Give social impact metrics a chance

I know what you’re thinking. As the Manager, B Corporation and Social Impact Metrics at MaRS, of course I’m going to make a case for social impact metrics. But hear me out.

To learn more about how you can adopt social impact metrics for your organization, sign up for the MaRS Social Finance Forum.

Measuring the social impact of nonprofit and charitable organizations is a polarizing concept. Some think quantitative measures are the only way to go, while others believe imposing additional regulations strangles the effectiveness of an organization. And then there’s an entire group that thinks social impact metrics simply can’t be viewed the same way in which the business community views financial metrics and accounting as their means of evaluation.

On that note, let’s take a short walk down history lane (I promise there’s a point to all this):

  • 1494: Italian mathematician Luca Pacioli introduces double entry accounting (the concept of debits and credits), it’s adopted by corporations and is still used today.
  • Black Thursday, 1929:  The greatest stock market crash in American history, ushering in the Great Depression. In response, accounting standard committees are created in the 1930s in each of the largest countries (rated economically).
  • 2001:  The International Financial Reporting Standards framework is developed to standardize financial reporting globally.
  • Today: This framework replaces national standards in over 90 countries.

As you can see, the process of improving financial measurement took over 500 years, and is still being worked out today. Hundreds of thousands of people have analyzed, argued over and pulled into every direction the myriad of financial rules and standards to represent a corporation’s financial state in the best possible light. Sure, mistakes were made and different parties were affected, but if nobody bothered to deal with the issues, we wouldn’t have the framework we have today.

So how does this relate to the topic of measuring the social impact of nonprofits and their funders using quantitative metrics? Both sides need to acknowledge the benefits and shortcomings of this emergent field. In order for social impact metrics to be credible and actually add value, people need to analyze, argue and pull them in every direction, but most importantly, use them.

How do we do so without killing each other in the process? We need to help create partnerships based on trust, allowing for mistakes and failures from both the funders and the nonprofit and charitable organizations.

To be clear, I believe that funders need to contribute the resources required to understand the metrics, since they need their grantees to report on them. The community sector doesn’t have the resources required to attack this new field, and if such demands were placed on them without appropriate support, it would surely strangle their effectiveness. Lastly, quantitative measurement was never meant to replace all evaluation methods—qualitative evaluation ensures that the soul of an organization is not lost.

I don’t think the measurement experts have the perfect answer to understanding how to better manage current resources and improve accountability today. I do believe, however, that they are on the right track, and we need to deal with the holes and endure the issues now in order to pave the road to a credible framework for tomorrow.

To learn more about how you can adopt social impact metrics for your organization, sign up for the workshop session For Good Measure at the Social Finance Forum, held December 13–14, 2011 at MaRS Discovery District.