Measuring Performance

I was recently at a Calgary+Acumen Fund event where CAWST presented on social impact investing and measuring performance of an organization.  It was a great conversation, in large part, because here was a charity that was advocating for stronger evaluation metrics before donors make charitable contributions.

When an individual evaluates a company before s/he invests there are several things that are evaluated:

• Leadership
• Financial stability
• Product
• Opportunity for financial gain
• Future plans and growth opportunities (new markets)
• Competitive landscape

What we discussed at this event was information that donors should be looking at before making their charitable contributions.  If you are looking at your charitable or social dollars as an investment in community, then approaching a charity from an evaluative position makes sense.

Social impact investing covers a broad range - from investment capital into a for-profit social venture, to a grant to a non-profit social enterprise.  At the core however, is that the investor is looking at how money is being used to address the mandated social issue.

When evaluating a charity from the perspective of a social impact investor there are some key things to consider.  Shauna Curry broke them into two main categories: The Cause (organization mission and mandate) and Organizational Performance.  To see her whole case for CAWST please see the slide deck below.

Social impact investing will always have an emotional component to it.  In a previous blog post I have stated, that you cannot remove the emotional experience from the charitable transaction.  This means that regular market forces won't play into leveling the charity market.  It is for this very reason that we have so many charities doing the same thing, and not all of them successfully or at capacity... lots of donors funding organizations based on emotional experiences rather than logical evaluations.

The Cause evaluation metric is what addresses your emotional motivation. What is the organization doing; How is it making a difference; How am I involved... It's the "gut-check" question of the evaluation process.

Organizational Performance speaks to what differentiates this organization from others.  In otherwords, what are the agency's Key Performance Indicators (KPI's). 

In my experience I have noticed one pattern that stands out amongst all the charities - when fundraising fails, it isn't just because of a tough economy - it invariably has to do with donors' lack of confidence in the leadership (board or executive management).

When a for-profit company is seeking investor support, aside from financial return, a critical evaluation metric is leadership.  We are seeing the results of poor leadership play out in several companies across Canada - CP Rail, Air Canada, RIM.  Sometimes investors are able to keep a handle on the leadership resulting in growth and positive work environments.  In other cases, it's too little too late for changing up the leadership resulting in poor performance. 

The same things happen in the charitable sector, a founder of an organization, may not be the right person to lead the agency for growth.  By the same token, a board made up of individuals who are interested in the cause, but do not have the skill-set for building or driving the solution can also have detrimental effects on an agency.  When you are about it make a charitable investment, looking under the hood at the leadership is critical, these are the people that will be able to implement the solution that you are investing in.  It is up to you to ask the tough questions - what is the track record of the leadership? What are the skill-sets of the management team and the Board of Directors? Are there any identifiable gaps that need to be addressed? How are they addressing them?

After leadership comes overall governance policies.  How is the organization demonstrating transparency and accountability?  An organization that does not make its strategies readily available or its financial documents accessible speaks to its management's and leadership's values. On the flipside of this coin, what are the risk management policies? Does the organization have a whistleblower policy? Are Board members accessible?

Once you have looked at the people part of the equation, it's time to look at the strategy side.  Strategy ranges from operational implementation plans to fiscal responsibility.  Ultimately, how the organization is reporting on the results.  Is it an agency that is always saying things are good, or is it open about some of the challenges it faces?  Does it even track the failures? Is there a feedback loop for managing the activities? How is this feedback loop being shared with investors, clients and other stakeholders?

At the end of the day, if social impact investing is what you are striving towards when it comes to charitable giving, your emotional investment should be tempered with realistic expectations and measurable results.

In an effort to make this process easier for donors we have released a new reporting system for charities.  Place2Give took the feedback provided by organizations, donors and financial advisors to better reflect the activities of an organization.  It is through this platform that we hope to empower donors to make informed decisions before they make a charitable investment.  Place2Give is a platform that allows donors to do the evaluating on the effectiveness of a charity, not a third party auditor, as we believe that donors need that emotional experience to help shape the logical decision.