The process of measuring social impact

The need for practical and standardised assessments for social impact measurement are now more important than ever. In this article, HLB Mann Judd break down the financial model they have developed to help not for profits work through the impact process.

Organisations throughout the world have created social and environmental change. These positive changes are often shared through success stories which communicate the impact generated. However, one of the biggest challenges facing organisations today is taking their success stories and translating them into compelling data.

Increasingly, donors and stakeholders are focusing on return on investment. Therefore, if an organisation can effectively measure its social impact it is more likely to secure future funding. 

The process of measuring social impact can be broken down into inputs, activities, outputs, outcomes and impact. 

• Inputs are the resources, people and materials required in implementing a program. 
• Activities are the programs or services delivered by the organisation. 
• Outputs are what the organisation generates from activities, such as the number of people served, hours of assistance provided or the number of training courses held. This is typically what organisations measure. 
• Outcomes are a direct result of these outputs, and are applicable to a range of stakeholders including families, carers, governments and the organisation. 
• The outcomes then drive the overall social and environmental impact for society.

It is imperative that an organisation has a logical and detailed understanding of the change it expects to generate. 

Measuring social impact is a comprehensive process, with information being collated from various relevant sources to appropriately measure value creation. This is then translated into financial numbers. It is effectively a cost-benefit analysis of the value of benefits derived from the investment required to achieve those benefits.

We have developed a financial model for this impact measurement process. Using this model, we work through the impact process with organisations by identifying client or service classifications for which impact will be measured, what outcomes are achieved for each classification and which stakeholders each outcome is applicable to.

In order to measure outcomes, data is collected by determining indicators for each identified outcome. These indicators can either be qualitative or quantitative indicators. A financial proxy is then assigned to the indicators to express them in financial terms which is backed by extensive research data from Australia and around the world.

The monetised outcomes as identified above are collated and then discounted for factors such as deadweight, attribution and drop off which takes into consideration the likelihood outcomes would have been achieved anyway or from other organisations and if this is reduced over a period of time. 

Importantly, at this stage an adjustment is required for the actual proportion of stakeholders who achieve each outcome and to what extent. This is where organisations need to collect data through surveys of their clients and stakeholders, and is typically where organisations lack quality data. By going through the social impact process, organisations can identify what data they need to collect in order to track how much impact is generated each year. 

The final impact report includes findings and analysis from the impact measurement process, which can then be used as support for funding and other requirements. 

Measuring the dollar value of impact compels organisations to gather regular feedback which in turn helps to improve processes, implement better impact models while keeping their primary objectives in mind and being held accountable to donors. The ability to quantify social impacts is one of the most significant ways to secure funding, but importantly can also justify the activities of an organisation, reinforce its mission and drive its strategic plan.

With a rise in value driven organisations, the need for practical and standardised assessments for social impact measurement are now more important than ever. Impact measurement tools are both challenging and empowering which enable organisations to shape future decision-making with a new perspective.

If you have any questions on measuring your social impact please contact Kim Kelloway kkelloway@hlbnsw.com.au or 0401 136 344.