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Prediction 3: 2024 Shifting Focus On Impact Management Capacity

Enhancing Social ROI: The Essential Role of Building Impact Management Capacity in Your Portfolio.
Category
Best Practices
Written by
Unmesh Sheth
Published on
January 15, 2024

Discover how building impact management capacity is a key investment for long-term success, ensuring optimal social ROI and sustainable outcome.

Impact data capacity by ecosystem leaders

Ecosystem players' vital roles in philanthropy and social impact investment have been discussed. These ecosystem players are grantmakers, impact investors, or accelerators. They work with grantees and investees.  The topic of impact has been hot in these communities, but how to achieve it is all about passing the buck. Until recently, there has been much discussion but little action. People have not developed impact management capacity within this sector.

Traditional impact evaluation methods involved hiring costly impact evaluators. They often go through rigorous, sometimes lean, approaches. Common practices include designing data collection processes, hiring enumerators, and collecting data. After collecting all the data, they aggregate the results and deliver them as reports. If applicable, the report will include benchmarking.

This approach was not only expensive and time-consuming but often ineffective. It offered little practical help to organizations.

This is often a one-time activity. It does not benefit social purpose organizations. They are not getting continuous feedback from the stakeholders they serve. In other words, the entire priority of impact management is completely backward.

Ecosystem players should provide technical help to organizations. This will help the organizations build deeper impact management data capacities.

Myth of Impact Management Data Capacity

Creating impact management data capacity has faced many challenges:

  • Cost of impact evaluation
  • Inconsistency in reporting, and
  • Practical usefulness of the data gathered.

As a result, funders often pass the buck to the grantee. They rely on one-time evaluations from third-party evaluators. They collect yearly metrics results from portfolio companies. Yet, these reports are hardly actionable. They design them for compliance purposes rather than for improvement.  For a long time, prestigious firms have dominated the field of impact reporting. Yet, their outputs often resembled smoke screens rather than actionable insights.

The Turning Point: Platforms are ready. Funders, Are you ready?

In today's world, data is king. It drives decision-making, shapes strategies, and measures success. This is especially true in the impact ecosystem. Funders and social purpose organizations must collaborate to achieve true impact. There, organizations focus on creating positive social and environmental change. Yet, many organizations still struggle to collect, analyze, and use data. They struggle to use data to drive their impact. This is where the concept of impact data capacity comes into play.

Impact data capacity refers to an organization's ability to collect, manage, and analyze data. This capacity helps the organization measure and improve its impact. It involves having the right tools, processes, and skills to optimize data use. Organizations risk falling behind in the ever-evolving impact landscape. This happens without a strong data capacity.

Now, there's a shift in the wind. Platforms like Sopact Sense are revolutionizing the way feedback analytics. These tools enable social purpose organizations to collect and analyze feedback within minutes, not months.  This approach enables stakeholders to voice their opinions more at a lower cost. This approach benefits small and medium-sized enterprises (SMEs) and nonprofits. The benefits include:

  • Sharing insights with confidence, depth, and accuracy.
  • Social purpose organizations can divide more time for high-value work. This includes insight analysis, storytelling, and report building.
  • Gain insights up to 40 times faster and respond to queries more.
  • Identifying the impact of specific themes in impact metrics.
  • Automatically identify new emergent themes.

Shifting winds, but beginning.

We see a need to have affordable, consistent, and easier-to-use impact measurement. To understand better, let's first take a look at an organization. Then, we can look at the challenges to understand the details.

The evidence of this shift is visible in various organizations worldwide. To illustrate, let's look at a couple of real-life case studies of INGO (not named) with the following program goals.

  1. Promoting sustainable development:. INGO contributes to global sustainable development goals through various initiatives.
  2. Community Empowerment: INGO empowers local communities by providing resources and support. This fosters self-sufficiency and growth.
  3. Innovative Solutions: Implementing innovative solutions to address complex social, environmental, and economic challenges.

How INGO Works with Partners for Data Collection, Monitoring, and Evaluation:

  • Partnership Establishment:  INGO collaborates with various partners, including NGOs, government bodies, and local communities. This ensures a broad approach to data collection and project implementation.
  • Data Collection Strategies: INGO gathers relevant data to assess the needs and impacts of their initiatives. They use traditional methods, such as surveys and interviews.
  • Capacity Building:  They work with partners to build their data collection and analysis capacity. This ensures sustainability and local ownership of projects.
  • Monitoring Progress: They conduct regular monitoring to track the progress of initiatives. The monitoring uses indicators aligned with the initiatives' goals.
  • Evaluation and Feedback: INGO engages in continuous evaluation of its programs. They incorporate feedback from partners and beneficiaries to refine and improve their strategies.

Challenges Faced by INGOs in Data Collection and Impact Evaluation:

  1. Varied Data Collection and Reporting Methods: INGOs often struggle with different partners' diverse data collection and reporting approaches. This makes it difficult to gather consistent, actionable insights.
  2. Scarce Longitudinal Data Collection: Only a few partners collect longitudinal data. They use it to understand changes over time. Those who do often face time-consuming and inconsistent reporting issues.
  3. Resource Constraints for Data Management:  Most teams within these INGOs need dedicated members. These members are responsible for collecting, aggregating, and analyzing data. This poses a significant challenge to efficient data management.
  4. INGO partners lack knowledge and expertise in impact management tools and techniques. This impedes their effective evaluation of programs and initiatives.
In the pursuit of meaningful change, it's essential to evolve beyond traditional methodologies. By embracing innovative platforms and prioritizing data optimization, organizations can transform their impact management into a tool for real, sustainable progress.

Risks of Not Advancing Impact Data Capacity

The risks of not advancing impact data capacity are significant. A study by Harvard Business School found that organizations with low data capacity were less efficient and less effective than those with high data capacity. This means that organizations without strong data capacity are not only less efficient in their operations. They are also less effective in achieving their intended impact.

One of the main risks of not advancing impact data capacity is the potential loss of efficiency. Organizations may struggle to collect and manage data without the right tools and processes. This wastes time and resources. It can hinder decision-making and lead to missed opportunities.

Another risk is the potential loss of effectiveness. Organizations that lack data analysis skills may struggle to understand their impact and to make informed decisions. This can lead to a lack of direction and a decrease in the effectiveness of their programs and initiatives.

According to Salesforce.org’s Nonprofit Trends Report, only 22% of social impact organizations have high data maturity today.

From “Data for Good” to “Data for Impact”

The Need for Data Optimization

Besides conducting a capacity analysis, organizations must also focus on data optimization. This involves implementing tools and processes to streamline data collection and analysis. It also involves developing a data-driven culture within the organization. Organizations can improve efficiency and effectiveness by optimizing data usage. This leads to a greater impact.

In conclusion, the risks of not advancing impact data capacity are significant. Organizations must focus on conducting a capacity analysis. They should also put data optimization strategies in place. This will help them stay competitive in the impact ecosystem. By doing so, they can maximize their potential for creating positive change in the world.

Conclusion

The 2024 leap in the social impact ecosystem marks a significant turning point. Ecosystem players now have new tools and methodologies. They are better positioned to redefine their impact. This progress promises a more effective, efficient, and impactful future. It will benefit social enterprises and nonprofits worldwide.

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