Not for Profit

Why measuring impact is vital for charities

Good governance and effective strategy is high on the agenda for profit and not for profit organisations. With charitable giving falling and increasing scrutiny on the sector - the time is now for charities to improve their governance. To do this, they must change the way they measure impact.

The global charity sector is having to adapt in a fast-moving world. At the heart of this transformation is a strong collective ambition to drive positive change for beneficiaries and communities both locally and internationally. But what happens when charitable giving doesn’t reflect this? A report by the Charities Aid Foundation estimates that global giving has decreased in the last year, with charity donations down by 1.8%1.

Resolving the current situation is not without its challenges. The funding landscape is already increasingly complex. Today’s charities are not only funded by the public, but by government contracts, philanthropic organisations, grant makers and social investors. On top of funding, charities also receive essential support and resources from an entire ecosystem of stakeholders including volunteers, philanthropists and members.

With each of these parties demanding increased accountability and results, the pressure is on more than ever for charities to demonstrate their impact. Furthermore, recent news stories have brought the issue of charity expenditure into the public domain. Getting impact measurement right will help to rebuild trust in a sector that is coming under increasing public scrutiny.

As a result, charities across the globe are asking: are we measuring the genuine impact of our work to demonstrate the best possible results to our funders and wider stakeholders?

The importance of measuring impact

For trustees and directors to best assess performance and make decisions about future activity, understanding impact is vital. But too often, charities are measuring outputs rather than linking activity to the impact it has made.

Delivering 2,000 vaccinations in a year is a legitimate output. But did it lead to a disease being eradicated, thereby improving the lives of people in a region by a substantial measure? Has it eased the burden on the health service in that region? This type of impact is arguably harder to measure, but undeniably more meaningful as supporters and investors seek out the ‘so what’ when examining charity outputs.

What are the challenges?

In the past, it has been suggested that financial pressures can push true impact measurement off the agenda for charity organisations2. Similarly, recent research sponsored by our Australian firm points to a potential skills gap within the sector: 'CEOs and boards see great value in the measurement and analysis of outcomes. However, there is a significant gap between the almost universal recognition of the importance of outcomes measurement and the resource and knowledge capacity needed to implement it3.’

The good news is that charity boards recognise these issues. Many are asking: ‘How do we make impact measurement and evaluation part of our governance activity?’ The Chartered Professional Accountants of Canada has broken this down further:

  • Do the programmes and services we deliver enable us to measure genuine impact?
  • What are we currently achieving with the funding and resources entrusted to us?4

By reassessing current practices, we see a real opportunity for charities to boost impact measurement and use it to make a difference in what they have set out to achieve. As well as shaping strategy, impact has the potential to be used as a tool to enhance decision-making, marketing and revenue generation. By communicating their impact more strongly, charities can meet stakeholders’ requirements while continuing to drive their mission forward.

Insights that matter - a global effort

For charities to better assess impact, it is vital to know how they feel about the way they currently measure impact and – critically – how they would like to change it. To provide valuable insights, we should consider how this affects the wider charity ecosystem which includes volunteers, philanthropists and social investors.

Building on our established global research, our not for profit teams across our global network are working together to produce two reports this year, which will benefit not just charities but other not-for-profit organisations too.

Our reports will:

  • feature the findings from our research with charities and draw on best practice examples
  • explore the critical role of trustees and directors in using impact measurement to deliver good governance;
  • help charities better define impact and enhance measurement and reporting, providing practical tools in response to the ever-increasing demand for impact-based practices.

Read more on how corporate culture is a building block for good governance.

To discuss the way your organisation measures impact, contact Carol Rudge.

References

  1. Caf World Giving Index 2017, Charities Aid Foundation, 2017
  2. A journey to greater impact, New Philanthropy Capital (NPC), 2011
  3. Outcomes: Research into practice, Curtin University and Grant Thornton, 2017
  4. Board oversight of not-for-profit program evaluation, Chartered professional accountants Canada, 2016