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Complete Guide to Impact Measurement for Businesses

Social impact is the new business imperative.

Taking a stand on what their contribution to society is, has become vital for companies in all industries and sectors. Even small and mid-sized companies are working to embed social good within their business.  But making a positive impact is only half the job. The other half consists of measuring, evaluating and reporting said impact.

We’ve seen many small businesses and startups struggle to figure out how exactly to measure the impact of their social impact efforts. With limited resources, and without a dedicated Corporate Social Responsibility (CSR) team, measuring the impact of their work can seem like a daunting process.

It doesn’t have to be though…

The following guide will give you a clear answer on what impact measurement is, what it means for your company and how measuring impact can help you create the momentum for more impact — and growth.

KEY DEFINITIONS

Social Impact

The effects an organisation’s activities have on the well-being of society.

Impact Measurement

The process that allows organisations to show the social value delivered to its beneficiaries and society as a whole. This process must be supported by an Impact Strategy and due Impact Assessment.

Impact Strategy

A structured action plan, that guides an organisation’s activities towards their desired impact goals. An Impact strategy typically includes a Theory of Change, Targets and Indicators, Standard and Custom Metrics, a selection of Data Collection methods and a Reporting System.  

Impact Assessment (or impact evaluation)

A means of measuring the effectiveness of an organisation’s activities, and judging the significance of the changes brought about by those activities.

CHARACTERISTICS

Social impact organisations (i.e.: nonprofits, foundations, etc) are often asked the question “what do you do?” in the context of impact creation.

Common answers would simply cover the organisation’s main activities and the groups or causes it helps. An ideal answer, however, would demonstrate effectively the real impact of the organisation’s initiatives.

The same applies to businesses. To be successful, the impact measurement process must have the following characteristics:

  • Long-term: Making an impact means creating positive change for a sustained period. With that in mind, impact measurement will necessarily have to be a long-term process.
  • Comparative: Impact Measurement should allow for relevant comparison. This will enable accuracy in understanding whether an initiative has made a difference in comparison to previous interventions.
  • Robust: To effectively measure the impact of your business’ initiatives, long term and comparative approaches must be prioritised. This will allow for accurate, robust results. 

2 TYPES OF IMPACT 

Businesses use impact measurement to better understand the impact of their projects, programmes and policies. These will potentially affect people at different scales.

There are 2 different types of impact companies must be aware of:

  1. Programme-level impact is the type of impact your services or the social programmes of your company have on the people who directly benefit from them.
  2. Community-level impact is the type of impact that all stakeholders, working together, have on the community or group you wish to impact.

The reason we separate these types of impact is that companies are not to be held solely responsible for creating community-level impact. Community wellbeing relies on a wide range of groups, individuals, agencies, organisations, and industries.  Therefore, companies can only be held responsible for the impact and performance of the services and programmes that they manage. This means the focus of your company must be on measuring Programme-level impact.

5 REASONS TO MEASURE THE IMPACT OF YOUR BUSINESS

  1. Transparency

    Showing that your business is creating positive change and is willing to be held accountable for its performance increases engagement from customers, investors, the media and the general public. It will also motivate your team as they see the impact they are contributing towards, and it will help you attract the best talent. 
  2. Outreach

    Communicating your progress effectively will build engagement with key stakeholders and will most likely help you expand your audience/customer base. Displaying reliable data will position you as an outstanding player in your industry and among impact-driven organisations.
  3. Achieving your purpose

    As a business with social impact goals, your mission and purpose are as important as your financial goals. Delivering on that mission is why you carry out your work. Therefore having definitive proof of how you are achieving your aims and to what extent is essential.
  4. Funding

    If you’re seeking funding, appropriately measuring your impact will ensure you stand out from the crowd in competitive fundraising processes. Demonstrating exactly how you deliver on your mission can make the difference between accessing funding and missing a valuable opportunity.
  5. Competitive advantage

    The emphasis on measuring impact is only getting stronger. You’re not the only company in your industry working towards a certain cause, your competitors probably are too. However, while most companies are simply making mention of their social impact work, very few are evidencing their impact.

WHO SHOULD BE MEASURING SOCIAL IMPACT?

The simple answer is everyone. Everyone who cares about making a positive impact on society through their work. Let’s look closer into it:

  • For-profit organisations, including corporations, large companies, small and medium-sized businesses, social enterprises and startups in general.
  • Not-for-profit organisations, such as foundations, nonprofits, sustainable development organisations.
  • Other entities concerned with social impact, such as investors and government institutions. 

2 WAYS OF EVIDENCING SOCIAL IMPACT

There are two kinds of evidence you can gather to measure the impact or your company’s initiatives:

  1. Anecdotal evidence: the method of collecting data using techniques such as case studies, interviews, life histories to understand why as well as what. The output is Stories.
  2. Quantitative measurement: the method of collecting data using surveys, group measures and analysing statistics. The output is Numbers.

WHAT SHOULD YOUR COMPANY MEASURE, EXACTLY?

The best way to establish what is to be measured is to get clear on your company’s values, vision, aims and objectives. This will help your company remain authentic and transparent as the impact will be measured in terms of its core values.

Once you’ve outlined your company’s overall mission you can move on to establishing the indicators that will give structure to your impact measurement process.

Indicators are needed to determine if you’re achieving your objectives. They will serve as measurable points of reference. 

Types of Indicators

There are two types of indicators.

  1. Direct Indicators account for things that you can see and count. For example, if you’re supporting an education project you may want to know how many of your participants have secured an apprenticeship. But this is not always so easy. Often you’ll be dealing with much less tangible things. This is why you need indirect indicators.
  2. Indirect Indicators account for qualitative factors. For example, you might see changes in behaviour or attitude amongst your target group.

When is the best time to develop indicators?

Ideally, indicators would be developed at the beginning of the project, after all, you need them to determine whether or not objectives have been achieved. You may find that you need to develop additional indicators. You can do this as you go along.

Developing useful indicators

To make sure indicators are useful, they should follow the SMART criteria. That is Specific, Measurable, Accepter, Realistic and Time-limited.

Establishing baselines

When compiling a set of indicators for a project, it’s important to remember that it’s not about the number of indicators, but about the meaningful mix. Even the best indicators are of no use without a baseline for comparison. For example: With a tutoring project, if you don’t know student’s grades before they started, you can’t assess your results.

Don’t worry if you’re getting a late start on establishing baselines. You can always ask participants about their grades before they started. If that doesn’t work, you can take the information you have now and use that as a baseline for future comparison.

WHEN TO MEASURE SOCIAL IMPACT?

Impact measurement is not a one-time endeavour. it’s rather an ongoing process, active during the whole project (or programme) cycle. In either of the following 3 situations, you will want to find out whether changes are sustained in the long-term. For example: whether participants got a job as a result of training. This can be difficult if beneficiaries are hard to track. Make sure participants provide their contact information and agree to stay in touch in the future.

One-off activities

For one-off activities such as workshops, seminars and bootcamps, it’s best to seek feedback on the day so participants still feel close to the impact. Try the ‘before’ and ‘after’ approach to be able to see the journey in perspective.

Small/Medium-scale
projects or programmes

If you want to measure the impact of a particular project with a specific group of beneficiaries, we recommend that you measure before the project starts and after it has finished. This will make it easy for you to see how your company made a difference.

Large-scale projects or programmes

For companies working with large numbers over long periods, the best way to approach impact measurement is to undertake randomised control trials (RCTs). This will allow you to benchmark your participants with a group not participating in your programme or receiving your services.

THE 5-STEP PROCESS OF IMPACT MEASUREMENT 

These are the mandatory steps for any business that wishes to measure their impact.

  1. Creating a Theory of Change (ToC)

The theory of change is the foundation of any social impact measurement system. It’s a visualisation of how the day-to-day activities of your company relate to its overall mission or long-term goals in terms of outcomes for the areas your company works in. It’s key in deciding what exactly should be measured.

2. Establishing Key Performance Indicators (KPIs)

Key Performance Indicators are the metrics you will use to track the success of your company towards its social impact goals. KPIs are an important factor in guiding your company’s social impact. They are not goals and targets themselves but they are measurements. 

3. Defining Methods for data collection 

Surveys are the most common method, and a well-designed survey will give way to accurate, valid, and reliable information. Working with well-structured data collection methods will ultimately help you improve your social impact work.

4. Collecting and Analysing data

Your data analysis should inquire and answer the following questions: ‘have the results been attained?’, ‘have the attained results been understood/appreciated by the stakeholders?’, ‘do the attained results have real value for the stakeholders?’.

The obtained value must be considered after the costs to obtain it. The final answer that can be obtained is ‘has the desired change been obtained? To what extent?’.

5. Reporting, learning and improving

A fundamental phase is that of communication and of the final sharing of what was obtained by the process of measuring. This allows to learn and possibly to perfect the process, to improve the interventions (let’s remember that the evaluation is not for its own sake). The reporting must be prepared and studied keeping in mind the audience and the communicative objects.

AN EXAMPLE TO GET YOU STARTED 

Consider Priya, a social entrepreneur whose mission is to improve air quality and health by selling low-cost solar panels to households in rural India. In the past, she got investors by pointing to her inputs for example dollars raised, and her outputs: the number of solar panels installed. However, investors increasingly are demanding a more rigorous valuation of her company’s actual social impact.

The first step is to identify which Key Performance Indicators for quantifiable objectives to track. The second step is to build your organisation’s capacity to collect and measure data. 

After gathering an initial round of data, one of Priya’s findings is that homes equipped with her solar panels experience improve indoor air quality with a 70% reduction in noxious gasses since the family is no longer dependant on kerosene lamps and generations.

After collecting data over a longer period, she finds that children from homes equipped with her solar panels experience a 20% decrease in acute respiratory conditions. This is an impact. These metrics are more challenging to quantify and require a long-term vision but they’re invaluable in achieving sustainability and scalability. 

By allocating the resources to collect these deeper data, Priya is now educed with a two-sided tool. Not only can she prove to investors the social return o investment (SROI) but she can also use the data to better manage operations, improve the product she provides and identify opportunities to scale.

In sum, this feedback loop enables Priya to better fulfil her organisation’s core mission of improving the health of rural populations. Ultimately impact measurement is illuminating effective solutions to social problems like never before. 

KEY TAKEAWAYS 

  • Contrary to what the denomination “Corporate Social Responsibility” suggests, social impact is not the concern of corporations only. Businesses of all sizes, across all industries and sectors, are increasingly incorporating impact into their overall strategy.
  • Social impact has real business value. While companies that are considered responsible benefit in many ways including better reputation, attracting mission-driven talent, and increasing market share, the real value goes to companies that understand their social purpose and benefit from making measurable social change. 
  • For decades, companies with social impact goals have relied on reporting just inputs and outputs like employees hired or products donated to prove social value. But these numbers don’t demonstrate social progress.
  • In a nutshell, Impact Measurement is all about helping companies improve the way they create social impact. By understanding what’s going well and what’s not, you can take steps to better serve the people and causes you support. 
  • Impact Measurement Process is not a one-off endeavour. It’s an ongoing process and should be planned, alongside the social impact initiative (project or programme).
  • A successful Impact Measurement Process will be: planned for the long-term; and comparative in regards to previous interventions.
  • The question is not whether or not to measure impact, but how to do it effectively and efficiently, and how to ensure that it is effectively embedded into your company.
  • The impact can be positive, negative, or neutral.
  • To truly understand our impact, we need to be using quantitative data. However, this isn’t enough to evidence impact. Companies must also talk about the story behind the data too.
  • There are 2 types of impact companies must be aware of when it comes to establishing measurements: Programme-level impact and Community- level impact. Since Community wellbeing depends on a wide range of factors outside the company’s influence, Companies should focus on measuring the performance of the services and programmes they manage. 
  • Social impact will continue to position itself as part of the competitive equation — soon companies will have to compete around their ability to improve social conditions and achieve social outcomes. In this context, companies that effectively measure their impact will outperform their competitors. 

FREQUENTLY ASKED QUESTIONS

We want to make sure we’re addressing every question entrepreneurs (or aspiring entrepreneurs) might have about social impact.

Are there any specific questions you can’t find answers to anywhere else? Drop your questions below and we’ll get back to you with clear answers and actionable advice.