A GPS for Social Impact
McCreless, Michael, Trelstad, Brian, Stanford Social Innovation Review
Root Capital and Acumen Fund propose a system for program evaluation that is akin to GPS by Michael mccreless & brian trelstad
Measuring social impact is a quixotic pursuit. We both should know. Over the last several years, each of us has worked at leading social investment funds - Root Capital and Acumen Fund - measuring, managing, and communicating the social impact of our respective organizations' investment portfolios. We have done a reasonable job counting outputs and aligning our performance with our own and other impact funds through the adoption of the Impact Reporting and Investment Standards (IRIS). But the social entrepreneur or investor who seeks to measure the real social impact of his investments needs information about how people's lives changed as a result of a project or product, against the nonexistent counterfactual of what would have happened without it.
These changes are often unobservable, as in the case of improvements in a program recipient's well-being. When the changes are observable, they may not be quantifiable. Even when they are quantifiable, they are denominated in different cultural and economic "currencies." How can one compare a long-lasting bed net that protects a Kenyan child against malaria to a loan to a small-scale farmer to buy fertilizer that improves crop yield and increases income?
Yet we know social impact when we see it, and when program recipients or consumers experience it. A to ? Textiles, one of the investees of Acumen Fund, manufactures insecticide-treated bed nets that the Tanzanian Ministry of Health distributes to rural areas. We have seen the malaria infection rate decrease there, but we don't know exactly how many cases of malaria were prevented, and we never will. Do we need to know precisely? Perhaps not. There is a danger in our desire for precision. It distracts us from attainable and accurate estimates of social impact, when in most situations, accuracy ("the truth") is more important than precision (calculating estimates to two decimal points).
The distinction matters because the problem of social impart measurement is unsolvable precisely, but quite solvable imprecisely and accurately. Many impart assessment methodologies seek to create a single estimate that is both precise and accurate. We have found that most of these methodologies are too expensive or complex to scale across a large number of projects, while lighter touch methodologies are often imprecise, inaccurate, or both. This leads to a sense among practitioners of being stuck. No matter how we try to measure social impart, either the data are unavailable or we cannot accept the results as fact, knowing how much fudge went into the calculation.
Even as experts continue to refine existing impact methodologies, we as practitioners must work to increase the rigor with which we combine information from multiple methodologies to tell a compelling and accurate story. By combining the information contained in several imperfect but practical estimators, we can triangulate a more accurate estimate of the impart of our work. We liken this process of triangulation to a global positioning system (GPS), which combines the signals from multiple satellites to triangulate a fairly precise estimate of one's position on the face of the Earth.
The analogy is simple. In theory, scientists could design a GPS in which three satellites could determine the location of a GPS receiver anywhere in the world, estimating latitude, longitude, and elevation simultaneously. In reality commercial GPS units use signals from up to 10 satellites to correct for measurement error in calculations based on the first three signals. By combining information from multiple sources, global positioning systems can overcome their own limitations to triangulate highly accurate estimates of a position.
Acumen Fund and Root Capital are two leading impact investing funds that aspire to generate exceptional social impact and a financial return by investing in enterprises that benefit the poor in developing countries. …