Accounting Without Money
Why Social Impact Measurement Matters
As a newly-minted Associate at On Purpose, a programme that aims to develop future leaders in the world of social enterprise, the last thing I expected was to be posted to the London headquarters of RBS, the corporation behind NatWest, Royal Bank of Scotland and Ulster Bank. After all, I applied for the programme because I had a vision of business that was about more than just money, and I wanted to explore that idea with like-minds and experts. Working at one of the most maligned perpetrators of the banking crisis wasn’t on the agenda. And yet here I am in the belly of the beast, my grey suit and brogues gnawing at my self-image as an intrepid explorer of the wild places that business-as-usual fears to tread.
I should have had more faith. I’m researching a hot topic in the sector: how to assess, measure and report social impact, defined broadly as the overall difference you make to those you are trying to help. And it’s a fascinating subject — rich with benefits and fraught with risks, with a few unintended consequences on the side.
Let’s get something out of the way early: you can’t actually ‘measure’ social impact. Any claim to measurement is really estimation, because social outcomes simply can’t be quantified in the same way financial ones can. If I had an organisation that made £10,000 profit, we can discuss the meaning of the money all we like, but my bank account still holds £10,000 more than it did. If this organisation helped 97 bereaved spouses cope with the death of their partner, ‘97’ is an indicator, but it doesn’t provide an unarguable measure of the increased well-being of the bereaved, or how their families, communities or workplaces benefit from our work. Reducing qualitative outcomes to quantitative ones might make it easier to create a graph, but it does not make measurements more meaningful.
The Benefits of Measurement
So if social impact measurement can’t give us rock-solid numbers, why should a socially-focused organisation bother trying? Let me count the ways.
You will benefit from coherence across all your activities. This seems to me like the most powerful reason to think about impact. To measure the outcomes of your work, you need to choose what to measure. To choose, you need to know what’s important. To know that, you need your values and mission to be clear. By identifying, trying to measure, and then publishing the results of your work, you are constantly posing the question, ‘are we achieving what we set out to do in the most effective way possible?’. Traditional businesses have this question locked into their calendar through annual financial accounting. For charities and social organisations of all stripes, accounting for impact can keep the right priorities in focus. Verity Timmins of FRC Group, a pioneering social enterprise in Liverpool, made the case for both in a Pioneers Post article: “If creating financial value tells us we are doing things right, our analysis of social value tells us if we are doing the right things.”
You will challenge your assumptions. It’s easy to believe that what you are doing is working if you do not measure it. The multi-million pound aid debacle of the PlayPump is a great example of the seductive fallacy that if an innovation sounds brilliant, it must be brilliant. Even the best intentions can lead to more harm than good, and a commitment to honest study of the results should be ingrained in every responsible approach to social problems.
You will be held accountable. Your investors, donors, advisers, staff and most importantly the people you serve will all be able to see if you are achieving what you set out to do. I recently met a social enterprise who had not thought about their social impact in any systematic way. They had two initiatives they wanted to develop, and I asked them if they had £100,000 to spend on them, how would they divide up the money? Because they had no framework to think about their impact, they couldn’t weigh the strategic benefits of either scheme and opted for 50/50. This ‘suck-it-and-see’ approach may not be enough for the stakeholders of the future. If a funder is choosing whether to offer money to one of two otherwise equally deserving social organisations, should it pick the one which is trying to understand the social outcomes of its work, or the one that simply believes they are doing good?
You will motivate and inspire people. Finally we’re onto the touchy-feely stuff. The more tangible your impact is, the more you can shout about it, and the more confident you can feel in your work. Your staff will feel better about their work, your supporters will have more reasons to engage with you, and you have more chance of inspiring other organisations to do better.
You will strengthen the whole sector. Right now there are myriad competing measurement approaches, but as the practice matures it seems likely that we will coalesce around some shared principles and perhaps some resources, such as IRIS Metrics. That will make it possible to aggregate data across multiple organisations, and to get a better sense of the most effective use of resources. In the meantime, sharing the results of your work, and the thinking that got you there, is enormously valuable to your peers who are starting out on their journey as well as the experts monitoring the sector’s progress. Big Society Capital, a social investment wholesaler dedicated to enlarging the sector, has collected impact reports from both investors and frontline organisations on their sister site, Good Finance.
What’s The Catch?
The process is not without its risks.
You could measure the wrong things. If you pick an indicator that doesn’t relate directly to the outcome you are trying to achieve — most likely because it seems easy to measure — and you don’t review your approach regularly, you could find you are committing all of the necessary resources to the process, and receiving none of the benefits. Worse, you might be tempted to pursue less than optimal courses of action for the sake of boosting your metrics. This is one of the dangers of payment-by-results contracts, and I’ve heard off the record tales of social enterprises picking the low hanging fruit to make sure they got paid, when their true purpose was to work with the very hardest to reach cases.
You could dive in too deep. Time and money are scarce for almost all small enterprises. Is impact measurement and reporting a luxury you can afford when those hours could actually be spent helping people? If it distracts you from your mission too much in the early stages, it could begin by doing more harm than good.
You could drown in a sea of data. We live in an age obsessed with data, and it’s tempting to collect it because it looks a bit like financial information and thus seems credible. But if there is no operational need for it — if that data is not going to help you make a decision — then you have data for data’s sake, and that never helped anyone.
The way to avoid these pitfalls is to make sure you are clear about exactly what you are trying to achieve and how that outcome is most clearly manifested. Then choose an approach to impact measurement that is proportionate to the resources you have. Start as small as is still meaningful for you: collect the minimum of data that you actually need, think carefully about how that information relates to the beneficiaries of your actions, and commit to improving year on year. As the Association of Charitable Foundations recently declared, “By placing impact at the heart of their activities, funders, charities and social enterprises demonstrate a commitment to learning, proving and improving.”
Ultimately, the argument can be boiled down to this: by aligning your social mission and the needs of your business you are more likely to make the change you desire, and to do so on a sustainable footing. It might not be easy — but the ‘how’ is a topic for another article.
Author’s note: I am keen to discuss this topic, and claim no special expertise. Please get in touch by responding below.
If you’d like to know more about On Purpose and its Associate Programme, this video is a good place to start:
