Theory of Change has become an increasingly popular measurement and evaluation tool used to implement social change in government agencies, international NGOs and other major organisations. At first glance it may appear to be just another unnecessary strategic change management tool. However, Theory of Change has proven to make a difference to social impact delivery. It helps to change the way of thinking about initiatives by mapping out causal pathways and working with clearly articulated assumptions. In addition, it is becoming a necessary tool to engage with funders, stakeholders and beneficiaries.
Key steps to developing a Theory of Change
Briefly said: Theory of Change is both a process and product. It is a methodology to assess the causal relationship of different outcomes that have to be in place to reach a defined long-term impact goal. It forms the basis for strategic planning, on-going decision-making and evaluation of specific initiatives or programmes. So, how does Theory of Change work?

The easiest and most practical way to design a Theory of Change is to begin at the end by defining an achievable long-term intended impact. Be as clear as possible about this goal and clearly identify the main beneficiaries. The goal should be in line with the organisation’s overall mission and target a measurable social impact.

In a second step, the preconditions to reach the target need to be mapped out. These preconditions – often interchangeably referred to as outcomes, building blocks, results or accomplishments – form a chain of causal relationships that are linked to each other and to the long-term intended impact by assumptions. Each outcome in the pathway of change is tied to an intervention, revealing the often complex web of activities that are required to bring about change.

The third step is the identification of indicators to measure progress along the Theory of Change pathway. We know that implementing change is difficult. We are all driven by habit and unless we see evidence that changes in our work routine lead to progress towards making positive change, we will not change our habits. For this reason, the implementation of a set of indicators that monitor progress and enable stakeholders to understand the contribution of each outcome towards the overall target is essential. We recommend to have at least one indicator per outcome to identify areas of improvement and, if necessary, to make adjustments along the Theory of Change pathway throughout the process.

This flexibility to change the pathway and to react to changes in the environment is a unique characteristic and strength of the Theory of Change. It is a dynamic process that should continuously be adjusted. According to Katelyn Cioffi, a Principal at Aleron, who specialises in Theory of Change: “Theory of Change is not a static product, it should be a living and breathing part of the organisation.”

The final step is to sum up the pathways and assumptions in a diagram and/or a narrative summary that captures the outcomes of the discussion.

The assumptions or rationales can be tested and measured and are a crucial constituent of the Theory of Change. They clarify the relevance of each outcome for the long-term goal and explain the outcome pathway as a chronological flow. We have made the experience that assumptions are in most cases the product of literature research, market expertise and experience. They explain both the connections between early, intermediate and long term outcomes and the expectations about how and why proposed interventions will bring them about.
A simplified example Theory of Change

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Four ways the Theory of Change can transform your organisation

First, Theory of Change allows you to plan and allocate resources more effectively. The use of different indicators along the Theory of Change pathway allows you to monitor progress and identify potential challenges early in the process. It splits the process of achieving a long-term impact goal into many different building blocks with measurable outcomes along the pathway.

Second, the Theory of Change fosters innovation. Defining outcomes and indicators at different stages of a project and the continuous reflection on changes encourages idea formation and innovation.

Third, from a managerial perspective, Theory of Change encourages engagement and commitment among your staff. It requires input and expert knowledge from different stakeholders inside and outside of the organisation and is often developed as a team effort. This substantially increases ownership of the idea and eases the implementation process.

Fourth, a well-designed Theory of Changes supports your fundraising activities by providing a clear articulation of your impact and activities to funders. This is particularly important when it comes to social impact investment and outcomes-based payments.