September 22, 2016
By: Martina Mettgenberg-Lemiere
Impact Assessment appears to be a continuous improvement area for most funders. To relieve the angst and offer practical solutions from existing practitioners, AVPN released the Guide to Effective Impact Assessment earlier this year. Here are 5 insights to make impact assessment work.
There’s no one size fits all – everything has trade-offs
Most of the organisations we surveyed started with existing frameworks such as Social Return on Investment (SROI) and then moved on to customise their approach to such an extent that they moved away from the original framework. Overall, most of the approaches are customised and organisations find their own way of measuring impact. While this amplifies that not one size fits all, there are trade-offs to the customised approach such as less comparability with other similar business models. This has been the experience of The Happiness Foundation, Social Ventures Hong Kong as well as Caspian Impact Investment Adviser.
Should I still aim for standardisation to compare across my portfolio?
Hardly any organisation we spoke with standardises all indicators for all organisations in their portfolio. Accounting for all relevant parameters on the same scale risks distorting the achievements of each investee. The common approach appears to be to have some common indicators and then evaluate each investments with customised indicators on its merits. The most experienced investors understand that each investee organisation is on a different stage in their growth journey, has a different business model and moreover different ecosystem to navigate.
Having said this, often organisations aim to standardise across their portfolio after having grappled with customised standard. Some organisations, such as EPIC Foundation, Lombard Odier and Microsoft Japan, start with a standardised approach. For instance, EPIC Foundation selects the organisations it funds already according to the criteria they will assess them on.
Impact assessment starts at due diligence
Even if funders do not develop a fully-fledged impact framework during due diligence, the conversation about impact is integral to due diligence and can often lead to defining initial KPIs which are then translated into the impact assessment framework used during the investment period. JVPF and Lok Capital exemplify this approach. An early start for the impact discussion during due diligence is highly recommended to influence the impact assessment framework.
Be prepared to do impact assessment for the long haul
Regardless of the early start, most organisations find that it takes years to track insights and refine the framework. A reason for this is that the initial framework may not capture the observed impact adequately. Often investments are changing throughout the engagement and therefore an adjustment in the impact assessment framework is useful. This is exemplified by most organisations such as Dasra, Microsoft, Caspian and Mars Catalyst.
Be prepared to learn and work in partnership, rather than assess and control
Given that the journey to measuring impact is a long one, a motivation to learn and to work in partnership rather than just control is key. Impact assessment can easily be seen as yet another reporting tool. Yet the most successful funders were those who not only structured the impact assessment as a management information system but a way to learn more and adjust their actions and funding. Coupled with motivation for learning, funders doing impact assessment well are also those who partner with their grantees/investees. Partnership increases trust and by consequence also the flow of information. This way it enhances the learning experience for both funders and investees. Organisations like Dasra, RS Group, SVhk and Kopernik attest to this.
Heeding these five points will help any funder make impact assessment work.
The Guide to Effective Impact Assessment distills practices in the four areas of getting started, learning from existing frameworks, implementation and presentation. According to AVPN research, these areas present hurdles to social investors’ approach in impact assessment and the guide presents a synthesis of literature and 13 portraits of Asian impact assessment leaders. Through its hands-on bibliography split into overview reports for general information, cases to provide specific examples and finally practical advice and guidance, the report allows readers to go beyond frameworks. Three additional full-length cases can be found on the website and are by Caspian Impact Advisers, Lok Capital and Axis Bank Foundation. At the end of November, AVPN will launch its Impact Assessment workshop in India – sit tight for updates or reach out for more information via firstname.lastname@example.org