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Philanthropy UK asked five leading figures across the giving and fundraising communities for their views on demonstrating charity effectiveness, and are delighted to publish their responses below. They discuss ways charities can best demonstrate their impact to donors, and challenge donors to commit their own resources to support charities in these efforts.
The panel:
- Daniela Barone-Soares is Chief Executive of Impetus Trust. Impetus takes a venture philanthropy approach to the charities it supports, providing long-term financing, as well as hands-on management and capacity-building support.
- Kevin Ireland is Executive Director of the London Housing Foundation. LHF specialises in providing grants and organisational capacity building support to voluntary agencies that tackle single homelessness in London.
- Tris Lumley is a Senior Analyst in the research team at New Philanthropy Capital. NPC provides independent research and tailored advice to donors on effective giving.
- Jeremy Swain is Chief Executive of the homelessness charity Thames Reach.
- Karl Wilding is Head of Research at the National Council for Voluntary Organisations (NCVO).
Kevin Ireland: First and foremost, it's important for the donor to be clear on what they are seeking to achieve from their grant-making. Then the key questions are: is there a good match with the grant-seeker's proposals, and will the charity be able to deliver as proposed? Ability to deliver something sustainable will depend on underlying organisational capacity, and this needs to be assessed. It's also important to understand the context within which the applicant organisation operates: how does the proposal fit within the range of activity in this area? Donors should not make decisions in isolation from what else is happening.
Daniela Barone-Soares: Ultimately it depends on what motivates people to 'invest'. But in general I would look at (1) quality of leadership; (2) ambition for social change (i.e., for achieving its mission: what are their goals or targets, and do they seem realistic/ambitious?); (3) whether the charity is addressing a 'cause' or a 'symptom' (Litmus test: if widespread, would their way of addressing the issue achieve 'system' change, or is it more of the same? Would it change a paradigm, alter behaviour and/or perceptions towards resolving the issue?); and (4) what the gaps are to meet targets and how the charity plans to address them.
Jeremy Swain: Donors are often attracted by innovation. Sadly, innovation is one of the most over-used and tarnished words in the charitable lexicon. Much that appears innovative can be, in fact, a re-packaged service that the organisation is desperately trying to preserve. If I were a wealthy giver, the factors I would look for would be: (1) evidence of how the project will meet the needs of its beneficiaries, and the impact it intends to have: (2) the track record of the organisation; (3) the sustainability of the organisation (i.e., how financially robust it is); and (4) the potential for leverage of additional financial or other support.
Karl Wilding: There are probably three sets of issues that donors need to consider: those of propriety, relevance and efficacy. First, despite increased information and transparency, not all individuals and organisations purporting to be charitable may in fact be all that they seem. Check the Charity Commission number, and then check it against the public register of charities. Second, finding the relevant organisation requires research. Factors to consider might not just be about the field of activity either - for example, relevant organisations might only be those with a particular set of values, policies or practices. Third, notions of efficacy potentially span a range of dimensions: finance, general management, user engagement and, of course, outcomes. The problem is that some of these are difficult to measure. This raises issues of trust and confidence: are you prepared to trust that the organisation will do what it says and do it effectively, or do you want the assurance of detailed reporting and evaluation?
Tris Lumley: Donors invest in charities to deliver results - to create real changes in the lives of the people they work with. So this is the first area for them to consider: what are the results generated by the charity's work? But the ability to deliver results rests on the charity being able to manage its risks, and having the organisational capacity to continue to deliver results in future. NPC breaks risk into elements of evidence, strategy, leadership, finances and organisation. So the other two key questions to ask are - what risks face the charity that might prevent it from delivering these results, and does the charity have the capacity to continue to deliver?
JS: At the outset, the charity should be able to explain how it intends to monitor and evaluate the progress of the project or service and be prepared to report honestly on how far targets are being achieved. However, donors are an idiosyncratic lot and it is important to find what kind of contact they wish to have. For example, Thames Reach recently responded to a major gift with regular email updates about the project the donor's money was linked to, only to find out that actually he didn't want the money linked to a single project, nor did he want an e-mail, but instead a general update in the form of "something that I can read in the bath". Lesson to us: ask first and don't make assumptions.
KI: This will depend on the nature of the proposal, in particular whether it is truly innovative or an extension of something that is tried and tested. In the latter case there is a track record to draw on, and it should be possible to demonstrate reasonable expectations of outcomes based on previous experience (from that agency or others). It is more tricky for genuinely innovative proposals. For these it is essential to be able to provide a convincing theory or model - and the onus is then on the grant-maker to understand the situation sufficiently that they can make reasonable judgements on this. It's hard to fund innovation successfully if you don't know what else is happening, with what impact, in that field.
TL: NPC believes that the most effective way for charities to communicate their impact is through a combination of numbers and stories, or quantitative and qualitative data. That means not only telling donors how many people they have helped, but also what the main changes were for those beneficiaries. For example, charity A trained 400 people, of whom 350 went on to get jobs, and 300 were still in those jobs a year later. Or charity B, supporting 1,000 schoolchildren with counselling - 80% of them improved their academic performance, and 70% said it had helped them deal with their problems.
DBS: Agreeing key performance indicators (KPIs) at the beginning of investment and reporting against the KPIs is key. Otherwise it becomes a moving target. KPIs should be a mix of qualitative and quantitative metrics, relevant to the mission of the charity - in tandem with their strategic objectives (so even if new measurements need to be established, they would not be onerous, as they will also help the charity measure its own progress against strategy). A one-page report every quarter on KPIs and milestones can be helpful.
KW: The annual report and accounts are increasingly the source material for donor intelligence provided by GuideStar UK or Intelligent Giving. So, getting them right - accuracy, clarity, timeliness, utility - is critical. Views differ on what organisations should be reporting on, but one trend to highlight is reporting on the indirect outcomes of the organisation's activities on the environment and wider society. Donors want to be reassured that they are having a positive impact, but also that they are not funding activities with a substantive negative impact in other areas. When will donors start to ask 'What will be the carbon footprint of my donation?'
What main challenges do charities face in demonstrating their impact?
TL: There are two main challenges. First, it is often difficult to measure the results - the actual changes in people's lives - of a charity's work as opposed to its outputs, such as the activities or services it runs. Second, charities often do not have the resources - money, skills, or expertise - to work out what and how to measure. NPC believes these challenges can be overcome. Charities can start by taking simple steps to work out a few key factors to measure, instead of being overwhelmed by the challenge of measuring everything that describes their work.
KW: There are many, including competing methods and approaches to impact measurement, assessment and reporting; a lack of tools to enable quick, easy collection of monitoring data at the point of delivery; over-emphasis on quantification; and insufficient resources to invest in outcome systems. It is said that funders (and donors) get the charities they deserve: until there is a serious debate about the cost of demonstrating outcomes, we shouldn't expect in-depth reporting.
KI: Measuring outcomes is part art, part science. First, though, it is important to be clear on what outcomes are expected - and here I do mean outcomes and not outputs. What changes will result from the interventions? One of the greatest difficulties in measuring outcomes is that of attribution: did the changes arise from this agency's intervention or from something else? Once again, the applicant needs to present to the donor - and the donor needs to be able to assess - the logic model. Does it present a reasonable case that the interventions proposed will stimulate the outcomes anticipated?
DBS: Impact is super hard to measure. For example, charities dealing with 'prevention' or targeting policy changes may have a huge impact, but it is hard to quantify. Reality in the charity world is that the numbers alone do not tell the whole story, so charities have to invest in creating a picture of the whole that is credible.
JS: Many charities work with people with complex and challenging needs where progress can be slow and difficult to measure. We work with extremely chaotic, rough sleepers, and last year one of our teams had great success in encouraging a homeless woman to come in off the streets after 15 years of rough sleeping. However, it took another two months before she was prepared to use a bed and a further three months before she was willing to use the dining area with other residents of the hostel. However, she is alive and the quality of her life is improving slowly through the patient efforts of staff.
DBS: First, understand the charity funding environment. Currently it is fragmented, volatile and short-termist, so charity leadership spends more time fundraising than doing anything else. Many small-to-medium-sized charities live hand-to-mouth and in many cases 'flex' their programmes to get funding, which also makes them unfocused. Yet most donors are unwilling to fund charities' infrastructure. Donors are not great at understanding that there are some costs they need to pay for as part of their giving: not everything can go directly to the beneficiaries. This in turn creates a capacity and infrastructure problem, making charities inefficient (and unable to attract good people). This cycle needs to be broken: long-term core funding and expertise are what charities need (with milestones and targets, to make sure efficiency is addressed). This is exactly our proposition at Impetus - we do that efficiently on behalf of our donors.
TL: Donors can start by asking charities about their results, and by offering to fund a charity's efforts to start measuring results. In NPC's experience, many of the problems charities face in demonstrating their impact stem from donors preferring to fund projects and direct services rather than supporting the charity as a whole organisation. But donors can play a huge enabling role by providing unrestricted funding to charities - allowing them to develop themselves as well as delivering services. This can help them to work on demonstrating their impact and improving their communications, thus becoming both more effective and efficient. Donors can also help by asking the right question of charities: about the results their work creates.
JS: The dream, of course, is that the donor does not want to be a passive contributor but wishes to become an ambassador for the organisation, enthusiastically telling their friends about their charity and urging them to join the cause. Donors are also able to create 'freedom to manoeuvre' by not tying funding to a specific project. This offers an opportunity to experiment. Yet, because of the risks associated with testing new models, it usually requires a great deal of confidence in the organisation. However, a challenging mission will only be achieved through the trialling of new ideas, and sometimes things will go wrong. Donors who are willing to take this journey with us are gold dust. We must show them that the ultimate return on their investment is the capacity to transform lives.
KW: Donors can play a significant role in demonstrating impact, being accountable and identifying need. The rise of social networks, Wikis and other forms of collaborative authorship on the Web point the way forward. Donors can be campaigning agents, using their social networks to build support for the causes they believe in and highlighting their impact. Charities often talk about building a relationship with the donor, but donors need to think more about building a relationship with the cause. By building more engaged communities around a particular cause, donors might address the concern that they are just direct-debit citizens.
KI: I'm enormously impressed by the wide range of excellent work undertaken in the United States on organisational strengthening. For example, GEO (Grantmakers for Effective Organisations: www.geofunders.org) believes that it is essential to strengthen the deeper capacity of voluntary organisations, not just to invest in extending service delivery. We support a little of this in the UK but need to do much more. If we look to the commercial sector we can see that it's the strong organisations that consistently perform well in delivering customer services. We should invest more in helping build strong voluntary sector organisations.
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