Measuring impact – whether human, social or environmental – can feel like an impossible task, but really just requires a step-by-step path.  There are many frameworks that you can draw upon; the key is to start simple, pilot an approach, and then evolve.

At the Opportunity Collaboration in mid-October 2009 in Mexico, organized by MicroCredit Enterprises, the topic of measuring impact was a top discussion topic of many conversations.  Several attendees requested that HIP Investor synthesize the core insights, tools and methodologies that we have observed so far – and how they might be of use.  Here is a simple 5-step approach that includes example frameworks to consider:

1. First, understand the distinctions among Inputs, Process and Results. An input counts how many applications for a micro-loan there are. The process would count how long that process took, and the rate of acceptance. The result of a successful micro-loan would range from re-payment to the benefits of that investment, like educated children or funds for purchasing health or water. Organizations that measure results tend to be the most successful – as they align their select highly targeted strategies and align their resources against them. They might also measure processes and inputs, but only if contributing to maximizing the result.

2. Next, determine what and how aggressively you want to measure. You can go as shallow or deep as you like. Determine how meaningful it is to do so. If you make decisions by intuition, the metrics might be less helpful. Not everything that is measurable is meaningful – at most choose five metrics (the number of fingers on your hand). But if you are deciding among multiple choices with scarce resources, metrics help to identify aspects that best connect with your goals – whether as an organization or an investor (or donor).

3. A range of measurement frameworks exist to learn from, and provide a starting place to build a template:

  • Ashoka asks three core questions: How many Ashoka Fellows changed government policy in five years? 50% typically. How many Fellows were replicated by another program in five years? 90% on average. How many people were impacted? This varies by field, and ranges from thousands to millions depending on the topic.
  • The Human Development Index by the United Nations covers social, environmental and economic indicators, and rates most of the 200 countries worldwide. These metrics, covering infant mortality, literacy and gender equality, also track year over year performance.
  • The Gross National Happiness approach of Bhutan looks at 72 indicators, including how people used the last 24 hours in terms of time. These compile the core “pillars” and go beyond traditional GDP as a measure of success. France is now evaluating how they can do the same with Nobel laureates Joseph Stiglitz and Amartya Sen.
  • The Balanced Scorecard is used in business and tracks four categories: customers, operations (including employees), learning and financial metrics. It is used by many large companies as a more comprehensive view.
  • The Global Social Venture Competition (GSVC) includes a Social Return on Investment analysis as part of its evaluation for business plans. World of Good won both the GSVC grand prize and SROI prize in 2004. Businesses select the 3 metrics that best drive their venture.
  • SVT Group has cataloged more than 30 approaches in a PDF guide, and describes what they are, how they work, how many resources and time commitments are required, and where they have been used.
  • Grameen Bank has a set of questions that frame how microfinance families improve their lives.
  • The HIP Scorecard. has a comprehensive look at five categories – Health, Wealth, Earth, Equality and Trust – based on Maslow’s hierarchy of needs and the UN Human Development Index. HIP has adapted it to publicly listed companies. The HIP 100 Index (and the HIP 500 Index) tend to beat the S&P by integrating these quantifiable human impact factors – and how they drive profit for corporations.

4. Seek out benchmarks to compare against. The U.N. Human Development Index tracks many categories of metrics at the country level over multiple years. Consider how your organization’s metrics might fit those – and demonstrate how it’s more comprehensive, more efficient or faster momentum of improvement.

5. Start a pilot of metrics that seem right for your mission and goals. Don’t overcomplicate it. Go with one, two, or even five metrics (no more than one hand!) – and track the impact you are creating. Compare it to the investment currency – and calculate a ratio. See how that ratio changes by day, month, quarter or year. Then, evolve your approach to use it as a great management and evaluation tool.

For more information, feel free to contact us (Paul @ HIPinvestor.com)

What’s your experience? Any other models or frameworks to suggest? Post your ideas below: