Measuring Social Impact in Philanthropy

Choosing how to give philanthropic dollars is usually a personal, often private, and hopefully rewarding enterprise many people like to keep close to home.

Those who spend much of their lives juggling returns on their financial investments and building wealth, often prefer to let other factors determine how to give to charity; emotion, for example, and perhaps friendship since frequently giving is something done in the comfort of circles or with friends.

The ever-bigger M'Lop Tapang centre for street children in Sihanoukville, Cambodia

But what is the significance of the donor community? Giving USA reports that every year, 40 million individual donors in the U.S. contribute $250 billion which represents more than 75% of total giving. That is a significant wad of cash that could be put to good use cleaning our environment and making our world a better place for marginalized communities. And that’s just in the U.S.

Obviously, there is no right approach to philanthropy and no absolute way to judge how effective a donation has been, despite that over the past two decades a whole industry has grown up around measuring social impact. But I think that once again we know more about what we don’t know rather than what we do.

Why do we need to think about how we give anyway? Isn’t that the point of giving – not to expect any return? I would say yes, true on one level, but not really. Why? Much has been written recently about the pitfalls of aid more generally. Two of the more vocal critics are New York University’s Bill Easterly and Dambisa Moyo whose book Dead Aid caused wide controversy.

The trouble is, without a concerted strategy or effective tools to guide us, many individual donors, grant-making bodies and foundations alike fall into the trap of providing aid that in the longer-term CAN be more damaging than helpful, despite our best intentions.

Because of issues around governance, particularly in a region like Asia where corruption is rampant, donors bypass governments, choosing instead to invest in a network of NGOs, which keeps these same NGOs flush with cash and lots of people employed.

If the NGO isn’t particularly thoughtful and doesn’t engage local government, this giving strategy also deprives the state of any stake in change and almost relieves them from the responsibility of improving the lives of marginalized citizens without a voice.

Another issue is that donors frequently prefer to contribute to contained NGO projects rather than to strengthening the organization simply because programmatic support fits with a particular donor funding agenda.

Although building new programs or expanding existing ones is important in terms of an NGO widening its impact, these often come at the expense of organizational support. It’s hard to see how an NGO can create a program, monitor it and measure its impact without sufficient organizational resources to do so.

Occasionally, or more than occasionally, an NGO has bent its needs to receive the targeted funding so there is little incentive or lack of adequate skills to really build.

And often that programmatic support is short term, given in periods of two to three years, after which the project is expected to be magically self-sustaining. Usually that is unrealistic and once funds are gone so is the program, leading to a real waste of resources.

So how do we make sure, as donors, that we are working as effectively as we can be with our own resources and not operating counterproductively, particularly in the developing world where issues are deep and broad?

This brings us right back to much talked about measuring impact. An excellent Wall Street Journal Article on Friday, Measuring the Bang of Every Donated Buck by Alice Hohler is a good discussion of the issues around this topic. http://bit.ly/d3Afil.

She points out that while many companies and NGOs have developed formulas for measuring the effectiveness of a donation, there still is no real magic box. She points to the tricky question of the unique qualities of nonprofits that are each fulfilling a social need in their own way.

There is little standardization in this field and little reason why one set of measures would fit all. Naturally, each organization then requires its own evaluation to assess its effectiveness and that is prohibitively expensive. It certainly isn’t scalable, which is another obsession among the donor community.

At the same time, any analysis of impact on the part of an NGO is only as good as the information gathered and few organizations have the resources, skill set or manpower to gather relevant data and then assess the real benefit.

An organization that  works to get children back into school will have a much easier time determining impact than for example a conservation group that works with communities to educate them about biodiversity and the value of preserving their forests.

But even in the first instance, we see there are many, many ways to count!

And then, how to compare organizations working in different spaces to determine which would use additional resources more effectively, providing the greatest benefit to a particular community?

We find that the best way around this question is to work in a holistic way with organizations, to help them set their own measurements with their particular children, to constantly work with them on developing initiatives and monitoring their effectiveness.

In that way, we can help them refine impact, reach more children or work more effectively in a particular conservation space. We shy away from the obvious numbers that are so often meaningless, preferring instead to let the work tell the story.

Any thoughts on interesting innovation in impact measurement seen working well?