I was recently talking with a colleague about how it’s time that we, as a sector, revolutionise our approach to impact measurement. This got me thinking about another component of the for-purpose sector that might benefit from being shaken up a little: grant-making. Having worked as both a fundraiser and a grant-maker, I’ve been musing for a while on what could benefit all parties. This article is first of a two part series that summarises my thoughts and insights on the topic.

Establishing the effectiveness of philanthropic donations can be extremely difficult, especially when you’re seeking to address cross cutting social issues. When making large philanthropic donations and grants, it can be tempting to take a contractual approach: agreeing quantifiable targets for the recipient to report on a regular basis. While this is an important starting point, donors should seek to build open and long-term relationships with the not for profits (NFPs) they support to achieve the greatest impact for the end beneficiary.

Numbers don’t tell a story: service delivery

There are very few areas of life where we believe that cheapest is best. The cheapest car? The cheapest hotel? The cheapest lawyer? Yet, when it comes to NFPs we often succumb to the belief that the organisation reaching the greatest number of people on the smallest budget is the one most worthy of our support.

NFPs are incentivised to produce big numbers and are consistently under pressure to ‘do more with less’. NFPs should, of course, deliver efficiently – but a balance must be struck to ensure quality is not compromised.

NFPs typically deliver services for which the end user does not pay (or does not pay the full cost). The feedback loop is therefore much looser than in the private sector (where user demand defines value though decisions on quality and price point) and does not necessarily include input from the end user.

Numbers don’t tell a story: social challenges

NFPs work to address social problems that are complex and multifaceted. The causes of inequality, poverty, homelessness and addiction, for example, are complex and multifaceted. As a society, our responses must address these challenges appropriately.

Balance the focus on short-term, quantifiable outcomes with progress towards identifying and addressing the root causes of social challenges. Some funders need to go where the problem is and the money currently isn’t. Funders who are truly interested in solving social challenges need to be open to working with NFP partners who take measured risk in trialling new solutions to tackle complex problems.

Quantifiable information is helpful, but rarely creates a full picture of NFP impact. Getting the question and method right is crucial to impact evaluation. We need to identify important questions and answer them reliably. In working towards long term, sustainable social change donors should look at the NFP’s theory of change and work with the organisation to demonstrate rather than prove their impact. This shift in perspective, when made authentically, can enable more a holistic capture of genuine impact.

Check out part 2 of the tips for grant-making greatness series!