Simpsons Solicitors

Peculiar Philanthropy – 1. Measuring Social Impact: Cost, Reliability and Awareness

January 5th 2014

Peculiar Philanthropy

Compared to traditional businesses, philanthropy has the distinguishing goal of doing good for others rather than making money. They are, of course, not necessarily mutually exclusive but it is the guiding and distinguishing philosophy of philanthropy. It is from this simple goal of doing public good that the other challenging features arise.

As the Gates’ Foundation put it: “Our work is complicated but why we do it is not”.

From those we visited, some of the common distinguishing and complicating themes were:

  • Measuring ‘social impact’If you want to do good, how do you know if good has been done? For example, if you decrease early childhood mortality, do you increase starvation?
  • The role of emotion, ego and philosophyWhy do people give their time and money to others? What is honestly expected in return? Why choose one charitable goal over another?  Should you support goals you are passionate about or goals that will do the most good for others?  
  • The uneven relationships between those giving and those receivinggood partnerships make for good philanthropy, what is impeding them?
  • The broader spectrum of financial arrangementshow far can charities be businesses and businesses be charitable?
  • The opportunities arising from the common goal of social good; If we all want to do good, can we work together better?

Lets look at the first of these.

1         Measuring Social Impact: Cost, Reliability and Awareness

If we are to do good, how do we know good is being done?  Before we measure it, how do we define it?

If a healthy life in a particular area is prioritised by being free of malaria, how do we measure how successful a program is? Ideally, you’d test everyone in the area over time.  In many areas this would be impracticable and too costly. An alternative is to look to more easily measured indicators for success.

In one example, an organisation seeking to reduce malaria reported their success on the number of mosquito nets successfully delivered to people in high-risk malaria areas. You know that malaria will be reduced if people sleep under nets.   Measure the number of nets given to people and you measure how successful your program is  – the more nets people have, the less malaria there will be.  A reasonable proxy.

Except if the mosquito nets are used for fishing and wedding dresses as they were in Kenya and Zambia.

This example highlights a number of difficulties in measuring social impact – the use of proxies, the breadth and depth of the assessment, and the time over which the impact is measured.   If doing good is the goal, how do we know that using the nets for fishing (or weddings for that matter) is worse for the community than using them for mosquitoes?  A follow up report showed that the mosquito nets added commercial value to village – the fish dried straighter on the nets, which allowed them to be sold at higher prices.  Higher incomes may lead to other social benefits for the community such as better food or security.  There is also the unpleasant and dangerous risk of assuming people don’t know how to best allocate resources for their own good.  All the more dangerous when decisions are exercised from another culture from another side of the globe.   Life is a complex eco-system in which the social, political, environmental systems differ sometimes obviously, but sometimes subtlety and crucially.  Sometimes impact will not be seen for decades and programmes may need long-term commitments.

Many of the organisations were open about their failures and difficulties in this area.    At Kiva, we heard of the failure of trust when a local administrator took funds intended for the benefit of the community.  Kiva reflected solemnly on the lessons learnt and the importance of understanding local culture and building local relationships of trust.  It is a lesson that has been learnt, their new Kiva program operates on a more dispersed network of trusted individuals.

We heard of the challenges of Tom’s Shoes, a commercial organisation, which has a goal of helping those in need by providing shoes or better eyesight. So for each pair of shoes bought, they donate a pair of shoes to someone in need.  However, apparently, the local shoe market and employment were being badly impacted alongside concerns about whether shoes were what the local community really needed.  One Acre Fund sought to ameliorate such unintentional market consequences by supplying their farming support at local market rates (rather than free).  Donor programs need an exit strategy too – what happens when they pull out? Will we leave things worse off? How do work within the community’s own legal, community and ethical framework for lasting good?

Just as in business, local partnerships are vital in any investment.  They are just as vital when it comes to measuring social impact and particularly so in the qualitative analysis (are we helping the community?) over the quantitative (how many mosquito nets have been distributed?) – the totality of the impact is essential and qualitative feedback just as important as quantitative metrics.

The RSF Social Finance organisation takes this further and has made it a priority to seek 360’ feedback from its network; including investors and grant or loan recipients.   Their inclusive and relationship based approach had annual meetings where investors, RSF and recipients would discuss whether last year’s interest rate on loans should continue or be changed in light of new circumstances. It allowed all the interested parties an opportunity to understand and discuss their own and others’ needs – a good business practice in any industry.  We talked to one recipient, an organic food producer, who said while initially unnerving the forum and the relationship of trust has become invaluable – RSF are a true business partner.   RSF reciprocates saying the relationship gives them a better understanding of the people, the business and the social impact.  It allows them to be better and more productive financial and social investors.

The reality is that social impact can be complex and expensive to measure.  This is particularly so when issues are long term and complex like many environmental issues. The use of proxies is often essential but it’s risky.

There is a trade off of certainty and expense in measurement.  As we go across the available means of measuring social impact, the reliability of the measurement increases but so too does the expense.  Taking a micro-finance example;

PAIMG1

To consider:

  • Strive for clear goals and success criteria;
  • Build trusted and trusting local networks to provide honest and accurate feedback on the successes and failures;
  • Value both qualitative and quantitative reports;
  • Consider the cost/benefit analysis of deeper measurement and watch for failed proxies;
  • Social impact changes over time – measuring over time can be important;


The next in the series is Peculiar Philanthropy – 2. Emotion, Ego and Philosophy