No More Labradors Please

Want to raise a lot of money from the public? The answer, according to Sir Stuart Etherington the chief of Britain’s voluntary sector trade body, the NCVO, speaking at a conference in London on Thursday morning, is to set up a charity featuring “a Labrador driving a life boat”. Most giving, he argued, is not the “rational behaviour” of homo economicus but something more personal and emotional, what he calls ‘homo civicus’.

Sir Stuart was on fine baronial form, teasing an audience gathered for the launch of a new global organisation designed to champion rational enquiry into charity performance, The Social Impact Analysts Association (SIAA). Is their effort to bring reason to giving doomed to failure? We hope not.

The idea that metrics of performance can and should be applied to philanthropy certainly provokes extreme reactions. Some in the charity sector grumble about the ‘Taleban’ of measurement zealots, led by New Philanthropy Capital (NPC), which was created in 2002 by a bunch of City types to do for the nonprofit sector what investment analysts have done for the financial sector. You get the irony. Since the catastrophic failure of the financiers in the crisis of 2008, it has been easy for charity sector types to argue that they have nothing to learn from the financial sector.

NPC has also found it harder than expected to gain traction with donors with its analytical reports and is now refocusing the business on helping charities rather than donors, a point that Sir Stuaart raised with some impish relish. (Yet there are also signs that the divide is slowly being bridged. Sir Stuart was also generous in his praise of NPC and, with caveats, wished SIAA well.)

There is an obvious fear from nonprofits that measurement means that the work of all charities will be boiled down to some single metric of impact or a place on a league table. But that is an argument for the proper, rigorous impact measurement that SIAA is trying to develop, not a reason for resistance. It is simply not good enough for nonprofits to say that they ‘believe’ or even ‘know’ they are having impact. In the past leading physicians would have sworn blind that leeches or ground up human body parts were miracle cures for diseases. Modern medicine grew out of scientific rigour and techniques such as randomised control trials that cut through subjective analysis to provide hard data on what does and does not work. Without hard evidence, how do we know that today’s nonprofits are not doing the equivalent of applying leeches to social problems? Sir Stuart’s argument that people are happy with such witch medicine is not an argument in its favour.

So we are fans of the SIAA and applaud the Bertelsmann Foundation that has been willing to back a cause that is both controversial and unsexy. But better metrics about nonprofit performance alone are not going to drive a much-needed productivity revolution in how we solve social problems.

Statistics will only have an impact if someone is willing to use them. Nonprofit boards should be the target customers for SIAA’s analysis. Yet too many of these boards are happy to be supine cheerleaders rather than playing a role as committed, challenging non-executives. This needs to change. (Maybe paying them would help – though as they are often chosen because of their capacity to donate, maybe not.)

Donors also need to change. Yes, that is happening already as philanthrocapitalist donors play a more active and challenging role in their grant-making but it is a transformation that still has a long way to go. Ordinary donors too are increasingly, through what we call mass philanthrocapitalism, being given the tools to drill down into what their money is achieving. Yes, Labradors and lifeboats still exert their pull but, with the right tools, we hope that it is starting to change. Also, what about beneficiaries? Organisations like Keystone Accountability are doing pioneering work to put the voice of nonprofits’ customers into the mix – a development that could really shake things up.

The SIAA also needs to think wider than just nonprofit performance metrics. Creating common impact measures in tandem with government could have massive leverage in helping to improve the allocation of public money. Government can also help social impact analysis by making sure that high quality public statistics are accessible, accurate and up to date. This is particularly important in developing countries. Statistics are a classic public good – it is in no one donor’s interest to fund the boring work of gathering data, yet that data is an essential tool for all donors to understand problems and measure their impact. We welcome that this week’s OECD High Level Forum on Aid Effectivness in Busan drew particular attention to the question of building statistical capacity (see paragraph 35 of the communique). We also hope that the recently-launched Open Government Partnership will help to drive a revolution in data transparency in rich and poor countries alike.

The final piece of the jigsaw is the private sector. And we are not talking about measuring the impact of corporate philanthropy. Businesses have massive social and environmental impacts, some good and some bad, through the resources they consume, who they employ, how they source and distribute their products, and so on. Though Corporate Social Responsibility (CSR) reporting is getting better thanks to mechanisms such as the UN Global Compact, we have a long way to go before corporate reporting really tells us the ‘total impact’ of a business’s operations. The SIAA should be building a common language with the corporate reporting gang (and the big accounting firms should be working with SIAA) to try to bridge this gap.

The SIAA is fledgling organisation with a potentially big agenda. We urge it to be bold, for there is a lot at stake.