Question

How are nonprofits organization's financial impact and social impact measured and demonstrated? What specific measurements are used?

Answer 1

The daunting word so many in the nonprofit sector have come to dread. The hot topic at conferences, roundtables, meetings, and featured in countless blogs and articles. “Measuring impact” has become a mantra for nonprofit professionals around the world. Growth in the number of nonprofit organizations and faith in the good intentions of everyone involved seems to no longer be enough; evidence is now required.

Multiple approaches have been developed to help nonprofits define and measure their social impact, but a single, stand-alone, universally accepted framework does not exist yet.

Although measuring social impact has become increasingly important for nonprofits and their donors or funders, the task at hand is challenging – to say the least.

So, Why is Measuring Social Impact Challenging?

1. It includes measuring complex concepts, such as “increase in self-esteem of an individual” or “increase in overall well-being”.
2. Measuring social impact also means accounting for other factors that might have influenced the element you’re trying to measure i.e. to what extent can the change be attributed to the activities of your nonprofit.
3. It is long-term and requires consistent and dedicated work throughout the span of several years.
4. It requires a relevant system/framework and robust tools, which can be hard to develop, especially for smaller nonprofits.
5. Even larger and more established nonprofits struggle to evaluate the quality of their impact measurement process.
6. There are no set rules, so approaches and terminology can radically differ from one nonprofit to another, which makes communication and collaboration more difficult.
7. The phrase “social impact” is increasingly vague and often misused to imply small changes.

Ok, I get that it’s hard. But what is even social impact?

University of Michigan defined social impact as “a significant, positive change that addresses a pressing social challenge. Having a social impact is the result of a deliberate set of activities.”

And what is the difference between impact and social impact?

“Impact” on its own implies an influence or effect on virtually anything or any kind of change from a current situation. “Social impact”, however, is grounded in the effect it has on a pressing social challenge.

Although what a “pressing social challenge” means might differ from one community to another, from one country to another, or even from one nonprofit professional to another, a minimum consensus exists on the fact that social impact should be more than a marginally positive change, and one that impacts a broader social issue.

Social issues include such issues as equality, livelihoods, health, nutrition, poverty, security, justice, conservation, energy use, waste, environmental health, resource depletion, and climate change.

Why is it Important to Measure Social Impact?

Albeit a difficult task, measuring social impact matters. This is especially the case for nonprofits since they seek to deliver their mission and bring value to their beneficiaries, and these are more difficult to track and measure.

Nonprofits need to develop the ability to know whether they’re making a difference and to know how to invest wisely so that they can do better over time. There are many other reasons to measure social impact, and here are only a couple:

1. By measuring impact, you gather data and stories that you can then use in your marketing and communications.
2. You are able to get quantitative and qualitative inputs and feedback for your programs and activities, so you can improve them.
3. By measuring impact, you are also able to report back to funders and be accountable.
4. You can attract new donors. Project funding is increasingly dependent on the strength of impact assessment.
5. You can share the information with other nonprofits and collaborate.