Are you a mission-driven organization? Are you an asset manager like Impact Fund, Funds of Fund, Impact Advisor, Social Impact Accelerator, or Foundation? Are you a nonprofit or social enterprise that works with stakeholders, beneficiaries, or employees? Do you want to raise impact capital or grant for your social impact mission? This article will show you different techniques to build impact evidence. Data collection and analytics can be used once you’ve defined your impact strategy. These techniques are simple but powerful in demonstrating impact to project funders. So, without further ado, let's dive into eight critical patterns of showing impact - the lean data way!
Raising capital through impact evidence.
First, who are the stakeholders of impact evidence? They can be Mission-driven organizations, Asset Managers (Impact Funds), Funds of Funds, Impact Advisors, Social Impact Accelerators, Assets (Social Business), Foundations, Social Entrepreneurs, Non-profits, etc.
Watch a step-by-step process for creating an impact strategy if you are starting.
Once you have an effective impact strategy, let's start with the next step, lean data collection, analytics, and learning strategy.
Why do we need an effective impact data analysis?
- You are required to manage data from different sources (both online and offline)
- You are Extracting insights from the variety of data scattered all over
- You have to communicate effectively with your donors and funders on how impactful your programs are
- You have considerable staff turnover and are short of human resources
Building impact evidence with impact data
1. Define impact data strategy
Many organizations need to start by defining an impact strategy. Whether you are a funder or an organization working in the field, you might want to align with multiple frameworks, such as IRIS, Impact Management Projects, and Sustainable Development Goals.
You can decide to use a Theory of Change model, a Logic Framework, or the Five Dimensions of Impact; the real goal is to know what is changing in the community because of your intervention.
Primary User: Defining a strategy is the perfect option if your organization has been around for some time but has only collected operational or financial data so far. It also works well for young social enterprises and new funds.
Reason: Defining the impact data strategy will dictate how your organization collects and aggregates data. Who are your stakeholders? Maybe grantees/investees or the end beneficiaries. What are the KPIs that we need to observe over time? Does an organization need to invest in cultivating a data culture?
Benefit: Having a strategy shows funders and donors that you know what you're working to accomplish and gives them a way to monitor how far you are of your community improvement goals. This will also help you identify the data gaps.
Challenges: You must be ready to allocate some budget towards data collection and reporting tools. Whether you collect data from your grantees/investees or your end beneficiaries, don't underestimate the effort to collect high-quality outcome results.
2. Programmatic reporting
Primary User: Organizations that may have collected data on stakeholders such as demography, which includes race, sex, locality, religion, etc., and or financial data. If your organization doesn't have the resources to undertake a completely new Impact Strategy, you can still use the data collected currently to derive some insights into your program's performance.
Reason: You have to start somewhere, and your funders and donors will appreciate that you are at least trying to understand who your stakeholders are and what direct benefits they are receiving from your services.
Benefit: You will get a basic understanding of your beneficiaries and what should be measured as outcomes in the future when your organization is ready.
Challenges: You might require expert help to figure out how to transform programmatic or output data into relevant KPIs.
3. Stakeholder's voice
Primary User: If your organization has experience collecting quantitative data, you might want to grow into collecting other types of data, such as qualitative data.
Reason: It's essential to understand if our stakeholders have the same perception of the services that we think they have from the quantitative data we collect. Sometimes we find surprises.
Benefit: Collecting this kind of data helps you understand what they are saying, thinking, and feeling about the services you are providing them. In the end, numbers don't mean anything if we cannot alleviate the problem we're addressing.
Challenges: This requires well-thought-through questions that will give valuable information, which might require some expert help. Also, it would help if you had the right balance between qualitative and quantitative questions, stories from the field, or Asset Manager annotations to understand the context fully.
4. Performance improvement
Primary User: Incubators and accelerators with a short-term relationship with the underlying entrepreneurs.
Reason: In this case, it might be hard to define outcome metrics since the contact happens for such a short period and in a very early stage of the entrepreneurs.
Benefit: Measuring the performance of the incubator or accelerator in terms of how useful their intervention is to get funding, acquire new business skills, or get in contact with advisors, might be enough at this stage.
Challenges: It still requires well-defined metrics that will be applied at the beginning of the intervention as a baseline and then at the end of six months after the intervention is over to understand what improved for the community development organization during that time.
5. Outcome improvement
Primary User: Organizations that work directly with the stakeholders and collect data to measure outcome performance over time.
Reason: It is crucial to understand our impact on a group of people and pointers on how individuals experience the impact, which is very helpful in some cases. For instance, using averages to understand the impact is dangerous because it can falsely skew the positive results.
Benefits: While cohort analysis helps us understand the overall impact the services had on the people, individual performance gives us a deeper understanding of how the analysis may be skewed when the impact is seen only from the perspective of the cohort.
Challenges: This is not simple. A thorough analysis process requires knowledge of sophisticated tools and methodologies to learn from the data you may have collected. A lack of such tools and methodologies can quickly discourage an organization from thinking in that direction.
6. Adopting five dimensions of the Impact Management Project
Primary User: Large and small organizations are looking at ways to start their Impact management journey. The Dutch government wants to create jobs in the coconut and palm oil industry in East Africa. For new impact investments to flow, the sector expects impact evidence that everyone understands. One of the organizations we are working with intends to adopt IMP 5 dimensions (What, Who, How Much, Contribution, and Risk) holistically collect and report on impact evidence to attract these investments and help the farmers establish a sustainable around coconut and palm oil business.
Reason: Virtually every successful organization, primarily motivated by the high financial outcome, puts much effort into understanding how their product benefits the stakeholders. The same level of rigor is ideal for impact-driven organizations, as well. To be successful, learning about is no longer optional.
Benefits: This methodology helps the organization concentrate on the stakeholders and their impact on them rather than thinking about measuring the impact they have on them.
Challenges: It may seem complex for an organization to start measuring impact. However, they could now start seamlessly by following IMP's 5 dimensions of impact.
7. Social Return On Investment (SROI)
Primary User: This option is good for more mature organizations with robust stakeholder data collection.
Reason: In the case of Asset Managers, it only makes sense if you enable your entrepreneurs or grantees to collect high-quality data, aggregate it, analyze it, and perform all the calculations in a not-so-overwhelming way. Also, it's mainly used to compare entirely different investments, but you still want to compare the "amount of impact produced by each of them."
In the case of organizations working directly with stakeholders, it only makes sense if you have the resources to define high-quality financial proxies relevant to your geography.
Benefit: It gives a financial valuation of the impact generated by an organization, which is easy to understand and compare to other very different organizations.
Challenges: Getting that valuation is time-consuming and requires a person with enough knowledge of the SROI methodology defined by Social Value International. Calculating SROI is only possible once you have impact data collection and management processes. It also requires a proper financial proxy for the calculation.
8. Aggregating results from partners
Primary User: Asset Manager and Asset Owners
Reason: For these kinds of organizations, it can be hard to create a strategy that involves data collection directly from the end beneficiaries or even defining outcome metrics. It is essential to understand the level of maturity of their underlying organizations. If we're talking about entrepreneurs with just a few years in the market, it is possible to start with some output metrics that can tell us at a high level the number of jobs created and gender distribution in management positions, for example. If we are talking about organizations with more experience in data collection, you can jointly create a strategy by Impact Theme with the 3 or 4 basic metrics per theme to understand the portfolio impact.
Benefits: Collecting these results directly from the partners ensures they also have a process to obtain this data from their communities.
Challenges:The metrics' granularity level will depend on the level of maturity of the underlying organizations and the relationship with the Asset Manager/Owner.
Following the robust impact data strategy and collecting valuable evidence can attract endless deal flow for the funders. They can identify, compare, and fund (or invest) high-impact projects with a big change. The organization can also learn from its data and allocate funds to the programs generating more profound or scaled impact. Impact evidence is a must to fulfill the challenges identified by global goals; impact evidence is a must to have and is not optional.
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