Editor's Note: This post was first published on NextBillion Brasil. The original post (in Portuguese) can be found here.
If you are after a quick answer and a good way to measure impact and improve governance, all you need to do is register your inclusive business as a B Corporation (www.bcorporation.net). However, if you do want to understand the role of measuring impact and learn a few of the best practices to assess impact, read on.
It's been ten years since I joined the social sector, ten years of countless discussions on impact assessment. Initially, I thought it would be impossible to effectively rate impact. But my background as an engineer allowed me to understand everything can be assessed and virtually everything can be measured - for a price, that is. A few years and hundreds of books, articles and presentations later, I forged my own beliefs. It's easy to measure impact! You just need to know your objectives. That's it.
If you have a clear vision of the changes you want to bring into the world, the procedure you intend to use and the related costs, then you should have no problem measuring and rating impact. Let's say your goal is to help people improve their quality of life. You could use any accepted measurement, such as income, the Human Development Index, the Physical Quality of Life Index, or any other index of Gross Domestic Happiness. You don't need to hire a United Nations team for this purpose; you can do your own research, online surveys or use any other means for gathering information. The difficulty of measuring final impact (the results) is its high cost. Ideally, results should be measured in detail, but this might end up being more costly than your own operating costs. A good way of finding an alternative to these metrics is to develop a Theory of Change, a simple way to describe how you will identify those impacts and discover some measurements according to activities and information that are less costly to obtain. These simple measurements should allow you to infer your final results. At the end of the day, the best way to assess final results is to have a strong and deep presence in the community you intend to serve. This means you can, at least, count on its members and share some significant testimonials.
If you use market forces as your main driver, you most likely have an Inclusive Business. Organizations such as B Lab developed a good methodology to assess impact and to certify organizations they call B Corporations. B Corps harness the power of their business to resolve social and environmental issues. B Corps also have comprehensive and transparent social and environmental performance standards that institutionalize stakeholder interests, and develop a collective voice through unified branding. The B Lab Certification System is consistent with methodologies like Impact Reporting and Investment Standards, IRIS, developed by Deloitte, PriceWaterhouseCoopers, B Lab, the Rockefeller Foundation and Acumen Fund. IRIS combines social, environmental and economical rating. Once you obtain certification as a B Corp, you will have access to the Global Impact Investing Rating System (GIIRS) and implement the B principles and procedures, you will be on your way to heading the list.
We can also take advantage of the work that has been done to analyze social initiatives that are not using the market to generate transformation. McKinsey & Co developed an approach and a website you will find very valuable. This year, I had the honor to meet Lynn Taliento and Karen Hadem, from McKinsey's Social Sector Office. We had a chance to powwow on these issues. One of the main conclusions of our conversation was that it is impossible and incoherent to try to develop a universal rating system. Human dynamics should not be simplified into metrics. If you really want to gather information to make better decisions, you must find relevant standards for your mission. McKinsey has developed the site Learning for Social Impact for investors, clients and other key associates. The site includes best practices, guidelines, tools, insights and practical support to develop strategies that lead to social impact. Foundation Center developed another source of methodologies and information. Tools and Resources for Assessing Social Impact (TRASI) contains a comprehensive list of 150 possibilities to measure and analyze social impact for programs and investments. TRASI includes tools for social investors, foundations, NGOs, microfinance institutions and more.
In the end, what matters is having clear objectives and strategies. If you promote an organizational culture based on knowledge and communication, assessing impact should be easier and less costly. If you simply don't know where to start, create a blog and begin documenting everything you see, feel and learn!