2013 Series: Measuring Impact, for Impact, London

The donor community and impact investors have long differed from the business community when it comes to the use of aggregated universal performance indicators, with businesses habitually more focused on tracking the real-time progress not the long term impact of their ventures.

The results agenda, though, has matured considerably in less than a decade and has come to test these and other basic assumptions about impact measurement.

A London event co-hosted last month by Business Fights Poverty, Business Innovation Facility and the World Business Council for Sustainable Development – “Measuring Impact, for Impact” clearly demonstrated how far the community has come in recognising what impact measurement can be used for: shifting the debate from questions around what is ‘the best’ way of measuring impact to asking more useful questions of how do you choose the best approach to fit your purpose, and what will you do with the results?

As Marianne Mwaniki, Head of Social and Economic Impact at Standard Chartered put it: “It´s what we do with the insights that counts.”

The subject of the event marks a pivotal change in approach to the plethora of tools we can use to measure impact; a shift encapsulated by Simon Maxwell, Senior Researcher at the Overseas Development Institute and moderator of the event. Summing up the detailed findings from the speakers, Maxwell surmised that methodologies are not regarded as “strict menus,” but should be approached already backed up with results intelligence while, at the same time asking , “What is the problem we are trying to solve here?”

If we approach results measurement with the mindset that the aim is to use insights to improve projects, outputs, outcomes or any given process under scrutiny and to solve particular bottlenecks or specific issues, it seems to logically follow that this will yield measures that can be fed back into the business or development task at hand, rather than just producing headline figures to satisfy investors or press departments.

Mwaniki highlighted that for Standard Chartered Bank, sustainability and measuring the impact of social action is “…part of how we think about our business and our strategy, opportunities and risk mitigation.” With 90% of their profits earned in new markets, Standard Chartered face social impact measurement with the question “how do we continue to be relevant in the markets that we’re in?”

To set the scene of the complex task at hand, Kitrhona Cerri, Program Manager for WBSCD discussed their process of narrowing down the broad range of methodologies out there to a basket of ten to create a new publication, ´Measuring socio-economic impact: a guide for business´. Cerri highlighted that businesses face a challenge in both navigating and applying existing tools and approaches, the majority of which have their roots in the international development sector. The WBCSD guide helps to simplify this landscape, and focuses on tools created with business in mind.

HOW YOU USE IT

Our use of impact results and our approach to measuring them were concisely encapsulated by an analogy used by Graham Baxter from his time in the Royal Air Force. He said a business needs a few essential dials on its dashboard to ‘navigate’ and respond to real time measurements in order to ‘fly’ better. These are different from ex-post assessment of what happened, which is what the black box can do, or a development impact assessment would cover.

So, ´Should we all measure different things because we all use results in different ways?’ Perhaps one of the most provocative elements of the event was presented by Caroline Ashley, Inclusive Business Results Director at The Business Innovation Facility (BIF). Caroline´s thought-provoking commentary stress-tested three hypotheses that The Business Innovation Facility have addressed in its work in tracking and measuring results. She outlined these as:

• Business needs for results information differ from impact investor or donor needs.
• Businesses need context-specific indicators. Donors and impact investors need universal indicators that can be aggregated.
• Businesses are interested in outputs and struggle to track outcomes. Donors/impact investors are interested in outcomes.

The sweeping generalisation, that individual indicators are useful for business and aggregated ones for donors, needs some modification attests Caroline. Aggregates help businesses to benchmark. But even for donors or programmes such as BIF, aggregates have limited value because because the big number masks the many zeros and small numbers that make it up. Zeros tell you little about sifnificance of impact. “In the micro-finance industry, after years on focusing on portfolio expansion, hard questions started to be asked about what the finance meant for borrowers,” she said.

In her post event blog, Caroline further explores whether businesses can move beyond tracking outputs to be able to assess the outcomes they deliver. She recommends:

• Using the Progress out of Poverty Index to track changes in living standards over time; and
• Focusing on the logical link between outputs and outcomes

This point was supported by Standard Chartered’s approach to tracking direct, indirect and induced impact. Marianne Mwaniki encapsulated their process as follows: When you look at an output such as number of loans, you can then ask questions about outcomes, such as what does financing for SMEs mean in the economy?

An outcome the bank could measure for this was the number of jobs created in the economy. Standard Chartered found that for every posted employee, 500 jobs were created in the local economy. This created enormous employee satisfaction and buy-in to do more. The next level of outcomes to look at, she says, would be the impact on quality of life each job created has; including labour standards, health and safety and robust systems. But as Marianne and the other participants highlight, these data are hard to come by and issues surrounding their availability and impact feed into the wider enabling environment.

The most powerful element of Standard Chartered’s approach is also its simplest. When presented with a large results number, instead of, “well, that’s a big number we can show,” it prompts the question “What more can we do?”