Social sector organisations and for-profit corporations alike have been subject to much rhetoric about why impact measurement matters – some of it here on this very blog. However, at the start of a new fiscal year, with general elections in progress and the spectre of a new government on the horizon, it seems an apt opportunity to remind ourselves why impact measurement is so important. Measurement serves not merely as a tool to satisfy funders or to safeguard against unintended consequences, but also as a critical tool for growth. We outline some of the key links between impact measurement and growth, to build a case for investing in impact capacity building.

Introduction

Impact measurement is often marketed as a compliance tool used to assure risk averse funders and identify areas of underperformance within single organisations. Indeed, it does both of these things very successfully. However, impact measurement is primarily a tool for growth – in income, but also in the depth, breadth, and systemic influence of an organisation’s work.

From our experiences, most social sector organisations accept the importance of impact measurement. Where many struggle is in articulating the tangible benefits that investing in impact measurement capabilities will bring to the organisations – the return on investment for capacity building.

In actuality, the benefits that investing in impact measurement can bring are manifold, and are highly dependent on the starting point and context of the organisation. However, the starkest and most tangible benefit is that greater impact measurement capabilities often create a corresponding increase in income.

However, the starkest and most tangible benefit is that greater impact measurement capabilities often create a corresponding increase in income.

How does impact measurement drive income growth?

There are four main ways through which impact measurement can contribute to income growth:

  1. Improving the quality of proposals
  2. Creating opportunities to enter new markets
  3. Broadening the value proposition of the organisation
  4. Identifying key trade-offs and decisions about social impact and financial performance

After all, impact measurement enables organisations to improve the quality of proposals by demonstrating knowledge and awareness of evidence, and a willingness to analyse and criticize its own work, which is highly desired by funders. Having strong impact measurement capabilities mitigates the risk of impact failure and demonstrates that an organisation is willing to be transparent and open about results throughout the process.

Strong metrics and analyses around impact not only help when working with existing funders, they can also open up new markets. Impact measurement enables a more rigorous and evidence based articulation of the value an organisation delivers for beneficiaries, which is key to entering new markets and gaining new supporters outside of traditional segments. Whether these new markets are impact investors or just intelligent donors looking to make informed decisions, it is difficult to break the barriers to entry without strong evidence behind proposals.

A thorough understanding of impact also helps by broadening the value proposition of the organisation by creating valuable intellectual capital. Many social sector organisations are uniquely placed at the coalface of social challenges; impact measurement provides structured ways to capture messages, learning, and insight from individuals on the ground. This knowledge is an incredibly valuable resource to policymakers and other stakeholders, making the organisation an even more attractive partner and advisor to key decision-makers.

Finally, impact measurement is key for social enterprises or profit-with-purpose businesses who seek to generate simultaneous financial and social returns. Understanding impact metrics helps to identify areas of confluence and dissonance between these two sometimes conflicting aims, so that the right trade-offs and decisions can be made based on the organisation’s mission and vision.

Impact measurement is a tool for income generation, but also a tool for continuous improvement, learning, and impact; naturally, increasing income is only one part of increasing impact. For those who claim, however, that impact measurement is a costly and unnecessary bolt-on, we would suggest re-examining the tangible benefits it brings in terms of income and sustainability.