Is it possible to determine true impact simply by defining and aggregating metrics? Metric-based reports are often nothing more than marketing exercises that disregard stakeholder-driven outcomes. It is just an output reporting exercise to investors if social purpose organizations and programs do not have outcomes-based strategies.
Outcome-based strategies are critical for determining the impact of an organization.
The significant advantage of stakeholder impact feedback for any organization is that it allows for continuous improvement of their products and services. Unfortunately, social purpose organizations are far behind what for-profit businesses figured out a long time ago. Impact data used in organization impact measurement and management processes are usually stale (one or two years old). It is insufficient. In this article, we will discuss what different organizations can do to collect meaningful data aligned with Impact experiments.
In today's economy, impact investing is growing and increasingly focused on creating net positive impact. Typically we assess investments from two perspectives: risk and return. However, in this changing world, the third dimension is social impact.
Considering both positive and negative externalities, how can investors focus on outcomes and how much meaningful change they create?
- Ensure that the nonprofits or social enterprises they invest in have a budget for impact measurement and management. Accountability is hard to demand and achieve without systematic data collection and learning at the source.
- Track and use impact learnings for investment decisions
- Think of SROI not as a number but as the impact evidence that is produced by the investees
As ESG consideration is on the rise, the future of ESG investing will demand accountability and the capacity to directly connect the investment and create a material change in our communities and ecosystems.
Read More: Putting the “S” in ESG Social
Social Impact Accelerators
Social impact accelerators or incubators have a mission to nurture and grow social enterprises. Depending on the level of maturity (early stage to mature), social enterprises often regularly collect financial and social impact metrics. We strongly suggest that Social Impact Accelerators have the additional responsibility of improving social entrepreneurs' learning capacity from their data. For example, Miller Center for social entrepreneurship invested in sixteen social enterprises in 2021 to increase their IMM capacity. The learnings are,
- Avoid aggregating core metrics. Instead, focus on additionality by increasing the impact management capacity of supported enterprises.
- Support nonprofits and enterprises to understand their outcomes and collect appropriate stakeholder data by mentoring and making necessary tools available to them
- Track impact specific to each nonprofit/enterprise because they all can be working in different impact areas. It will help prevent the burden of collecting (not material) non-decision-making metrics.
Nonprofits / Social Enterprises
It is about time that nonprofits and social enterprises take control of their impact learning process. Collect and use data that will help you serve your stakeholders better. As we saw during COVID, many had to listen to their stakeholders and change their programs to provide relief then make a change. Here, the context is more important than SROI type calculation, but it builds trust in the long run. Tips for all nonprofits and social enterprises are,
- Create a budget for your impact measurement and management process. Having impact evidence available all the time can help you attract new funding.
- Define key outcomes and key indicators which are valuable to you to scale and not just for reporting
- Create capacity to collect stakeholder data and have a system to learn from it to make operational or program decisions
As an ongoing practice, create the habit of using impact data for business decisions. For example, an organization providing affordable housing should continuously see whom they are serving and whom they are leaving behind? If housing creates gentrification, how can it reach out to the right demographic? Just collecting the number of units built and the number of people served will not bring insight into making operational decisions.