey of more than 1.7 million people from 164 countries, to put a price on optimal emotional well-being: between $60,000 and $75,000 a year, which aligns with past research on the topic. So, if we know that wellbeing and happiness don’t correlate to income, and data continues to show that Americans are some of the most stressed out people in the world, why do so many governments map employment and job growth as a measure of success? And why does every report feature graphs rising up to the right when the real story is about why one might find herself above the line or below the line and what needs to happen to get more workers on the better side? The true story is often so much more bleak, given that more and more working adults have to hold down 2–3 jobs (the less glorified side hustle or gig economy trope) just to get to even half of that magic happiness salary. Where are the buzzy infographics capturing the more honest and complicated implications of these stories?

Given the complexity in any given ecosystem, whether it’s affordable and healthy urban food access or how those in need of social services can navigate governmental agencies to find information, we would surely do better to push investors, change agents, philanthropic and charitable organizations and entrepreneurs to begin taking ownership of KXIs, where X evolves into a nuanced and defensible indicator of something that really matters in the relevant theory of change. Our friend, George Aye, founder of Greater Good Studio, recently took a look at what “good” design means in the social sector. He offers, with considered perspective, from his years of experience and aspiration to push the industry at large, that good design honors reality, creates ownership and builds power. Indeed, how might we begin to measure reality, ownership and power? At Yoxi, we already look at how our investments enable transformation or increase trust (KTI) or foster learning (KLI) in unique ways. But each requires a more rigorous contextual assessment of what measurement are most sensible, and we can surely do a more thorough job of pursuing deeper discussions with both our founders and their myriad stakeholders. We see this as no only our purview but that of all so-called impact investors.

To date, those studying the emerging field have tried to calibrate around mission alignment or offered models like the Spectrum of Impact Measurement (below) which build on the science of controlled experiments, including even randomized control trials. This relies on data collection and understanding causation instead of correlation, an admirable and important pursuit. But it backs us again into tying funding to the realm of quantitative over qualitative data when the level of complexity we’re now facing might make this a useless exercise.

We find ourselves circling back to the question of what might happen if we endeavored to invest as an art not a science, if we looked for the stories latent in the data. More than just a craze, the science and art behind the visual representation of data has held the key to hidden insights for centuries, as master Edward Tufte loves to convince anyone new to the subject. And those leading the way in our current age, like Jer Thorp, invite us to ask what might happen if we invest in the mapping BEFORE we know what it might pay off, a leap of faith.

In Cascade, for example, a project that visualizes the sharing activity of content over social networks, an interactive, exploratory tool accesses a constantly-updated database of sharing events, constructing sharing structures called ‘cascades’ in near-real time. A first-of-its-kind tool, it links browsing behavior on a site to sharing activity to construct a detailed picture of how information propagates through the social media space. While initially applied to New York Times stories and information, the tool and its underlying logic may be applied to any publisher or brand interested in understanding how its messages are shared. Built at The New York Times Company Research and Development Lab, one could call Cascade a novel investment of the R&D type we used to see so much more frequently.

If we don’t know what we don’t know in the complex and interdependent landscape of business today, how should we be shifting the stories we tell with the data we collect and the data that we bother to collect in the first place?

Seekers Seeking Same

We set out to uncover prosperous paths to a beautiful future, and we know that prosperity means different things to different people. For us, it’s a more equitable society, one we can support and foster and fuel through wise investment. We believe that when people understand and really feel their own potential, they can for the most part make good decisions for themselves which also benefit others — something we are seeing in the recent results of the Stockton experiment around universal basic income.

Impact investment can unleash the promise of founders like our explorers, allowing them the valuable time to grow, connected to their communities in an authentic way. They will know their ecosystems better than any investor can, and they’re in it in a way we can never be. Investment might allow them to take chances and risks, to connect more deeply and discover more powerful lever for the change they envision. We could just focus on market solutions and job creation, but if our heart is ultimately pointed in the direction of serving humanity, shouldn’t we always remain inquisitive — asking is this right, is it fair, is it good for all of us?

Our track record has proven that we’re doing something right at Yoxi, though one might rightly point out that our impact is better visible across the portfolio rather than tied to any single investment. And, as investors, we face a critical moment in our investigation of how best to create and measure impact. With a growing chorus willing to acknowledge that our deepest pockets are enabling the crippling inequalities that threaten to destabilize the world as we know it, it is becoming clear that we are not up against monetary shortages.

As knowledge management expert Larry Prusak astutely points out, “Peter Drucker was right when he wrote: “What gets measured gets managed.” But why is this so often taken to a false corollary like “What can’t be measured isn’t worth managing”? So much of life cannot be measured yet is still lived and enjoyed.” From facing our relationship to our ecological limits to the failure of imagination we have perpetrated, we are seeking brave companions to join us on what we once offered as catalytic camaraderie in the pursuit of more meaningful ways to measure and enable true impact.

How would we begin to measure this?

Written by


Yoxi is a social innovation explorer. We make humble and heroic investments that arrive when the art of questioning is mission-critical to creating real impact.

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