Philanthropy and the Impact Revolution

Philanthropy has reached an “impact tipping point” and none too soon. On one side of the "leading with impact" divide is the learning-first sector, one where organizations are becoming empowered to track and monitor their results real-time and seamlessly share and learn best practices from similar initiatives.

As a result, more resources are being directed to high-impact projects, and organizations can spend less time navigating convoluted measurement and metrics mazes often imposed by donors and foundations that are distributing these grants.

Is this vision pie-in-the-sky, or does it accurately reflect how the nonprofit sector will further evolve during this century? NGOs really do not have much of a choice. In 2015, the Chronicle of Philanthropy polled Americans and found about 35 percent of them had little or no faith in nonprofits. That is a frustrating statistic for NGOs, many of which insist they do what they can to spend money wisely and keep costs down.

Is much of this problem due to the lack of effective communication? Shifts in American attitudes toward charity provoke worry: The evidence suggests Americans are donating less than they have in the past. Perhaps nonprofits will have to become accustomed to doing more with less; but what is clear is they need to change how they  communicate and measure impact more artfully so that donors “get it.”

At the recent Dreamforce conference hosted by Salesforce in San Francisco, social impact thought leaders from across the sector discussed what it means to lead with impact, and how best to prepare.

The upshot is nonprofits find they need to be held accountable to a different standard than what was acceptable in the past. But this change could actually open up opportunities to generate more social impact faster and with more meaning, as explained by Victoria Vrana, Senior Program Officer of the Charitable Sector Support Team at the Bill & Melinda Gates Foundation.

“For so long, nonprofits in the social sector have been measured by operations, performance and overhead, and not on the actual change they’ve been making in the world and on people’s lives,” she told TriplePundit’s Nick Aster during an interview. “The impact revolution is about actually knowing the change you’re making in the world, and being able to communicate it in a way that’s meaningful.”

Vrana also cited studies she had seen indicating 65 percent of Americans would donate more to NGOs if they could both understand the impact and see the results.

The good news, especially for the people who rely on these programs, is that more NGOs and donors are adjusting to this reality. Vrana noted 87 percent of corporate philanthropic programs measure the impact of at least one of their grants. “In order to achieve their missions, these organizations need to know what good they are doing in the world, and the more they know about what they want to measure, the more they can talk about what they care about, what they are achieving, and what the results are,” Vrana said.

This new reality may be uncomfortable for some nonprofits as some argue they need to position their programs in the way private sector companies have for decades. “NGOs have to look at their mission as a product as donors demand more info,” said Jason Saul, CEO of Mission Measurement, a Chicago-based firm that describes itself as a global leader in measuring social impact outcomes.

One NGO embracing this new way of measuring and communicating impact is the Urban Institute. According to Sheena Ashley, the organization’s director of its Center on Nonprofits and Philanthropy, it is critical that both individual donors and philanthropies  understand the role of impact so they know how to translate their generosity into social good.

“It’s about going beyond the units - communicating how an NGO can have that impact is hugely important,” Ashley told the Dreamforce audience.

“What we’re seeing is that in the past, there’s been a lot of nonprofit activity, and there’s been a lot funding that been that has gone into that funding activity,” she told 3p. “But we haven’t been able to answer the questions, ‘So what?’ or ‘What has been the result?’”

In turn, Americans are becoming more frustrated. And this sentiment is coming at a time when the nonprofit world is increasingly taking on responsibilities once carried out by the public sector.

What occurs between the time donations and grants are made, and then finally a project’s completion, often gets lost in translation. “There hasn’t been any accountability mechanism that has asked organizations within, why they put so much costs into a program,” explained Ashley. “Now they are learning the language, as in what’s the ROI, what’s that amount per person benefiting from this impact, and how we can do it better.”

The focus on new metrics and a new way of proving accountability is a warning to the larger nonprofits organizations that have long taken the lion’s share of donations and grants across the U.S.

“We see smaller organizations coming in and disrupting the business model of the nonprofit sector,” added Ashley, “and we especially see this in disaster relief.”

While larger organizations have struggled to move fast in the wake of a catastrophic event such as a natural disaster, smaller organizations have moved in, and their work frequently turns donors’ heads. “The smaller startups say, we can do it faster, and we can do it cheaper because we don’t have all that overhead,” Ashley explained to 3p.

This ongoing shift hardly applies only to the nonprofit world. Organizations are becoming more educated about how and why impact matters, and what difference their work has made. Instead of just measuring, and instead of counting “this many expenditures, and this much activity,” now organizations are articulating the actual result of that “busyness,” to use Ashley’s term.

As a result of this new way of looking at impact, everyone benefits, insists Ashley. “That’s going to help us push forward on all of the social impact that we’re all trying to achieve, not just in the nonprofit sector, but in the private sector and government as well,” she said.

Image credit: Rajarshi Mitra/Wiki Commons