Is it worth it? How can I argue for the support I need? Are the promised benefits of this effort being realized? Those seeking to make a meaningful difference in this world ask variations of these questions of ourselves as we invest our talent, time, and relationships into causes we believe in, and we ask them on multi-million-dollar initiatives for which we raise — and report on — capital.
The bottom line: How can we be sure we’re making the difference we target?
I have personally grappled with this question — in its many forms — my whole life, including 2+ decades of creating transformation within and on behalf of nonprofits, governments, private, and listed companies across six continents.
Image credit: Arek Socha from Pixabay
Depending on your circles, you may be hearing more and more about impact: impact models, metrics, impact reporting, social impact indicators, and the like.
The good news: you can know your impact. Allow me to take you through it.
In this post
I suspect that this post, more than most, will meet you, my reader/listener, at a much greater range of starting points. You may be asking the question above for the first time, or you may have “impact” in your job title. How can we all get on the same page?
Part of the problem with our work of remaking the world for the better is how difficult it can be to enter the conversation and the community. We can’t have that. So, please allow me to try to rise to the challenge. Please use comments to help connect any dots I leave hanging, so that we can all benefit from greater and more actionable clarity. Thank you!
In this post, I hope to demystify the concepts and explain why you must create an impact model for your efforts (aka venture, project or cause). If you find yourself explaining impact to others, you may find this post helps expand your toolkit. In a later post, I will guide you through the process of building an impact model. Stick with me, and you will get that much needed certainty over whether you are making the difference you target.
First: on the jargon around “impact”
Like with any groundswell occurring simultaneously around the world, this topic is fraught with jargon: social impact, social return on investment, the “s” in ESG, etc. While some will argue for the absolute correctness of one term over another, after eight international moves and work on six continents, I am not one of them. Plus, English is not my first language, so I am never as attached to words as many expect me to be, as a “through leader” and a writer.
As usual, for me “impact” is not what it says but what it does. Simply put, “impact” refers to making a meaningful difference.
Understand the jargon but focus on the content, not the semantics, using whatever words resonate with you, your team, and your audience.
Why do we care about impact?
In basic barter economies, one can only make a living by creating value that is both in demand and obvious, such as horseshoes, clothes, or midwifery. The subjective assessment of value is a product of a more complex equation: salt or imported silks commanded premium prices because they signified status. Today, neither price nor popularity mark genuine value. Sadly, a significant proportion of economic turnover has the opposite effect. Plastic bags, palm oil, sugar and trans fats in foods, and disposable fashion made in sweatshops clog our arteries and landfills and sabotage ecosystems while leaving no real benefit behind.
As our life gets more complex, it becomes harder to trace the impact of any action. Faced with this uncertainty, both government and the third sector — industry wasn’t being held accountable yet — settled for accounting for activities. If there was a correlation between a child’s access to a tablet or a laptop and that child’s performance in school, an organization may have focused on distributing tablets. But how much of a difference did that tablet make in a child’s education if the child (a) had no wi-fi, (b) was living through adverse childhood experiences (ACEs) like domestic violence, or (c) brought home the only device the entire family depended on for income, social connectivity, and entertainment?
Collectively, we did not even know to care about outcomes until relatively recently. So, we settled for busyness and throughput.
However rational and well-intentioned, failure to close the loop between throughput and impact often leads to ineffective activity that sinks immense amounts of capital without a meaningful return. Sadly, failing to evaluate outcomes leads to underinvestment in what really matters in society, but that’s not the worst of it. Too often, public and nonprofit funds have fueled a greater dependency on such funds or even made things worse. The false sense of impact created by throughput-focused reporting ultimately breaks public trust.
Through Dead Aid (2010),[1] Dambisa Moyo shone the first floodlight onto the flaw of the entrenched nonprofit model: its celebration of throughput (for example, of blankets or meals) rather than of breaking cycles of disadvantage. There are undoubtedly times to deliver bottled water, blankets, and canned food, but this approach should rarely extend beyond emergency response.
What is “impact”?
Impact refers to altruistic benefits and is the “end” in the “means to an end.” To the extent that a project’s or an organization’s core mission lies in the advancement of altruistic goals, impact measurement merges with the measurement of that project’s or organization’s overall performance.
Simply put, impact is the difference between effort and outcome where outcome is the change you — as an individual, an entrepreneur, or an organization — wish to create in the world.
Sports offer a good analogy. While a lot of attention is devoted to what players do on, say, the soccer field, it is the goals that decide the game.
This analogy also illustrates (yes, here comes jargon! Sorry…) the difference between attribution (direct impact) and contribution (indirect impact or influence), and the essential role of both. No matter who scores the goal, they only occur consistently if everybody on the team plays their positions well, contributing, and going out of their way to aid each other. In fact, while the general public may only know the names of the players who do the final picture-worthy act, everybody who matters knows who planned the play, who passed, who defended, and so on.
There is no impact without contribution any more than there is a goal without a team.
With most impact worth targeting, many of us are not the scorer but a (let’s hope vital) team member. We influence rather than control the outcome. It is rare that direct impacts are the focus of a project or an organization. The US General Services Administration, the country’s largest owner of real estate, and Fortune 500 companies come to mind. If every aspect of their operations (from the buildings they occupy to their sourcing of paper towels, coffee, and stationary) were aligned to ambitious impact goals, such organizations can recast global systems.
For almost everybody else, direct impact is likely to pale by comparison to indirect impact, or influence. But that is not to say that small direct impact — those paper towels, that coffee, how you get to work, whether it is powered by clean energy — is irrelevant. Even if you only have five staff or five square meters to your name, you better walk the talk or forfeit the credibility to influence the world. Even if the difference you make in your small operations is but a drop in the ocean, you absolutely must advance each of your impact goals through everything you can directly control. Moreover, your direct impact is your live experiment. Learn from it both the tactics and the empathy it takes to create transformation so that you can lead others.
What is “social impact?”
“Social impact” has become a shorthand for social, environmental, and economic outcomes, acknowledging that they tend to converge. Social impact is distinct from the return on investment (ROI) or other metrics meant to capture the direct benefit of an activity to the organization.
If input doesn’t directly cause an outcome, how do we know if we are making the difference we target?
I spent countless hours supporting changemakers in launching and scaling their transformational ventures; on coaching; on writing these posts so that more of you can benefit from what we’re learning. How do I assess whether my effort is worthwhile? How do you — as a social worker, engineer, manufacturer, business executive, elected official, or nonprofit leader — confirm, to yourself and your stakeholders, that your venture has made the difference that compelled all of you to invest time, money, goodwill, and other resources?
An investor or donor may look at it from a different perspective. For them, if what we do does not necessarily translate into why we do it in the first place, how can we make sure this venture is productive, not just busy? How do we ensure accountability?
The answer to these questions is an impact model.
What is an impact model?
An impact model is how you can assess whether your mission-driven venture (project, organization, cause) is making the difference for which you created it in the first place.
An impact model is effectively an accounting system that makes the connections between inputs (for example, free tablets), activities (for example, the number of tablets distributed or events held), outputs (for example, time spent learning, literacy and numeracy levels, or graduation rates), and impacts (for example, whether that child ended up breaking out of the intergenerational cycle of disadvantage and poverty) easy to understand and act upon.
An impact model anticipates, monitors, and reports on net impact. In this way, an impact model is like a financial model or a budget, except that it tracks social, environmental, and economic gains rather than financial ones.
An upcoming post will take you through the steps of building an impact model, grounding these concepts in your reality.
Collective impact models
Also known as collaborative impact models, collective impact models are shared by several actors/projects/organizations and are current international best practice. Moreover, they are lauded as the future of social change because of their ability to activate institutional self-interest in pursuit of complex (global or intersectional) goals that any single actor has an excuse not to tackle individually. Collective impact models acknowledge that few entities have sufficient influence to deliver the impact that matters. Here, several stakeholders across industry, government, and the third sector agree to collaborate in a structured way towards — and to be jointly assessed against — meaningful shared metrics. Like any negotiated multi-party arrangement, collective impact models depend on mutually reinforcing activities.
While it is broadly acknowledged that especially going forward, collaboration and partnerships are necessary for effective progress, silos die hard, and examples of collective impact models remain few. But not for long, if you and I can help it.
Can all value be measured?
Sadly, not yet, but the consensus is: persevere.
I am a part of a global community of practice that is pushing the boundaries on what we can legitimately and meaningfully measure. The absence of data for an indicator – let alone of the underlying methodology — may be a symptom of the very problem we are here to solve. Questioning and pushing for progress are often impactful in and of themselves and may very well be your venture’s crowning contribution. That said, some thought leaders argue that not all impact should be measured. Even as we collectively pursue more accurate and accountable impact models, many pursuits are worthy of our best effort regardless.
The most effective impact models expand on financial models to track impact as a function of financial input. This allows reporting on “social impact return on investment” (SIROI), another piece of jargon you may need to know.
How does an impact model differ from business-as-usual?
Even at the best-practice level, organizations stop at tracking their inputs and outputs. Both are essential but insufficient. With impact metrics, an impact model will take the value of any current metrics to the next level. It will also become a lens for refining and resourcing the inputs and outputs that contribute to the targeted impact.
With traditional reporting, it is tempting to share polished stories and justify actions. An impact model sets the venture on a path less traveled, linking it with peers around the world. An impact model makes room for authenticity and places focus on improving, not just proving.
An impact model makes room for authenticity and places focus on improving, not just proving.
Impact is often a “long game.” Contrary to the demands of traditional quarterly reports, worthy goals may take a few years of effort before meaningful impact can be documented. In my next post, I will illustrate this on Pollinate Group, an award-winning social enterprise serving the poorest of the poor in Nepal and India.
The benefits of an impact model
Both the development process and the final product have benefits:
Reset what is possible, reaching further than may be thought possible.
Align activities and teams to your venture’s goals.
Empower your best people to amplify each other’s contribution towards shared goals.
Declutter your operations, eliminating redundancy, waste, and noise.
Dramatically increase effectiveness against global or intersectional priorities.
Qualify for impact-focused funding (may be called “outcomes-based”).
Enhance public trust and approval due to clear and compelling reporting.
With a collective impact model, take all that to the next level while saving money through economies of scale.
All in all, building an impact model may be the best use of your time as a changemaker. Whether you build an impact model for yourself, a project, or a whole industry, it will allow you to focus your efforts and ultimately gauge whether they make the difference that motivated you in the first place.
So, please reflect on this content, ask questions in comments, and look out for the next post that will guide you through the process!
[1] Moyo, D. (2010). Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux.
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