What every funder needs to know about impact

19 June 2015

This article was originally published in Alliance Magazine. This can be viewed here.

Sue Holloway, director of Pro Bono Economics.

As an economist working with charities, I’m constantly asked about how they should report their impact and what data they should collect. Those conversations usually start because a funder has asked the charity to report back on a particular project or they are bidding for funding. Yet for evaluation to be truly effective and robust it can’t be driven solely by funders’ demands.

So what should funders consider when it comes to asking charities about their impact?

Evaluating a charity’s impact doesn’t happen overnight and without a lot of hard work over and above the day job of delivering services.  Funders need to be aware of the resource involved in gathering key data, and consider how they can support this back office activity as well as the intervention itself.

The first way to do this is by explicitly including money for impact estimation in the grant, or funding core costs to support monitoring and evaluation. Clearly funders will need to be sure that the resources spent on estimating impact are both proportionate and produce good quality evidence.  So it’s vital they understand what makes for robust evidence, and work with charities to agree what is appropriate in each case.

But charities don’t just need data to report to funders.  They can, and should, also use it to understand and improve their services.  But this often doesn’t happen, because their limited resources for estimating impact are focused on the reporting requirements of grant makers and donors.  Rather than just looking for a snappy figure on impact, funders need to support charities to identify and collect data in a way which makes it useful to both parties, and helps everyone to understand what is working well and what they should do more of.

While putting a value on a charity’s work, in terms of public benefit created for every pound spent, may sound great, in reality this may not be something all charities could or should be doing.  Nicola Pollock of the John Ellerman Foundation agrees: ‘A small number you can rely on is far more useful than a large, often general number which no-one really believes or understands’.  So funders need to be careful that they are not encouraging charities to provide unreliable evidence in an effort to impress.

Finally, too many trusts and foundations ask for too many different things in a thousand different ways.  Getting agreement among different funders supporting similar interventions about the impact they want to see demonstrated, and how that is best done, would allow charities to do the work once and use it many times.  They will need to take the lead, as they arguably have the resources to do so, and we should not underestimate the time and effort involved in coming to this sort of agreement.  The Inspiring Impact strand for funders, commissioners and investors, led by the Association of Charitable Foundations, has made a start by  agreeing a set of  ‘Funders’ principles and drivers of good impact practice.’* But again, it’s vital that charities are involved in the conversation about the specifics – they can share best practice about what is feasible for different levels of activity and different types of intervention.  And grant makers can facilitate the conversations between different charities, and encourage the adoption of best practice within the charities they support.

It’s all about devoting the right level of resources to data collection, and encouraging conversations among funders and charities, to ensure that the impact estimations produced are of the highest possible quality.  Both sides stand to gain.  Funders can be more confident that their money is achieving the change they are expecting.  And a more streamlined way of reporting impact, which also provides the right information for operational decisions, has to be a more efficient use of charities’ limited resources, allowing them to deliver more for the people they help.

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