A great read from Forbes Magazine by Rahim Kanani. In an interview with Marc J. Epstein, coauthor of the new book titled Measuring and Improving Social Impacts: A Guide for Nonprofits, Companies, and Impact Investors, we discussed the origins of the book, the role of data collection and analysis in measuring impact, contribution versus attribution, and much more.
Marc J. Epstein is Distinguished Research Professor of Management at Jones Graduate School of Business at Rice University in Houston, Texas. Prior to joining Rice, Dr. Epstein was a professor at Stanford Business School, Harvard Business School, and INSEAD (European Institute of Business Administration). In both academic research and managerial practice, Dr. Epstein is considered one of the global leaders in the areas of innovation, sustainability, governance, performance measurement and accountability in both corporations and not-for-profit organizations.
Kristi Yuthas, coauthor of Measuring and Improving Social Impacts, is Swigert Endowed Chair at the Portland State University School of Business Administration, and has worked with companies and nonprofits around the world. She has over 100 presentations and publications in sustainability, ethics, and the use of business tools to address social issues.
Rahim Kanani: Tell me a little bit about your approach to writing this book, and why the idea of measurement took center stage.
Marc J. Epstein: There is an increased interest among both donors (to nonprofits) and investors (to for-profit social enterprises) for greater accountability for the money intended to be used for social purposes. Also, large amounts of new money is flowing into the sector as business leaders have earned large sums from their activities and want to give back to society. But these donors and investors also want the accountability and performance excellence that they expect in the for-profit world. And they want evidence that they’re making a difference. These leaders want more clarity on the objectives, the paths to success, and measures of success. They know that without clear performance measures organizations usually cannot determine whether they have succeeded or failed.
Therefore, there needs to be more focus on what is important for achieving social impacts. This includes a clear definition of what success would look like, a carefully articulated path of how success will be achieved, and a specification of the measures that will be used to measure whether success has been achieved. These social challenges are so large that we must do whatever is possible to improve the social impacts of the financial and human resources being invested.
Kanani: Today, there is clearly a strong focus in the social sector on measuring and improving results, often in the context of big data and analytical tools to assess performance. But how does all of this translate or apply to social impact?
Epstein: Big data analytics is often not very relevant to determining the social impact of most social purpose organizations because the scope of work is usually small and local. It is sometimes used in fundraising in large organizations which is too often consuming more focus than the primary purpose of the organization which is to provide greater social impact.
The need for better clarity on mission and the proper data to collect is one of the biggest challenges. And where appropriate, big data can be useful. Many organizations have few measurements in place and rely on anecdotes for their evidence and for their reporting to the public and their various stakeholders. An increasing number of nonprofits have developed measures of the outputs of their organizational activities. But we know that measuring outputs is not the same as measuring success on the goal of increasing social impacts.
The goals should not typically be about measuring numbers of children in school (outputs) but rather how many are better educated and better able to achieve a set of life goals possibly including employability (impacts). This should not be about collecting more data but rather about collecting and properly analyzing the data that matters and is more relevant to the project’s or organization’s objectives.
Organizations need to be more focused on what data should be collected and only collect that data that will aid in the decision making and reporting of impacts rather than collecting large amounts of data that will not be useful for improving the organizational impacts.
Kanani: In the book you talk about linking action to impact. What should nonprofit organizations do to better understand how their own programs are in fact responsible for the impact they’re seeing on the ground, or not seeing on the ground?
Epstein: One of the biggest deficiencies we observed in the large number of visits and interviews we did for this book throughout the world is the lack of clarity and rigor around specific project or organizational goals. Without a clear articulation of what an organization is trying to achieve, measuring success and impact is quite challenging.
If an organization is unclear or does not communicate clarity on what they specifically want to achieve, it will be more difficult to measure whether their activities or other factors caused changes. So the clarity is critical for both achieving and measuring success. Once they have clarity on objectives, they can focus on whether the sequence of activities they plan to perform can logically be expected to create the desired impacts.
Kanani: From small nonprofits to billion-dollar nonprofits, the range of experience, expertise and resources are vastly different, so what advice would you give smaller organizations who are eager to better understand the impact of their efforts and how to improve their work in the context of their limitations?
Epstein: All organizations, large and small, should devote a few hours with their senior management team brainstorming about goals and activities and then developing a clear logic model that carefully defines their inputs (resources and constraints), processes (organizational activities), outputs (results), outcomes (intermediate effects), and impacts (progress on social issue).
Without a clear definition of success and how you are going to get there, useful measurement is impossible. For most organizations, this process will be extremely important and revealing for future organizational improvement. After developing a clear logic model and implementing activities that are consistent from the inputs through to the impacts, needed organizational changes become significantly clearer.
This is less about being large or small but being clear about goals and then clearly having a logic and a chain of activities that will likely lead to desired social impacts. This is the case for small local organizations as well as global ones. Once that is in place, the path to both implementation and measurement becomes clearer.
Kanani: Where should bigger, very well-resourced institutions like foundations and mega nonprofits put their resources in order to truly understand the complexities of contribution versus attribution?
Epstein: Larger organizations need to go through the same process on the projects that they invest in and on the organization as a whole. Too few large foundations and nonprofits have the clarity they need and have articulated this throughout their organizations so employees, volunteers, donors, and beneficiaries are aligned. Too few organizations have thought carefully about the issue of what specifically they are trying to achieve.
This is evident when we ask about the contribution of the individual programs and the contribution of the organization as a whole. It is also evident when we ask about the issue of the contribution of their activities to the solution of the problem. Certainly some social issues (climate change) are so daunting that one organization may not be able to solve it and contribution is tougher to measure. Others are more easily defined (feeding children in a local community) and measured. But foundations and NGOs need to think more carefully about what they are trying to achieve, then develop programs that will have a good chance of making a difference, and then measuring success.
Kanani: Finally, if you were speaking to 3 different audiences–nonprofit organizations, businesses and impact investors–what are some of the big takeaways you would want each audience to walk away with from this book?
Epstein: The message is similar for all three of these audiences though some nuances do exist.
Corporate foundations, private and public foundations, impact investors, high net worth individuals, and corporations (both as corporate activities and corporate social responsibility activities) should be focused on their social impacts. For all of the above (except corporate activities) improving social impacts is a primary goal. Then, let’s be more rigorous as to how we go about trying to achieve greater social impacts and then measuring success. For corporate activities, impacts on society should be part of the calculus of manufacturing processes, supply chains, labor practices, and the impact of products and services. In all of these cases, managers need to know what the impacts are and make appropriate decisions accordingly. Now, too often, we have not completed the measurements of performance and don’t know the results.
Further, corporations can provide greater successes to both society and their own organizations by more careful analysis of their own capabilities and interests and aligning those with the social issues that they can most successfully impact. This can provide greater social impact and also utilize and build their own corporate capabilities.
Foundations and NGOs need to do better with their donors money. High net worth individuals and impact investors need to create more social good with the money they are investing in social enterprises. It is critical for the donors, for the recipients, and for society that we get the most benefit possible from these donations and investments. Measurement can be done. It does not need to be expensive. And it must rely on a clear specification of what an organization or individual wants to achieve and clarity of activities that are expected to achieve those goals. It is critical that we do all that we can to solve the enormous social challenges that do exist.
Our five step Social Impact Creation Cycle and the specific guidance provided in the book about the creation, measurement, and improvement of social impacts is intended to help organizations increase their positive social impact and make a measurable difference.