What Impact Means to Funders
We often talk about voluntary sector organisations needing to prove their value for money to funders. But how often do funders base their spending decisions on robust evidence of impact?
To try to answer this question, we asked Jacob Harold of the William and Flora Hewlett Foundation and Andrew Barnett of the Calouste Gulbenkian Foundation how foundations are thinking about this on either side of the Atlantic. We hosted an audience of analysts, charity representatives, and think tankers at the Calouste Gulbenkian Foundation’s beautiful venue in London’s Hoxton Square.
The issues that foundations are grappling with both here in the UK and in the United States seem remarkably similar. Andrew and Jacob agreed that foundations who assess their own impact and that of the projects they support are a minority and also face significant challenges in measuring their impact effectively.
In part, this is because the information available to funders about voluntary sector organisations’ performance is hugely fragmented. There are now hundreds of websites which try to help these organistions track and communicate their impact to funders and the wider public; but the fragmentation means that funders’ attention is spread too thin.
This is why the Hewlett Foundation is supporting an initiative called ChartingImpact. ChartingImpact asks hundreds of organisations to answer five simple questions about their impact, in order to concisely assess and communicate this to others. The point is to bring together lots of the information that has previously been dispersed.
This fragmentation is itself indicative of the increasing demand for social impact analysis. In the UK, this has been driven by the emergence of social investment, and, more controversially, of social impact bonds and payment by results. While there is potential for this new demand to help improve the standards of impact analysis being carried out for voluntary sector organisations, both Jacob and Andrew were quick to point out the legal, ethical and operational problems that organisations may face if they are paid by results. Cashflow problems aside, there is a risk that organisations focus their efforts where they are more likely to have a demonstrable impact in the short term, rather than focus on longer-term and more complex issues where results may be more difficult to demonstrate.
The social impact space is still in its early stages of development, and charitable foundations have a crucial role to play in pushing for best practice. As Andrew pointed out, foundations are not large enough to distort markets, but they are sufficiently large to promote positive social change.