Don’t Check Your Business Skills at the Door
Last night I heard John Keller, founder of RPM Revenue Drivers and serial/social entrepreneur, talk about the qualities that make an individual or an organization successful. He drew this pyramid and talked about how everyone has the potential to be successful if they master this process from the bottom up. I noticed that measurement was second on the pyramid, and I thought about our discussion in class about measuring social impact.
Measuring social impact is important for several reasons. First, it helps leaders of social benefit entities solidify the vision and goals of their organizations. Even before the data is collected, the process of thinking through the desired results will help them hone in on what they really want to accomplish.
Second, it helps social benefit organizations know how to best allocate their resources. Based on the data collected, managers can uncover both the inefficiencies and the successes of the organization so they can cut programs that aren’t working and expand those that are.
Third, impact measurement makes it easier for organizations to get outside funding. Investors, donors, and potential partner organizations will be much more willing to support a social venture if they can see clear indications of its success.
Although impact measurement is essential, if it is not applied correctly it can become an obstacle.
For example, once the data is collected some managers of social ventures may falsely interpret the data to support their predetermined biases. Without careful, unbiased interpretation the data will be useless and may even serve as motivation or justification for managers to pursue poor courses of action.
In addition, some individuals and organizations use the measurements too narrowly. They choose one measurement, like overhead ratio, to compare organizations from a variety of sectors. However, social ventures are so different that simply comparing them using one measurement will not provide enough context to make a wise investment decision. Individuals should instead evaluate social ventures as they would evaluate for-profit investment opportunities—by comparing and contrasting various metrics, strengths, and weaknesses to analyze past performance and future potential.
Clearly social venture leaders and investors must measure impact and correctly use those measurements to make decisions for success. As Kim Tanner of Jeneses says, in the social innovation space we shouldn’t check our business skills at the door.