Why measuring impact is vital for charities
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%.[i]
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, they are also funded 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. Impact measurement may also form part of wider effort to rebuild trust in the charity sector.
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
Effective impact measurement is an essential part of good charity governance. 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 organisations.[ii] Similarly, recent research sponsored by Grant Thornton Australia 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 it.”[iii]
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?[iv]
By reassessing current practices, we see a real opportunity for charities to boost impact measurement and use it to really 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
For charities to better assess impact, it is vital to know how charities 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.
At Grant Thornton, we already have a number of established global research programmes to help us do this. For example, our three-year research programme between Grant Thornton Australia and the University of Western Australia is designed to build the capacity of not-for-profits in the all-important area of outcome measurement and reporting. We can also draw in wider research from our UK corporate governance institute.
Grant Thornton has conducted various pieces of research exploring the governance theme in recent years. In 2017 we published the report Beyond compliance, looking at the importance of culture on governance across the global business community. In it, we provide recommendations for boards to consider so they can play an even more effective role in fostering a successful culture.
A global effort
To build on this research further, the global not for profit team 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;
- Explore the critical role of trustees and directors in using impact measurement to deliver good governance;
- Draw on best practice examples of impact measurement from across the charity community;
- Propose a way for charities to determine the true impact they should be measuring, how they can do it, and how it should link to their overall strategy.
Our aim is to help charities better define impact and enhance measurement and reporting, providing practical tools in response to the ever-increasing demand for impact-based practices.
Across for-profit and not-for-profit organisations, good governance and effective strategy has arguably never been as high on the agenda as it is today. There is a substantial opportunity for charities to improve their governance by making improvements to the way they measure impact. Our reports aim to arm charities with the tools they need to make those improvements.
Get involved - be part of our research
We are looking for participants from around the world to take part. Please get in touch with Carol Rudge, global leader - not for profit, to find out more.