In preparing to write about what prevents people from ascertaining whether they’re having an impact or not, I saw an interview with Professor Michael Sandel, who teaches political philosophy at Harvard. Sandel outlined the three general types of moral arguments. One is the utilitarian idea: in other words, whatever creates the greatest happiness for the greatest number. For example, torture of the one is justified because it benefits the many. The second is individual rights: freedom to choose for one’s self. For example, not being forced against one’s will to subsidize another’s welfare, or conversely, freedom to live a full life through access to opportunity. And the third is virtue and the common good: what is in the public interest. For example, provision of public education to cultivate a shared sense of civic responsibility among those educated. Each type of reason has come up in SVT’s research and experience into how people relate to measuring impact.
While many nonprofits and for-benefit companies we’ve polled consider managing impact to be of primary importance, it tends not to be as urgent as other priorities. Many of these groups are asked by funders to create customized reports tailored to the funders’ tastes, but these reports tend not to improve the ability of management to know what is working or how to improve. Thus not only is it physically difficult to find additional resources to do a more meaningful kind of impact analysis, and some feel it would be unjust to pay for it themselves when they’re already being asked by funders to do so much for the sole benefit of the funders. If funders or others with a vested interest would “put skin in the game” to help get impact measurement paid for, many impact-oriented businesses and nonprofits say they would be much more likely to do it—essentially an issue of individual rights and fairness, as well as resources.
On the investor side, many early stage investors don’t see a strong need in their own investment decisions for evidence of impact or for a management capacity devoted to assuring and improving impact. Down the line, however, these investors recognize that later stage investors, who tend to be more institutional, do value this information. Still, most often the infrastructure does not get put in place early, when it would be cost-effective to do, for reasons that at first blush boil down again to the individual rights argument: why should the enterprise or early stage investor subsidize the creation of an impact information infrastructure when it is mainly going to benefit others later?
But there is more to the story than just fairness. I recently debated with a social venture capitalist friend about how one can know whether impact is happening. He said, ”Do you know the bonefish? They swim in schools that collectively look like a big fish. When a predator comes upon them, the school collectively senses it, and instantly moves as one into two or more groups to confuse the predator.” To this venture capitalist, there is a connection among the fish that lets them act instinctively in unison for the collective good. This is analogous to the relationship between him, the individual impact investor, and the ventures he invests in. He trusts his ability to judge empirically and intuitively whether impact is or is not taking place. To him, applying formal and objective measurement is not only unnecessary; it risks interfering with this transcendent connection. His is one spin on the stance held by a number of philanthropists and investors, as well as entrepreneurs and other leaders in the social capital space. They express skepticism about applying the language and metrics of efficiency and effectiveness. They see these as being derived from free market capitalism, which has seemingly proved adept at hollowing out our capacity for wisdom and humanity. So there is a “virtue” argument against measuring impact.
Yet it butts up against the experience of many in the field who passionately believe the common good is being failed by the current absence of impact measures. A social entrepreneur we know who has worked for the past five years in Cambodia has been deeply troubled by the fact that so many aid and development nonprofits in the region receive funding from donors overseas, without any check on their actual results. In one case he knows of personally, the director of an orphanage is known locally to have sex with the orphans in his care—and yet well-intentioned donors continue to fund the do-good organizational profile he posts online and in grant proposals. This sort of tragedy spurs many to call for a behavioral shift toward accountability and an impact measurement infrastructure.
Champions and foes of the impact measurement movement have been too quiet about the moral issues at stake. Let us name them and improve our grasp of them, so we can collectively shape solutions that address the moral risks on both sides of the issue.