Getting the best value from your measurement of results
'Measuring Impact, for Impact' was the title of our event last night, and the running theme of the evening was about how to ensure that results are tracked in a way that adds value to decisions, rather than in a way that ends in a mess of data or dusty reports.
You may have seen some of detailed economic impact reports done by Ethan Kapstein (the ones with several zeros) for clients such as Standard Chartered Bank and SAB Miller. The reports are great for demonstrating what a substantial impact these firms have on emerging economies. But this was not our topic last night. What I was delighted to hear, from Marianne Mwaniki at Standard Chartered, is how the bank had used the findings to ask 'what more can we do?' Kapstein's analysis of multiplier affects demonstrated to management how relatively small shares of their portfolio in lending to SMEs and agriculture made disproportionately large contributions to jobs. So the bank turned its efforts on boosting these portfolios.
Kittrohna Ceri shared WBCSD's new tool, "Measuring socio-economic impact: a guide for business'. While it provides an excellent overview of 10 different tools that companies can use, the overall theme - of the guide and of our evening - is precisely NOT to get stuck in methodologies. The top priorities are to define why you want to measure impact, with what scope, and use that to match make your needs with the methodology options.
My presentation drew on the particular advantage that BIF has on this topic: we do a lot to track commercial and social results of the inclusive businesses supported in our BIF portfolio, but we also give direct technical support to some of the businesses on how they can best set Key Performance Indicators and metrics for their own purposes. This gives us a bird's eye view of how needs of businesses and needs of donors that support business differ or overlap.
My aim was to consider and question some common hypotheses:
- if results tracking must be done to inform and improve decision-making, then businesses and donors (and by implication investors) must need different results, because they are making different kinds of decisions
- businesses need context-specific indicators, while donors need universal indicators that can be aggregated
- businesses focus on measurement of outputs (what is delivered, such as units sold) while donors want to know about outcomes (the difference it made to somebody).
The Presentation (here) explains how businesses certainly must develop highly project-specific indicators, although when they can use standard terminology, such as the categorisations provided by IRIS, this can help them benchmark. And although most businesses are only comfortable tracking outputs, some do have a business interest in understanding outcomes. Why? Not only because outcomes account for whether they are achieving whatever social mission is in place, but because they affect whether suppliers continue to plant new crops and supply, or whether consumers stick with their product and brand years ahead.
What of donors? In BIF we tot up the turnover and number of people reached at the Base of the Pyramid across all projects. But mixing a few large and many small numbers, based on early stage business growth is not so useful for further understanding what's really happening in the portfolio or what it may deliver. So we have developed own tailor-made commercial index (potential for viability) and development index (likelihood of significant development results) based on a range of indicators. With this we can see likely patterns of performance across the portfolio, differences (for example between large and small companies, start-up or mature, and consumer or producer-focused) and trends over time. Last year's review is published, and we look forward to a big update later this year.
So the hypotheses do not quite stand up: donors do need aggregated indicators, but they still need some tailoring, rather than purely 'universal' indicators. Limited universal indicators are useful to business too. Measuring outcomes is critical to donors, but is relevant to companies too. Their problem is not lack of interest but lack of feasibility and affordability. Two tips for reducing these problems around outcome tracking are:
1. Use the Progress out of Poverty Index as a relatively cheap way to track changes in living standards over many years amongst people in or near poverty.
2. Focus on understanding reporting and checking the logical link between outputs and outcomes. How many lanterns lead to how many productive hours for users? Or how many vaccines lead to how many more healthy children? Use work from others to make this link.
If we can't measure outcomes, it doesn't mean we just assume outcomes happen. Look at what happened to the micro-finance industry, when after years on focusing on portfolio expansion, hard questions started to be asked about what the finance meant for borrowers.
The audience inundated us with some of the most searching questions I've heard in a BFP event. The conversation was itself a great indicator of how the debate about the results of business has truly moved on since the first such BFP ODI DFID event in 2009.
Graham Baxter IBLFdrew on his experience in the Royal Airforce to eloquently focus the task: what are the core results than need to be 'on the dashboard' so the pilot can fly the plane (business) in real time? These, I believe, will be entirely project specific, unlike the annual aggregated and benchmarked data that Board members, shareholders, investors or donors would want for assessing if their money is in the right place.
Let me take two quotes from Marianne to sum up the theme:
"Numbers are just numbers"
"It's what we do with the insights that counts"
The event was co-hosted by Business Fights Poverty, Standard Chartered Bank and Business Innovation Facility, with support of Business Call to Action. Details here.
My presentation, 'Should we all measure different things because we use results in different ways?' is here.
Kitrhona's blog about the WBCSD resource is here.
There is a host of further information from BIF on the topic of results measurement. See our:
- blog summarising current resources and Hub links
- Impacts Network, with more posts about results measurement than you get on the main home page
- the Inclusive Business Results KnowHow page.