Does impact really matter to donors?

On April 28, 2010 The Resource Foundation (TRF) and The United Nations Office for Partnerships co-hosted a forum on Evaluating the Dynamics of Partnerships in Latin America and the Caribbean at the United Nations headquarters. This event brought together 65 corporate and foundation leaders, along with evaluation specialists to discuss the potential, challenges, intricacies and importance of partnerships, particularly as they relate to promoting development activity in Latin America and the Caribbean.

During the Association of Fundraising Professionals (AFP) International Conference last week in Baltimore, the outgoing Chair of AFP offered a new definition of ROI: Results, Outcomes and Impact. While the words themselves can mean different things to different people, the message was clear. Donors want more than just a relationship with an organization and moreover, they want more than a testimonial or a picture. They want to know that their gift, or investment, has produced a tangible and meaningful result for the organization and/or its beneficiaries. This is certainly the case for more and more institutional funders, including foundations and corporations, and it is increasingly true for individual donors. 

We've all read an annual report that lists each grant made in detail, page after page of painful details in some cases.  Ok, so they gave $2,000,000 to the Mr. and Mrs. Do-good Foundation.  I wonder what they were able to do with that money.   I wonder why they chose $2,000,000. If it's such a good cause, why not $3,000,000?

It’s pretty common for most grantmakers to track the number of lives touched and dollars distributed to grantees. Those data points are great to know and sound like they have “impact” but they don’t really help grantmakers figure out what to do next. 

Nonprofits fall on difficult financial times. Competition for funding is getting fierce. Foundation endowments decline by 25%. Donors want to understand their return on investment. Organizations are closing their doors.  While these are the current and most pervasive headlines about the nonprofit sector, there is another kind of conversation and groundswell of activity percolating: how to best measure or assess social impact. It is no longer enough for organizations to say that they do good work because their mission statement references the social change that they aim to generate. Today, more and more organizations are looking for, developing and finding meaningful ways to understand and communicate the results of their work. 

The social sector is abuzz with language related to measuring results, measurable impact, and outcomes-based thinking these days, but what do these terms really mean for funders? 

At a recent client meeting, the Executive Director of a large advocacy and policy organization frustratingly asked, “I wish I had a way to measure our work, in a way that makes sense not only internally, but externally…how can I measure policy and advocacy work?” We hear similar sentiments from the majority of clients, especially those that work on policy and advocacy. Achieving policy change can take years and at the end of the day, is typically measured based on whether or not a piece of legislation has been passed. We, and the people who live and breathe policy and advocacy work, understand that there are many intermediate steps that happen in order to get to that point.

"We just met with a foundation the other day, and that's what piqued their interest — the outcomes. A lot of donors are saying, 'If you can't show me the difference my dollar makes, I'm probably not going to give you that next year.' " - Joshua Hale, Big Shoulders Fund Executive Director "...over the years there's been an increase in requests to understand the tangible outcomes. Now [donors] say, 'Give me a specific story, give me a quantitative result.' " - Lorrie Lynn, United Way Director of Research, Planning and Education

Thomas Siebel, founder of Siebel Systems, Inc., achieved significant results when he decided to take a stand against methamphetamine ("meth") abuse in Montana a few years ago.  Investing several million dollars in media campaigns, Siebel dramatically improved the state's ranking among U.S. states in terms of meth abuse—moving from 5th to 39th—and more than tripled the percent of Montana teens who are aware of the dangers of meth—shifting that number from 25% to 93%.