Earlier this year, I was invited to lecture about impact measurement for a number of different social enterprise-related classes, both as part of academic programs and incubators. While I mostly stayed fairly practical, 'academic-lite', I thought it would be useful to give an overview of what the field of impact measurement looks like and the options and tools out there.
I've frequently come across the statement that there can be a bewildering array of tools that makes impact measurement challenging to access and apply. I would agree that it can seem confusing. At a basic level though, they all identify, collect and use/show data that indicate that social value is created. They just differ in how deeply they go into the mechanics of how social impact occurs and finding evidence of meaningful impact that occurs years into the future, and which is often are traced to many different factors.
Because impact measurement draws on different disciplines such as accounting, program evaluation, cost-benefit analysis and business performance management, there are a lot of terms out there that often are describing very similar things. This can be confusing. It is also hard to understand how much impact measurement is needed and how to go about doing it, especially when your attention and energy is focused on launching a new business.
So, here is my attempt, in five minutes, to boil down impact measurement approaches into four methods of increasing complexity (with an option for financial valuation). As a social enterprise, I think it makes most sense to tackle what is less complex to do, especially when you first start out. It can also be really beneficial to set out an impact map to guide what you measure into the future. Leave evidence-based systems models to the experts! However, it can be quite useful to know what they are finding out from this research to show that what you do is relevant and matters.
1. Standards/ Certifications: Measurement that relates to whether specified practices have been adopted that advance a social or environmental mandate. (e.g. Fair trade, Organic…) It doesn’t measure or ‘prove’ the impact of that mandate. (e.g. Standard of living, ecosystem integrity, etc.)
2. (Key) Performance Measures: Measurement tracks whether or not a social enterprise is meeting goals that relate to social / environmental mandate. This is fairly practical and often based on outputs or short-term outcomes.
3. Impact Map + Indicators: Measurement is based on a theory of how the activities of the enterprise lead to social and environmental outcomes. These can vary in complexity and be called Logic Models or Theory of Change. Sometimes external factors are included and efforts made to exclude what would have happened anyway or be attributed to others.
4. Evidence-based Models: Measurement is part of more complex models that look at impact as a system with many variables and feedbacks. These models are advanced and improved within academic disciplines. (e.g. Recidivism models, energy-economy models, etc.). This is not something done by a social enterprise, however it’s useful to look at published research and relate it to what you may do as a social enterprise.
5. Financial Valuation: Additional methods may assign a financial value to indicators that do not have a direct market value. This is done by using a variety of economic valuation techniques. This enables the calculation of ratios. (e.g. Cost benefit analysis, Social Return on Investment, Expanded Value added statement)