The art (or science) of measuring impact

Measuring impact in the social sector has long been a misunderstood and often underutilised concept. However it can no longer be ignored with the increasing prominence of social enterprises and the added scrutiny they bring. Impact analysis is now vital if social enterprises are to further compete with normal businesses in this new socially focussed world.

With the ever growing and evolving world of social investment, frontline social enterprises along with social investment intermediaries are increasingly required to show the social impact they are having as a result of the investments they receive. At the other end of the spectrum, social investors will be looking at their portfolio, not just in terms of rates of returns and growth of their margins, but from an impact point of view. They are asking exactly what social outcome has been achieved from the money they have invested. If the social investment market is going to thrive then it is paramount that social enterprises are able to answer them.

Too often people and organisations confuse the need for a common understanding of social impact assessment with simply quantifying the impact that is achieved. However seeking one or a range of common metrics to measure impact is neither achievable nor terribly useful. Top down metrics forced upon front line organisations are rarely able to capture the real work that is being carried out, leaving a lack of social data being inputted and thus little value or confidence in the results that are generated. While the even more cumbersome and lethargic approach of monetising an organisations impact has little use at all. Is there really any value in a charity stating that they generate £8 of impact for every £1 spent? For me, it verges on an out of date marketing tool unsuitable for the increasingly philanthropic and socially aware public.

So how can frontline social enterprises begin to show the impact they have? There are already numerous organisations attempting to shape or lead the way, all trying to force a common language or methodology. Social Return on Investment, Social Accounting and Audit, Social Impact Balance Scorecards, Global Impact Investing Rating System (GIIRS), Impact Reporting and Investment Standards (IRIS), Human Impact and Profit (HIP); the list goes on. But we’re still no closer to getting where we surely want to be; a common language or methodology with which to measure performance.

In my view there is a simpler approach, one which does not require PhD studies or millions of pounds of funding to develop. It is something which seems rather more self-evident: go to the source (i.e. the frontline organisations) when looking for results, as that’s where we’ll get the most valuable and relevant information.

Let’s support these frontline organisations to develop their own methodology for reporting the impact they are having. Our focus should be on encouraging a bottom up approach, with the focus on longer term societal outcomes, not the ‘quick-wins’ that are too often being reported today. The role and the major challenge for the investors and social investment intermediaries is then aggregating these results. This is still a challenge, but it’s a good place to start.