I have been browsing profiles on what is apparently the hottest new dating site—but it’s really weird. It’s still only in beta, and it only gives the person’s photo and net income. I’m looking for something really long term—like raise kids, grow together—but all I have is their income? Who can make a decision like that?
And so it is with funding and investing: financial history alone is a woefully insufficient basis for predicting successful achievement of social change goals in organisations. Our current financial reporting systems are “in beta” and don’t tell us whether businesses will make our dreams of sustainable utopia come true or break our poor bleeding hearts.
CSR reporting, social accounting and other supplements to the financials have emerged to help us back the winners in the race to a sustainable future, but will more and better reporting really help? We can add ever more indicators and metrics to the mix, but I argue that as in romance, there is no shortcut past getting to know someone “the old fashioned way”—talking through what really matters, accepting each others’ strengths and vulnerabilities, and putting in the work to find a way forward together (or knowing when to break up).
Every week I hear of new frameworks, standards and indicators for reporting on values, ESG and myriad dimensions of business impact. They are usually strong, well-researched pieces of work, and surely a valuable tool for critically assessing the fitness of an organisation to deliver on its multiple bottom lines.
But we should exercise caution when we summarise an organisation into a bullet point list of indicator data. Social scientists use validated scales to understand human behaviour but not to rank individuals from best to worst.
In the same way, we should use our impact indicators to inquire into and understand the success and failures of organisations, but not as the primary basis for comparison, ranking or future funding.
If you want to make an informed prediction of an organisation’s future impact, a carefully curated list of indicators to complement financial reports can help, but it’s a bit like adding academic transcripts to the online dating profile described above.
Funders and investors of social innovation want to find game-changers, creative minds, mavericks—but predicting success in schools is comparably difficult. “Trying to separate out creative people in schools is hard, as much of their behaviour is similar to those who are just lazy, have ADHD, or are generally disruptive.” (Bear this in mind as you keep a lookout for the next great ‘disruptive innovation’).
No over-arching system of metrics will effectively predict the best innovative solutions to complex social problems. Positive social change outcomes are as difficult to predict in organisations as “success” is to predict in individuals.
So how do you find the “real deal” organisation that will take a great idea/model for social change to scale? Not by compiling a giant comparison table of organisations scored by the latest 100-point scale and funding the “99s”. For impact evaluation standards and indicators to deliver value to both sides of the flow of investment, they need to be used in a framework that puts organisational management and strategy at the centre; the place where the hard conversations and decisions happen, where conflicts are resolved and mistakes are learned from. The messy, hard work at the heart of successful relationships—in business and romance!
If you want to invest in scaling something that works, the key point is a commitment to learning: “Organisational learning is incredibly important. Organisations that are adept at learning from mistakes and adapting to new challenges are more likely to be successful, and in the nonprofit sector, more likely to make significant progress toward mission-related outcomes”.
Jodi Nelson, Head of Evaluation, Gates Foundation