Social impact management: 5 key themes for foundations

By Esade Entrepreneurship Institute

In a recent case study by the Esade Entrepreneurship Institute, co-authors Lisa Hehenberger, Leonora Buckland and Deborah Gold examine the challenges foundations face when developing management strategies to measure their social impact.

The role of foundations in the complex process of social change is evolving. "Foundations struggle to balance a new performance management mindset with a desire to preserve a longer-term vision that understands social change as a complex process that may resist measurement," write the authors. Impact management involves a different set of systems, processes, culture, and capabilities foundations need to set in motion to measure their social impact.

The authors explored how four leading European foundations – the Calouste Gulbenkian Foundation (Portugal), the Esmée Fairbairn Foundation (UK), Impetus (UK) and Reach for Change (Sweden) – are navigating these challenges.

Impact management involves a different set of systems, processes, culture, and capabilities foundations need to set in motion to measure their social impact

Their research suggests that the foundation sector faces a distinct set of enabling factors, barriers, and priorities regarding impact management compared to other actors (e.g. non-profits or impact investment funds).

Impact management: Learning journey roadmap

The study developed an impact management learning journey roadmap for foundations to explore five key themes, outlined below.

“We have framed this whole process as a learning journey. The roadmap is aimed to be a practical and useful tool for foundations, and it reflects key insights from the research,” say the authors.

1. Designing an impact management approach

This covers the "what", "where", "when", and "how" of impact management including, for example, designing which tools are used, how impact data is collected and validated, and how stakeholders can be included in the process. These are the essential first steps in any impact management strategy by foundations.

"There can be many triggers for foundations to go back to the drawing board on impact management. Foundations rarely get the chance to start from a blank slate. But there are examples when foundations have made radical strategic decisions driven by a stronger and more determined push to understand their impact," point out the researchers, mentioning some of the case studies, for example, Impetus, Reach for Change, Esmée Fairbairn Foundation or Calouste Gulbenkian Foundation, each of them offering different approaches to this issue.

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The study concludes that many European foundations have not begun the impact management learning journey. “Particularly for foundations that are still distributing multiple short-term grants, measuring and understanding impact is challenging and limited," say the researchers.

In comparison, the American foundation sector is more advanced in impact management practices. “It is led by strong supporting intermediary organisations, a more developed professional evaluation community, as well as a culture of greater transparency and collaboration.’’

2. Resourcing and organising for impact management

This is about ensuring that the organisation is budgeting sufficiently for impact management related work and creating an appropriate organisational framework for it to be a foundation-wide activity and concern.

"While impact management budgets are increasing in American and European foundations, financial and staff resources are still tight as it has historically been an under-resourced area," state the authors.

Example recommendations of the study include the creation of a clear impact management budget and associated organisational structure with well-defined roles, ensuring the core foundation team has the right skills for impact management.

Also, creating an organisational structure, processes, training, and incentives to ensure a greater communication and learning exchange between grant making and impact/social investment employees/teams (where these exist) and encouraging trustees to understand the value of impact management and properly resource it within the foundation.

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3. Embedding impact management through organisational culture

As the saying goes, "culture eats strategy for breakfast," thus foundations need to pay special attention to carefully embedding their approach as part of the organisational structure, enabling the shift from a compliance and communications-oriented mindset, to one where learning and honest reflection are prioritised.

“Organisational culture is one of the crucial success factors for impact management and has been historically underestimated," say the authors, who recommend foundations devoting time and money to learning from impact management, building organisational processes and structures to support learning goals and priorities and to find ways to bring staff along in the process.

Foundations need to pay special attention to carefully embedding their approach as part of the organisational structure

4. Building internal and external capacity

The European foundation sector needs to invest more in building internally – as well as among grantees – the necessary skills for implementing impact management. In that sense, researchers suggest that "foundations need to build the appetite for impact management among their grantees/investees, and this approach may not always be initially well-received."

To reach these goals, the study suggests to upskill foundation staff so that they can help grantees improve capacity for impact management, increase the opportunities for grantees to use core or specific funding for evaluation/impact management purposes and also increase the budget for capacity-building of grantees around impact management.

Data and technology could enable exciting opportunities for foundations to work together to improve impact management

5. Collaborating, sharing knowledge, and being transparent

There are encouraging signs of foundations pooling data, reducing the grantee reporting burden, and sharing insights and learnings. Data and technology could enable exciting opportunities for foundations to work together to improve impact management across the sector, as more honest sectoral peer exchange about programmatic successes and failures, what works, and what does not work, could dramatically improve its success.

There are best practice examples of significant collaboration, knowledge-sharing, and transparency in the European foundation sector, particularly in terms of reducing the grantee reporting burden and creating shared and open-source data repositories. Yet these practices are not yet widespread, and the sector could benefit from prioritising and amplifying such activities.

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