Top Trends 2009 #6: Measuring Social Impact

by Nathaniel Whittemore

Published December 27, 2008 @ 09:20AM PT

Number six on the list of the trends that will shape social entrepreneurship in 2009 is the move to measure social impact. 2008 saw a healthy uptick in this discussion, and in some ways, the increased focus on how measure the social value organizations create is the product of converging forces:

• On the one hand, there is greater pressure “from above.” A new generation of blended value investors like Good Capital and New Cycle Capital are quite literally adjusting their “risk-reward” equations to factor in the social value created by their investments, and need to be able to quantify that value in a rational way as they select projects. And as a the competition for nonprofit dollars increases, grant-makers are also taking the lead on reorganizing their grant-making to focus on hard evidence of impact.
• At the same time, there is pressure “from below.” In a connected, digital world, nonprofits can’t act with impunity. When programs don’t work, or disrespect local culture, or behave with hostility towards existing actors, reports can trickle up, creating major problems.
• Importantly, the social enterprise space is producing organizations that have found ways to measure their impact in rational ways, giving momentum to those looking to move beyond anecdotal evidence of success as well as putting pressure on those who don’t. Better World Books has an “impact” page on their website that spells out what they’ve achieved simply, precisely, and compellingly…in bullets.
• Finally, the economic crisis is putting new pressure on foundations and investors to be more strategic and responsible with their money. This is produced by real reductions in grant-making capacity due to dwindling endowments, but also by an emerging philanthropic meme of effectiveness with which grant-makers want to associate themselves.

There are a number of important voices in the social impact discussion to keep track of 2009. Traditional philanthropic institutions such as Hewlett and Rockefeller have been leading this conversation from within the philanthropic world for a while. By virtue of their position, they have an immense ability to influence the direction of the mission measurement conversation.

The new investors for good who are out hunting the best “blended value” social enterprises are an immense force for change, as well. To some extent, they are more nimble and adaptable than larger institutions. They are bringing fresh eyes to their investments. The first investment of Good Capital’s Social Enterprise Expansion Fund was Better World Books, the example used above.

Third party consulting, research, wealth management and certification/standards groups are the other important actors. Mission Measurement is a Chicago-based firm that helps nonprofits cut through it to clarify their purpose and create coherent impact assessment strategies. GiveWell is a charity review site that does intensive analytic research to determine which nonprofits are truly excellent. Groups like Guidestar, Charity Navigator, and Great Nonprofits all take different approaches to assessment. I think wealth management groups like Sean Stannard-Stockton’s Ensemble Capital Management are incredibly important because they’re at the front lines of helping people decide where to put their money, and have a great ability to help push the field in a more strategic direction.

So what will happen in 2009? I think that:

• The new blended value investors will be a leading voice in the field, pushing it to better understand what types of metrics can and can’t be compared across industries.
• There will be a reasonably sustained debate about the strategies different actors use to measure. One of the major fault lines will be whether it’s appropriate to compare the “social return on investment” from a group in one sector (such as education) to a group doing something entirely different (such as health).
• Someone will refocus the question of impact by finding new ways for “beneficiary voices” to be heard, particularly by using mobile technology to give on-the-ground communities affected by international development programs a direct line to the world. I hope I hope I hope.

Further reading:

• The One Thing You Need to Know Before You Donate to Charity This Holiday Season
• GiveWell Blog
• Tactical Philanthropy
• Money Well Spent: A Strategic Guide to Smart Philanthropy - by Paul Brest
• Paul Brest (Hewlett President)'s Blog