Philanthropic focus on impact is undeniable, but are funding and measurement practices setting us up for success?

The pursuit and facilitation of impact are omnipresent in the philanthropic space. In the 60 practice-focused, peer-exchange activities Philea organised in 2022, philanthropy professionals learned from and with peers how to leverage philanthropic assets to move the needle on key societal and environmental issues.

Last week, I represented Philea at the HIGGS conference Philanthropy 2.0 – the importance of social impact. More than 300 participants from philanthropic organisations, non-profits, corporate social responsibility departments, and other funding bodies from Greece and abroad came together to reflect on the role of funding to catalyse social impact, touching on both the ‘why’ and ‘how’ of practice.  

It was enlightening to be in a conference that kicked off by tackling questions further upstream touching on the distinct roles and interactions among state, markets, and civil society (of which philanthropy is part) before zeroing in on philanthropic practices. Being able to situate the role of philanthropic organisations in the social contract of each country, and what constitutes their social license to operate, enriched the conversations and offered insights into the development of practice.

Are we on the same page when we talk about impact?

“At the MacArthur Foundation, I often felt my job as a programme officer was to read proposals and find holes in them – this theory of change is weak, they’re too small, and so on. Yet one grant application at the Global Fund was from five women in rural Peru who signed their request to start a literacy center in their community with thumb prints. Five years later, we got a final report in which they signed their own names. You want impact evaluation? That’s it!”

Inevitably, one of the first questions that had to tackle on the panel I participated in was on the definition of impact. While acknowledging that the answers in our work are plural, the poignant quote of Kavita Ramdas above, from a recent piece in Alliance magazine, offers a few hints on key ingredients for impact: the structural shift of conditions for the women in the quote as the gained literacy skills will have far-reaching implications in their lives; as well as that impact needs an expanded time-line. Too often, both foundations and other funding organisations attempt to carry out critical work in one or two years, when deep change requires longer horizons. 

What I love about the quote is that it gives impact an orientation of justice.Redressing profoundly unjust arrangements, and restoring rights and dignity, are the levels where more philanthropic needs to operate, leaving behind obsolete models of charity. More impact talk and practice need to nod towards tackling power imbalances and root causes, and what Martin Luther King Jr referred to as “the circumstances of economic injustice which make philanthropy necessary.”

Two serious diseases get in the way of impact  

Beyond power imbalance and structural injustices, there are two dangerous diseases that get in the way of transformative change – “projectitis” and “obsessive measurement disorder.”

Project-itis refers to an unhealthy emphasis on restricted project grants that do not fund ‘true costs’. Projects unfortunately remain a dominant funding model, something that carries tremendous implications for the health and resilience of individual organisations and the broader civic space. The term ‘non-profit starvation cycle’, and research around it, has brought awareness on how projects could succeed and organisations fail – yet, despite significant efforts in the sector, the practice carries on.  There is increased evidence on the transformative impact of multi-year unrestricted funding, but the sector still has a long way to go to de-emphasise project-based support.  In discussions with funding organisations, the number one reason that is brought up time and again is about impact attribution and fear that more flexible and unrestricted giving would make it impossible to understand the difference their funding made, and attribute impact. From anecdotal evidence and discussions, practioners are ready to accelerate the shift but most boards are still apprehensive.

Obsessive measurement disorder: Metrics and KPIs do matter. Especially when funding might enjoy any form of tax advantaged status, measurement is linked with accountability. But when we become hostage to narrow, quantitative KPIs, spend time and resources to answer questions when it’s not clear how they are going to help us get better, then metrics stop serving us well. In the book ‘The Tyranny of Metrics’ Jerry Z. Muller offers examples of obsessive measurement disorder (a term coined by Andrew Natsios) and troubling stories of what happens when we end up focusing on narrow, heavily quantitative metrics that turn into a stumbling block for reaching greater impact.

Frameworks to understand the expansion of change strategies

Historically, most philanthropic organisations directed their funding towards service-delivery organisations, where outputs can be counted and cause-and-effect can be established (e.g. a food bank that provides a meal to someone that has not eaten, will make the person less hungry). However, as the ambition of philanthropic work to combat root causes and change systems (that produce hungry people) instead of only alleviating symptoms (providing meals), have led philanthropic organisations to adopt other strategies that are better positioned to bring about transformative change.

Professor Alnoor Ebrahim in the book ‘Measuring Social Change’ identifies four distinct strategies (niche, integrated, emergent, and ecosystem), based on the degrees of certainty over cause-and-effect relationships and control over outcomes. Natasha Joshi from Rohini Nilekani Philanthropies, in the powerful piece ‘Plotting Impact Beyond Simple Metrics’ identifies different types of social change work based on the tangibility of results and the speed of emergence of change. 

Aligning our practices with change strategies beyond service delivery

As foundations pursue impact and strategies (e.g. policy change, collaboration, field building) beyond ‘niche’ strategies and ‘countable’ things, our funding and impact measurement practices seem not to be fit for purpose.

In aiming towards policy change, can we expect to move the needle with one or two-year project-restricted grants? What KPIs will serve us well in this type of work; will we get more effective in our work by counting the number of meetings with policy makers, or do we need new practices and tools to help us understand how we might change frames, narratives, and the terms of the public discourse?

In pursuing collaboration and collective impact approaches, does it serve us well to try to carve out the impact of ‘our’ work, or will this present a new set of challenges and might cause friction in our work with other stakeholders? How can we know that we move the needle on things that matter, like building trust?

Most philanthropic organisations aim for North Stars (creating more just societies, and climate positive economies), yet continue funding and measuring progress in ways that are not commensurate with the ambitions of the work. Expanding the toolbox to encompass flexible funding, and plural learning practices, are urgently needed to turbocharge new social change strategies and ways of working.

What associated practices are foundations exploring?

As a sector we are reckoning with the increased awareness of the complexity of the work, and how different impact orientations and social change strategies, beyond service delivery, necessitate a re-examination of funding and measurement practices. What could foundations do in response to this?

1/ Unrestricted, multi-year funding seems to be helping the most change makers on the ground, and this is what they ask for; however, project-based funding can still be designed differently and lead to better outcomes. Initiatives like Funding for Real Change have made a tremendous contribution to the field by developing a spectrum of fair funding practices.  

2/ Acknowledging that social change is grantee-led work, an increasing number of funders are working to remove barriers, simplify reporting requirements, move from quantitative-heavy KPIs to trust-based learning conversations with partners. The language and associated practices we capture nod more to learning and adaptation than compliance-heavy measurement, evaluation, monitoring. Qualitative data and stories can be just as helpful and effective as quantitative markers, and learning needs to become part of the very fabric of this work as opposed to an add-on.  

3/ Holding funding organisations to the same standards as grantees, and move the onus from grantee partners to funders. For a long time the default setting was try to measure the impact of the work of grantee partners, but increasingly, more funders hold up a mirror to assess how they are doing, and learn from partners and grantees how they could better leverage different material, social, and knowledge assets foundation possess. Questions about the effectiveness and accountability of grantees persist, but the question I hear often from funders is ‘are we being helpful in enabling change”

The best of times, the worst of times

The scale and magnitude of challenges we are facing (inequalities, climate, digitalisation, new geopolitics in a multipolar world) and the permanent state of poly-crisis, cause fear and paralysis. When things feel destabilising, the risk of clinging to old certainties and ways of doing things, is real.

That’s the opposite of what we need now. In a discussion I had with a philanthropy practitioner, they shared a quote that has stayed with me: ‘things are changing. Everybody in our organisation feels the shift.’

Changes in practice accelerated by the Covid-19 pandemic, heightened scrutiny over the role and function of private funding, and the urgency of the poly-crisis, all cause movement in the tectonic plates of philanthropy. In addition, a new generation of leaders and changemakers have joined the philanthropic sector, and together with partners, are leaning into some of the most difficult issues, acknowledging and attempting to do things differently. The strategies and answers will always be plural, but if we have a chance to create more equitable and just futures, we will all need to bring our best self to this work. 

How is your organisation thinking about impact, funding and learning; and what new practices are you considering adopting to catalyse structural & transformative changes? What drivers will propel your work, and what holds you back?

Get in touch to keep the conversation going at the Philea Forum, or one of the upcoming practice-focused programmatic activities!