Research & Evaluation Spending Benchmarks

Running a successful business without an accounting system is tough. Investments in the right things produce a positive financial return. Investments that don’t work out produce a negative financial return.

But, when you measure success by improving people’s lives, cash in and cash out isn’t enough. You need to measure impact and outcomes over both the short and long term. Communicating long-term results helps sustain and scale your work. It makes great statistics to share with press and stakeholders. It attract staff and participants. It helps you invest the resources you have wisely.

That’s all great, but how do you budget for evaluations? It’s a question we get pretty regularly by organizations of every type and size. So, we did some research to see what the best practices are.

Conventional Wisdom

A lot of evaluation consulting firms and government agencies recommend 10%-15% (or more) of program budgets should be set aside for research and evaluation. That’s nuts. Few organizations can afford to set aside that much. It’s just completely unrealistic. And really, that money should go towards programming, treatments and interventions that more reasonably priced evaluations prove are helping people … not to expensive consultants and statisticians.

Reviewing Actual Spending

So instead of looking at best practices, we looked at real benchmarks. What are other organizations actually spending?

Philanthropic foundations tend to be very open, forthright and introspective about their work. This gives us the opportunity to peak in and see how they allocate evaluation resources. The diversity of what they fund (healthcare, education, workforce development etc), means what we learn has wide application across sectors.

In 2014, the Hewlett Foundation published an excellent report as it reviewed their own evaluation spending. Instead of going with the “best practice conventional wisdom,” they surveyed a group of peer organizations to see what percentage of program money they actually spent on evaluation.

They found that most organizations spend between 1.5% and 7.5% of their program budget every year on research and evaluation. Smaller organizations spent a larger proportion given their relatively smaller grant amounts.

In 2009, the Evaluation RoundTable, a network of evaluation leaders at foundations across the US, Canada, and the UK conducted an assessment of actual spending. Like the Hewlett foundation, they found smaller organizations and initiatives spending a larger portion of their budget on research and evaluation (around 7.5%). Overall, across all organizations and programs reporting, 3.5% of budget is set aside for evaluation with a low of .3% and a high of 18%.

Today, a quick internet search of some household name foundations and programs show an increasingly strong commitment to evaluation and a committed budget set aside. For example, Oxfam International explicitly commits to invest “a minimum five percent (5%) of its program budgets to monitoring, evaluation, and learning by the end of the Oxfam Strategic Plan 2013–2019.” The benchmark Hewlett report suggested doubling the organization’s evaluation investment to 2% over three years.

Other institutions are less explicit about setting aside certain budgetary amounts, but their policies are clear. They show evaluations as an integral part of operations and resources should be allocated accordingly. The Kellogg Foundation states, “we believe strongly that evaluation should be conducted not only to demonstrate that a project worked, but also to improve the way it works.” The Gates Foundation says, “our evaluation policy is rooted in our business model.”

ProofPilot Recommendation: 2% or less

ProofPilot’s primary mission is to democratize research and evaluation tools for small organizations. For smaller organizations 7.5% of program initiatives is a lot of money.

Thankfully, technology provides many efficiencies. We’ve leveraged new ideas and techniques to bring down costs and set a pricing strategy that allows even very small operations to benchmark evaluation costs at 2% or less of program operations.

Originally published at proofpilot.com on March 1, 2017.