There are two main challenges to measuring impact. One: how to do it well. Two: how to do it cheap. Getting both to happen can be done in either of two ways: force it, by making it a requirement; or attract it, by creating an environment in which the parties whose efforts are necessary to make it happen want it.

Forcing it of course means that it happens, which can result in some innovation around quality and cost because once the information exists people begin to see what its value is, and once they have to get it they may think about how to make that happen most easily. However the cost of getting it will almost certainly be higher than if the market has to internalize the cost, and thus internalizes the incentive to drive costs down. And, the quality of the information may be good because hey, it has to be produced whether we want it or not, so we might not really dig into the inherent value it has.

Around the world there are social entrepreneurs striving to do business that makes a real difference, and some of them find it important to track the impact they are having, both because it’s a good management practice or because they see that the information gives them market leverage. But it is interesting to consider how the government’s relationship to the force it/attract it question affects private sector practice when it comes to impact management. In the past roughly 3 years or so, in social democracies in Europe, South Korea, India and Japan, the governments have begun to motivate social businesses and enterprises (particularly those that spur job creation especially among populations facing barriers to employment) to measure their impact. By contrast the United States government has been relatively hands-off, both in the financing of social entrepreneurship and in requirement to measure impact. Of course the US government tracks how its money is spent and whether that is consistent with the stated use of funds, but in general, when it comes specifically to entities with a social purpose that earn revenue, the US government hasn’t yet taken bold action compared to these other countries.

This is beginning to change, in ways I and others will talk about more here.  But while this stance has meant somewhat slower development of the market for explicit social impact measurement standards and tools than in those other countries, it appears that the hands-off approach also has the consequence of causing both mission-driven and profit-driven innovators to sniff out how and where the information is wanted and to create solutions the larger market might actually see as valuable enough to pay for. To illustrate here are two very different spins on how made-in-the-US impact assessment is evolving.

World of Good and World of Good Development Organization together are a classic, best-of-breed social enterprise example: a US-headquartered hybrid private mission-driven business with a supporting nonprofit organization. WOG is a marketing and distribution company that sells fair trade artisanal goods to major retailers like Whole Foods, a major high-end grocery chain, and Ebay which acquired the company a year ago. WOGDO educates traditional craftspeople in regions of developing countries with particularly limited market access about product design that can appeal to global buyers, and verifies whether production meets fair trade standards in terms of environment, wages and safety. In order to verify the fair trade quality of the hundreds of producers in its supply chain, WOGDO has begun experimenting with both the use of mobile and SMS data collection tools, and even with involving the employees of these producer companies themselves in accounting for what is going on.

There is an inherent elegance to the design of this impact verification experiment, in that it is after all the employees who have a vested interest in the company continuing to exist, and thus provide them with a living, and in assuring that the company is treating them equitably. Of course there are issues to be worked through, and one organization probably can’t work them all through alone, but I think they’re on to something.

WOGDO has to date relied on charitable subsidies to date to underwrite its costs, but a more mainstream American spin on a fundamentally similar type of employee-centric impact assessment is Undercover Boss, which was the #1 new series of the 2009-2010 season according to its network, CBS. This show has CEOs posing as regular employees of their own companies going to work for a week.  While serving primarily as a full hour of (presumably) free advertising for the company (and at times being so scripted and advertorial that I was amazed to learn the show averages 17.7 million viewers), as the CEOs work “alongside their employees, they see the effects that their decisions have on others, where the problems lie within their organizations and get an up-close look at both the good and the bad while discovering the unsung heroes who make their companies run.” Trailers for the show advertise it as a response to the skepticism and frustration of mainstream America with our corporate fat cats, and however staged the discoveries about the hard conditions, low pay, and sacrifices their employees are enduring, I think the defensive undercurrent that would motivate executives to undergo “reality TV” is real.

The appetite among consumers for proof that corporations understand the ramifications of their actions on peoples’ lives, whether employees or customers, is not going to stop when this show wanes in popularity. Instead with 17.7 million US consumers a week getting trained in how to think about how employees and other stakeholders are affected by the way companies operate, I’ll wager WOGDO’s systematic tracking of its impact is an asset that’s growing dramatically in value.