The Opportunity of Impact

Charity Intelligence is in full agreement that the dialogue on assessing charity performance needs to be changed. I would suggest a slight wording change from Bruce MacDonald’s Nov. 24 post where he talks about Redefining the Problem though; I would call it Focusing Attention on the Opportunity. At the heart of it, I believe I am saying the same thing – the Canadian charitable sector would benefit greatly from a focus on measuring and reporting on impact.

Donors have to make assessments in their giving. How should they decide which charities to support? Ideally donors would support charities that have the highest impact – charities that do the most good with donations.

At this time, the vast majority of charities do not report on their impact. Many charities are struggling with how to measure the change that they help to create. Therein lies the Opportunity, and it is a dual opportunity. Charities that are able to better measure their impact will both have the tools to be able to continually improve their operations, as well as the ability to provide donors with the information they need to make better giving decisions.

The charities that we have seen that actively measure their impact – where, how, and how much change they help create – are manic about helping their clients or improving on delivering against their mission. In order to continually know that they are doing a better job at whatever they are doing, they need to measure what matters and use that information to improve. This is the key opportunity in measuring impact.

The second opportunity is that donors will be better able to truly understand what matters when assessing charities. In the absence of information on impact, donors looking to assess charities fall back on what is available, on what charities often proudly put forth – cost efficiency metrics. Given the inadequacy of these simple metrics, charity ratings have emerged and have become a tool that many donors find immensely useful.

In compiling these ratings, charity analysts are using a variety of different measures: transparency, accountability, governance, leadership, funding need, and cost efficiency (fundraising and administrative cost ratios).

The current charity lists and ratings use different combinations of these factors. MoneySense’s grading assesses cost efficiency, governance and funding need. Imagine Canada’s accreditation is based on governance, financial transparency, ethical fundraising practices, and staff and volunteer management. Charity Intelligence’s ratings are based on donor accountability, financial transparency, funding need, and cost efficiency.

As charity analysts, we’re all trying to measure what matters most. This is an evolutionary process for us all and there is general consensus that we need to move more towards understanding impact.

This is the goal for our ratings at Charity Intelligence. As a start, we have measured the impact of 50 Canadian charities in the social services sector. We recently released our list of the 10 highest-impact charities from this small subset. As part of the evolutionary process towards what matters most, we plan to incorporate impact into our charity ratings.

It is early days in measuring impact. Shifting the focus from cost-efficiency to charity impact will change the discussion. This is the opportunity before us.