Building resilient, high impact charities


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Aleron ( recently published a study about impact and efficiency in UK charities.

Our aim was to explore how charities are coping in the current environment and seek to understand what the key priorities are, what actions are being taken, and where there are areas of strength and weakness. We also try to understand current approaches to impact measurement. After engaging with over 100 third sector organisations, we combined feedback with our own experiences in both the third and private sectors.

The key question we have drawn from our study is: How can charities improve social impact, become more resilient, and maintain sustainability in good times and bad?
The solution lies in charities ensuring that they have all of the building blocks in place, that they are responsive to sector specific challenges, and that they embrace impact measurement. We believe that impact measurement is the key to unlocking more effective performance improvement, and ultimately improved outcomes for beneficiaries.

We hope this study will provide some clear and practical steps to improve impact and efficiencies. To have a starting point, we have included a diagnostic to identify areas of opportunity within organisations.

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Building resilient, high impact charities

  1. 1. Building resilient, high impact charities A study on impact and efficiency in UK charities November 2013
  2. 2. Building resilient, high impact charities Study from Aleron Third Sector Consulting 2 We would like to thank everyone who generously gave their time to participate in our surveys and interviews. Your insights were invaluable to our research. We were also inspired and energised by all of the stories we heard of dedicated people, working hard to make a real impact for their beneficiaries.
  3. 3. Building resilient, high impact charities Study from Aleron Third Sector Consulting Executive Summary 3 Over the last few years, the macroeconomic climate has created challenges for both charities and businesses; almost 6,000 charities have closed since 2007. To meet growing need, third sector organisations have to deliver more with less as resources become increasingly scarce. Charities grapple with many of the same issues as for-profit businesses. Some charities have been successful in delivering certain aspects of existing commercial best practices, such as improving internal processes to increase efficiency. Many others have not had the opportunity to invest in ostensibly internal capabilities, due to the imperative to devote the bulk of resources to direct charitable expenditure. However, given the need to be more resilient and efficient, these internal capabilities are critical precursors to delivering effective, sustainable, and value-adding change. There are a variety of new ideas and resources aimed at providing charities with guidance to meet emerging challenges, but many of these offerings generally lack practical next steps and robust, evidence-based foundations. The sector has also developed some new approaches, such as impact measurement, that seem to be gaining traction. However, impact measurement requires a great deal of time and resources in order to be effective and there is still not a case history of successful adoption. Whilst there is much discussion of the issue, it is more speculative than substantive, and concrete steps and actions have not been adequately defined. In this study, we explore how charities are coping in the current environment. We seek to understand what the key priorities are, what actions are being taken, and where there are areas of strength and weakness. We also try to understand current approaches to impact measurement. After engaging with over 100 third sector organisations, we combined feedback with our own experiences in both the third and private sectors. Our findings have been structured into three sections: 1. Laying the foundations The first section explores the building blocks common to all organisations – all of these are critical in helping charities establish high-performing operations. This section includes strategic planning, operating model definition (e.g. processes, systems, staff, organisation structures, culture) and effective delivery of change. 2. Performing as a charity The second section describes areas unique to the third sector. This section includes theory of change, financial sustainability, governance and role of trustees, and cross-sector collaboration. 3. Measuring to improve The third section examines how charities are weighing in on the impact measurement debate. This section includes what is important in the measurement of impact, and the use of these measurements to drive performance improvement. The key question we have drawn from our study is: How can charities improve social impact, become more resilient, and maintain sustainability in good times and bad? The solution lies in charities ensuring that they have all of the building blocks in place, that they are responsive to sector specific challenges, and that they embrace impact measurement. We believe that impact measurement is the key to unlocking more effective performance improvement, and ultimately improved outcomes for beneficiaries. Whilst charities face clear difficulties in taking the necessary steps to embrace impact measurement, they need to act now or risk being left behind. The simplified self-diagnostic on the next page has been developed in the light of this study, to provide organisations with a tool to identify symptoms of underperformance, likely root causes, and potential solutions.
  4. 4. Building resilient, high impact charities Study from Aleron Third Sector Consulting 4
  5. 5. Building resilient, high impact charities Study from Aleron Third Sector Consulting Self-diagnostic 5 ROOT CAUSES SYMPTOMS Ineffective strategy & plans Inefficient operating model Ineffective approach to change Ineffective impact measurement Governance and leadership • Unengaged or interfering Board/trustees  • Sudden changes in strategic direction   • Unclear roles and accountability leading to overlap and/or gaps   • Beneficiary not put at the centre of the strategy   • Untargeted growth of income and/or activities   • Lack of new thinking or innovation    Day-to-day management • Micro management of day-to-day activities  • Lack of coordination and silo working   • Measuring everything but not using the information  • Anecdotal outcome measurement  • Administrative burden related to internal compliance  Organisational agility • Decision-making delays  • Ineffective escalation and issue resolution  • Unresponsive to external changes    Attitude to change • Excessive planning with limited action   • Change too gradual and no ambitious agenda  • Constant change with no impact   • Constrictive risk management approach   • Inhibitive IT and internal processes   Staff and structures • Lack of staff buy-in to key actions    • Low staff morale and engagement   • Roles created around personal skills and preference  • Excessive internal conflict and friction   • Continuous organisational restructuring   Funding/finance • Short-term mentality to funding   • Donor base shrinking    • Inability to meet funder reporting requirements   POTENTIAL SOLUTIONS • Theory of change • Vision and strategy definition • Planning • Funding approach • Operating model review • Governance & leadership • Board review • Staff development • Process redesign • Systems architecture • Prioritisation & business case • Change planning and management • Communication • Learning & development • Impact strategy • Performance management • Data analytics • Feedback analysis • Communication and stakeholder engagement
  6. 6. Building resilient, high impact charities Study from Aleron Third Sector Consulting 6
  7. 7. Building resilient, high impact charities Study from Aleron Third Sector Consulting Table of Contents 7 8 Introduction 10 Section 1: Laying the foundations 11 Strategy 16 Operating model 20 Implementation 23 Section 2: Performing as a charity 24 Theory of change 26 Financial sustainability 27 Governance and role of trustees 29 Cross-sector collaboration 33 Section 3: Measuring to improve 34 Clarity of purpose 35 Assessment method and measures 36 Data collection and analysis 37 Measuring to improve
  8. 8. Building resilient, high impact charities Study from Aleron Third Sector Consulting Context 8 A difficult environment In the past decade, pressure from the external environment has created new challenges for the sector. While UK financial markets are increasingly bullish, the environment remains challenging: • Decreasing levels of voluntary giving and public cuts – 20% real term reduction in 2011/12 • An ever-rising demand for public services • Increased competition across the sector, especially for financial resources and commissioned contracts • Closure of almost 6,000 charities since 2007 • Changes in regulations affecting charities To effectively respond to these multiple challenges, UK charities need to become more resilient, more efficient and better able to measure and demonstrate impact. A wealth of knowledge and ideas There is a plethora of studies and reports on how UK charities can best serve their causes. However, there is a palpable lack of practical advice on how to successfully implement new ideas. Existing studies often fail to explain how a charity should best work on a day-to-day basis to transform an abstract vision into a tangible reality for its beneficiaries. Most notable for us, however, is that many charities willingly share their learning with others. We engaged with over 100 organisations while conducting this research and were inspired by the generosity that many demonstrated in sharing their time and ideas. The overhead debate Becoming agile, efficient and impactful requires investing in better organisational capabilities, processes and tools so that staff and volunteers are better supported. However, there is a tightrope charities have to walk in regards to overhead. Many charities come under fire for investing in organisational effectiveness rather than spending on charitable activities. Unfortunately, trying to assess “how many pennies of each pound donated go directly to the cause” is misleading as it does not account for the impact delivered. Therefore, a distinction needs to be made between good and bad overhead. “Overhead“ is understood to represent the management, infrastructure, systems, tools and processes that make an organisation work. Bad overhead is superfluous expenditure that does not support the objectives of the organisation. Good overhead, however, creates the capabilities to maximise social impact. Unfortunately, donors and funders rarely make a distinction between the two. This means that management, staff and volunteers are under increasing pressure to deliver more for less – often lacking the resources to develop appropriate support, processes, tools and systems. Even the biggest and most established organisations are not immune. In With Charity for All, Ken Stern asserts that the US Red Cross were unable to respond rapidly to Hurricane Katrina, as they did not have the required infrastructure in place. Only through a partnership with Walmart were they able to succeed. Introduction Source: Charities Aid Foundation, Charity Commission
  9. 9. Building resilient, high impact charities Study from Aleron Third Sector Consulting Laying the foundations Good practice applicable across all sectors Our Approach 9 In this paper, we will share the learning from our survey of over 100 third sector organisations. Our approach was to identify the actions different organisations have already taken to cope with emerging challenges, and how they plan to work in the future to ensure that their work is resilient and impactful. Our experience has taught us that increased crossover between public, private, and third sector organisations can be beneficial for all involved. We will share a number of approaches and techniques that have been adapted from commercial practices, but have been successfully applied to improve impact and efficiency in the third sector. To inform our research, we started with 4 key questions. These questions informed both our survey and our interviews: • What makes a high performing charity? • What are the practical actions that should be undertaken to create the greatest impact? • What are the best ways to improve internal efficiency? • How can innovation be embedded into the operations of third sector organisations? Charities are full of character and idiosyncrasies that are often deeply rooted in their history and organisational culture. Working along a broad spectrum of causes and purposes, with individualised approaches, it is often difficult to make blanket statements about the sector. With the clear aim of seeking to derive practical actions from this work, we have structured the findings using the framework below. As part of the executive summary we have provided a simple diagnostic tool that will allow individual charities to consider issues and symptoms within their own organisation and identify potential root causes, which then lead to suggested solutions. OrganisationalBuildingBlocks Performing as a charity Good practice specific to charities Measuring to improve Using impact measurement and analysis to improve performance Strategy What does the organisation seek to achieve and how will it do so? Operating model What are the required organisational capabilities to deliver the strategy? Delivery of change How is change delivered efficiently and effectively? • Effective strategic plans • Innovation • Theory of change • Financial sustainability • Clarity of purpose • Selecting methods and measures • Organisational structure • Staff skills and culture • Role of board and trustees • Cross-sector collaboration • Data collection and analysis • Change management • Measuring to improve Figure 1: Our framework Introduction
  10. 10. Building resilient, high impact charities Study from Aleron Third Sector Consulting Section 1: Laying the foundations 10 Although there are obvious focal and cultural differences between for-profit, public and not-for-profit organisations, there are similarities in any high performing, efficient organisation. Inconsistencies or problems in core elements of the organisation, whether in charities or profit making companies, impede progress and result in underperformance. Charities must assess whether these building blocks are in place and ask themselves several key questions: • How do we develop an actionable plan to achieve our objectives? • What is the best way of structuring our organisation? • How do we develop the capabilities we need to deliver our impact? The current environment has highlighted the importance of resilience, sustainability and efficiency across all sectors. Other sectors have focused more on these issues in the past, due to shareholder pressure or the public deficit. Many respondents to our survey and interviews believe that charities now need to focus more on their strategy, structure and capabilities to make them more efficient and resilient. To articulate some of the areas where there is intersection between third sector and universal business issues, a standard framework has been used to structure some of the findings from our study. Any organisation, regardless of sector, needs to get these core components right in order to achieve their strategic imperatives. Strategy Defining the mission, objectives, and social benefit Change Management Planning, mobilising and delivering impactful change across the organisation Figure 2: Standard business framework Operating Model Building and configuring capabilities effectively and efficiently Section1:Layingthefoundations
  11. 11. Building resilient, high impact charities Study from Aleron Third Sector Consulting Strategy 11 Findings A range of external drivers have impacted charity strategies over the past 12 months. These include: • uncertain economy (e.g., budget cuts) • social trends (e.g., public interest for certain causes over others) • new regulations (e.g., changes in school curriculum) • changes in the competitive landscape (e.g., entry of new suppliers into the market for some services) • demographics (e.g., an aging donor population) Additionally, legacy issues such as unfocused growth, outdated systems, and inconsistent processes have left many leaders fighting fires rather than focusing on future strategies. As a result of these internal and external issues, 70.6% of respondents have completed a strategic review in the last 12 months, and have identified the following top 5 priorities for the next 12 months: 1. Grow income – while many charities want to grow their income, there is also an increased focus on growing in a more targeted way. Numerous charities have realised that their activities have become too diverse, and are attempting to retrench and identify what really matters to them. 2. Have greater impact for beneficiaries – charities are looking at ways to scale their impact to meet increasing demand with limited resources. 3. Raise visibility and public profile – in a more competitive environment, brand awareness is increasingly important for raising funds, and charities are investing in development of their public profile. 4. Improve internal efficiency – charities who have historically underinvested in their internal processes and tools are now facing an imperative to improve internal capabilities. 5. Be innovative and embrace new ideas – innovation is widely seen as key to delivering results and adapting to changes in the environment. Charities are looking to leverage a variety of initiatives, from partnerships to web analytics, in order to support their work. In this section, we will take an in-depth look at how to develop effective strategic plans and embrace innovation. 9.1% 25.0% 36.4% 40.9% 52.3% 52.3% 56.8% 59.1% 65.9% 70.5% 72.7% Find the right partner for a potential merger More campaigns and advocacy Recruit and develop staff Expand the scope of your mission/activities Improve the quality or number services Engage in more partnerships Be innovative and embrace new ideas Improve internal efficiency Raise visibility and public profile Have greater impact for beneficiaries Grow income Figure 3: Strategic priorities for the next 12 months % of respondents (multiple choice) Section1:Layingthefoundations Source: Aleron Third Sector Annual Impact Survey, 2013
  12. 12. Building resilient, high impact charities Study from Aleron Third Sector Consulting Strategy 12 Developing effective strategic plans In difficult times, organisations can put caution over ambition in setting their strategic agenda. While there is consensus that changes are necessary, it is difficult to identify the plans that will improve resilience. Charity leaders need to have an improved evidence base of what works, so that they can build strong, holistic strategies around the activities that will really make an impact. A rigorous planning process ensures that organisations are able to transform their vision into actions. As described in section 2, a theory of change provides a strong foundation for the development of a strategic plan. The plan will use this theory to develop objectives, actions and clear milestones. While each organisation must find the planning process that works for them. Figure 4 shows a simple framework to help structure the process and tackle key topics. One common question regarding the planning process is: “should it be top-down or bottom-up?” In other words, should it be developed by the head office and cascade to the local operations or should it come from the local operations and be consolidated at the top level? Our view is that the centre needs to set the direction and approach and ask local operations to contribute to the planning process. This ensures stronger buy-in for the plan and helps clarify accountabilities and responsibilities. Charities also need to find ways to effectively harness innovation and incorporate it into their strategic plans. They need to embrace measured risk taking, and think more about the long-term strategy rather than dealing with existing issues. What do we want to do and why? • What is the status of the cause we want to support (current/future)? • Which activities occur today and what are the gaps or challenges? • What do we want to do? • Our vision and goals? • Our intended impact? • What is our theory of change? • Which activities will we deliver and what value will we bring? • How many employees and volunteers do we need? • What is the required organisational structure, processes, systems and culture to support them? • What opportunities do we have to improve and scale our impact? • How much will it cost? • How much funding do we need? • What is the business case for change (investments required and expected future income and expenses)? • What are the key risks and how can we mitigate them? • Are all aspects of our plan targeted towards impact for beneficiaries? • Which structure and governance model will insure that we deliver our plan? • How will we monitor and evaluate progress and impact? • How should we communicate our plan to stakeholders? How will we achieve it? What will it cost and how can we fund? How will we ensure successful realisation? Inputs Market, competitor and partner analysis; cost and price benchmarking; SWOT analysis; feedback from beneficiaries, employees and funders Figure 4: Strategic planning framework Section1:Layingthefoundations Source: Aleron Third Sector Consulting
  13. 13. Building resilient, high impact charities Study from Aleron Third Sector Consulting Strategy 13 Figure 5: Factors affecting strategic plans in the coming 12 months Average ranking from 1-5, 1 being less important More Important Less Important 0 0.5 1 1.5 2 2.5 3 3.5 Learning from past plans Employee engagement Feedback from donors and funders Understanding of external context Key priorities Feedback from beneficiary groups Competitive environment Availability of resources Innovative ideas and techniques Embracing innovation Respondents consider innovation a key driver for strategies and plans, with investment of time and resources in innovation programmes (see figure 5). However, some struggle to find ways of using innovation in a strategic way. Embracing new ideas, without scoping exactly how they will contribute to strategic objectives, is a common pitfall for many third sector organisations. High performing organisations have developed a holistic approach to innovation, which makes it easier to generate, qualify, scope and implement innovative ideas. Finding the right sources of innovation is key to identifying the ideas that will really make an impact. While many use employee suggestions, it can demotivate staff if ideas are not implemented. As one respondent said, “engaging the wider organisation in innovation has a great emotional pull for staff – but most ideas tend to get parked.” Partnerships and collaborations are useful sources of innovation for some but also have drawbacks. Larger consortia can be less dynamic, and partnerships can pull the organisation away from core strategic objectives. No matter what the source of innovation, many believe that a structured process is instrumental in ensuring that the right ideas are implemented. One organisation uses an innovation pipeline with clear stages and sign-off points to qualify, pilot and track potential initiatives. However, not all charities feel comfortable taking measured risks. It can be difficult to strike the right balance between applying high standards of risk management and rigorous analysis, whilst also embracing new ideas. Many feel that it is easier to implement innovation in areas like trading or fundraising, where there are clearer metrics to define objectives and monitor success. On the next page, we articulate the core elements of an cohesive approach to innovation. Section1:Layingthefoundations Source: Aleron Third Sector Annual Impact Survey, 2013
  14. 14. Building resilient, high impact charities Study from Aleron Third Sector Consulting Innovation framework The key to successful innovation is to have the right strategy, process, resources and culture to support it. Strategy Having a clear understanding of the organisation’s strategic priorities, and how different types of innovation can help, is vital. An organisation should keep the beneficiary at the centre of any innovation, and should rate potential new ideas against the ease of implementation and the ultimate impact it will have for beneficiaries. Process Having a clear process for developing innovative ideas encourages staff to be creative and to actively think about how they can improve their work. Culture To ensure that stakeholders are engaged, leaders need to champion innovation and create a supportive culture for innovation. Strategy 14 Generate Select Develop Monitor Adjust Implement Resources Commercial organisations have found that clear ownership of innovation encourages success, and having an innovation manager or unit is key to making it part of the culture. Charities have also found this, particularly in the area of fundraising. While having a dedicated resource for innovation can be unrealistic, there are some steps that can be taken. • Designate innovation leads within departments who will be responsible for gathering and selecting new ideas for development. • Create an internal grants system that will support development of innovative new ideas. • Dedicate time at senior management meetings to discuss potential new ideas. • Identify people with the right competencies to see ideas through to implementation. Feasibility Potential Impact/Strategic Alignment Motivation Leadership Risk Taking Sourcing new ideas that could have positive impact. Innovation Culture • Innovation embraced by CEO • Clear structure & process • Incentives for innovation & creativity • Acceptance of failure • Measured risk-taking • Active risk management Qualify ideas based on priorities, impact, and feasibility. Research and develop ideas to be tested. Pilot and test ideas that could be beneficial. Measure and assess success of projects. Make improvements and integrate innovation. High potential ideas Section1:Layingthefoundations
  15. 15. Building resilient, high impact charities Study from Aleron Third Sector Consulting 15 Section1:Layingthefoundations
  16. 16. Building resilient, high impact charities Study from Aleron Third Sector Consulting Operating model 16 Findings Over the last few years, large organisations have started to review their structures and processes to drive consistency, better support their staff, reduce costs and provide better management information. The operating model is a key concept to facilitate this process. As the diagram below illustrates, the components of the operating model are interconnected and aim to support the services delivered by the organisation, regardless of their nature. A thorough assessment of the operating model needs to be part of the strategic planning process. A strategy will only be successful if the operating model is supportive of the organisational objectives. Respondents identify the following key issues with their operating models: • lack of clarity around the responsibilities of leaders • difficulty finding the right structure and eliminating silos • lack of effective ways to genuinely engage and develop employees and volunteers • ineffective processes and IT systems • effort expended on ancillary tasks that do not directly support objectives The issues of governance, silos, staff and culture, processes, IT systems, and ancillary activities are common in many businesses as well. Recently, many respondents have tried to adjust and improve their operating model. These responses have differed based on the individual issues that are being addressed. In this section, we will discuss organisational structure, skills and culture, and processes and tools. Activities & Services Processes & Tools Skills & Culture IT Systems People Figure 6: Approach to defining the operating model To define the operating model, each component must be defined starting from the top-down. This means that the activities and services are the central concern for any redefinition of the operating model. • What are the processes and tools required to support our activities and services? • What kind of skills and culture do we need? • What IT systems are needed to support our processes? • How should we be organised to best deliver our processes and ensure we develop our skills? • Which people do we need (employees and volunteers) and how do we best attract, develop and motivate them? Section1:Layingthefoundations Source: Aleron Third Sector Consulting Organisational Design
  17. 17. Building resilient, high impact charities Study from Aleron Third Sector Consulting Operating model 17 Skills and culture There are several key challenges that charities face when building the right culture and the finding the right capabilities within the workforce: • High staff absenteeism and turnover rates. According to CIPD, the current absentee rate in charities is 8.1 days/employee/year (vs. 7.6 across all sectors), with a median cost of absence of £590 per employee in the sector. The median staff turnover rate in the third sector is 15.2, vs. 11.9 across sectors. • Lack of a robust performance management or appraisal process to support managers, particularly for volunteers. Some have refined performance management, but have found that change must be incremental so that the right level of buy-in is achieved. • Lack of clear development opportunities and career progression for staff. Limited resources and failure to articulate what is expected from staff and managers can prevent staff from developing. Only 29% of of staff feel they have clear career development opportunities. • Additionally, one of the biggest skill gaps identified is management skills, which is crucial to maintaining valuable staff – as one of our respondents said, what most people want in their job is a clear vision and strong line management. Organisational structure Silo working, poor communication, and lack of strategic alignment are common issues. Staff in support functions such as HR, Finance or IT often feel distanced from frontline operations, while frontline staff can feel that support functions focus on their own agendas rather than meeting the needs of operational staff. There are a number of examples where frontline services have tried to escalate the issue of the lack of functional support, but in almost every case, this escalation only travels up one level in the organisational hierarchy before being pushed back. This lack of a genuine, bottom-to-top feedback loop is of critical concern if issues are to be identified and resolved. Large organisations also struggle to balance the power between central teams and local teams. It is a common trend to go through phases of dispersed and centralised power, as leadership tries to find the right balance. Our respondents address these issues in different ways: • Leveraging technology, such as building virtual communication hubs to facilitate collaboration across geographical and functional areas. • Implementing working practices that foster communication and collaboration, with desk swaps between fundraising staff and service delivery staff or shared strategic planning sessions. • Changing their organisational structure to realign it to their beneficiaries, customers and funders and hence break internal silos. Figure 7: Importance of support for frontline staff % of respondents Very important Neutral Not important Campaigns/Advocacy Facilities/Properties Marketing & Comms Finance HR IT Strategy team Fundraising Senior Leadership Source: Aleron Third Sector Annual Impact survey, 2013 Section1:Layingthefoundations
  18. 18. Building resilient, high impact charities Study from Aleron Third Sector Consulting Processes and tools Processes and tools are powerful, but often overlooked, levers within organisations. Many UK charities have realised that there is an opportunity to increase operational efficiencies and impact by making process improvement a priority for the next 12 months. Most respondents feel that their internal processes are neither effective nor efficient. As illustrated in figure 8, this is especially true at levels below senior management. Four main reasons can explain the current situation: • An historical under-investment – process and systems have rarely been a priority for senior management. As a consequence, it is not uncommon to see systems that are too old to be supported by the vendor. • Significant growth of the last 10 to 15 years – in addition to legacy systems from mergers, many have processes and systems not designed to be scalable and handle a larger organisation. • Increased external requirements from funders, customers and partners – this creates a new challenge to have flexible processes, systems and tools able to interact with external organisations. • Finally, process reengineering is difficult – failure rates are typically above 70%. Issues often relate to a lack of support from management, limited internal knowledge and the support of poorly qualified consultants. It is difficult in this environment to redesign processes and ensure continuous improvement. One respondent said: “I feel we are spending too much time trying to sort out internal processes, but do not communicate effectively about what these are across the organisation. Also these processes are open only to the select few, with little buy-in from the organisation as a whole.” Overall, we found that charities who have successfully changed their processes and systems had a CEO who was committed and involved in the change, and had a clear internal mandate with appropriate resources. 2 2.5 3 3.5 4 Trustee CEO CEO-1 CEO-2 CEO-3 Disagree Agree Neutral Figure 8: Internal perception on the efficiency of internal processes Average of ranking from 1-5, 1 being disagree strongly Source: Aleron Third Sector Annual Impact survey, 2013 Operating model “My organisation has efficient internal processes” Section1:Layingthefoundations 18
  19. 19. Building resilient, high impact charities Study from Aleron Third Sector Consulting Operating model Identify inefficient processes Map current processes Evaluate processes, prioritise areas for re-design Re-design with key stakeholders Develop implementation plan/pilot • Can the organisation achieve its goals with its current processes? ₋ Are staff spending time on value-added activities? ₋ Are tasks, roles, and hand-off’s clearly defined? Do staff and volunteers have the necessary resources and skills? ₋ Are measures in place to ensure quality? • What are the 4-5 sub- processes that result in the final output? • What are the key work tasks within each sub- process? • Who is responsible for each? • What are the problems with the current process? Where do things go awry? • Given the organisation’s strategic priorities, where is the greatest opportunity for impact? • How will the new process differ from the current one? (consider output, work steps, roles, and resources) • What, if any, benchmarks exist for this process? • Does the organisation currently have the capacity to implement the re-designed processes? • How well does this process align to other elements of the organisation design? Where might it cause friction? Redesigning internal processes Achieving leaner, more targeted processes presents long- lasting benefits: greater cost efficiency, with reductions in duplication and manual labour; improved compliance and employee satisfaction; and a simplified approach to impact measurement. It also ensures that frontline staff do not spend a disproportionate amount of time form filling, but report on activities and services in a targeted, time efficient way – giving them more time to work with beneficiaries. Despite significant improvements and benefits, there are high risks associated with radical changes of business processes. Organisations need to respect some basic principles and follow a structured approach. Basic principles of process improvement: • Don’t get bogged down by details – any process can be broken down into a handful of sub-processes – capture those on a single page. • Prioritise the problems that matter – don’t get overwhelmed by all the things that could be improved – focus on the 2-3 areas where change will have the most impact. • Implementation is as essential as design – keep this in mind when thinking of whom to engage and how – pilots are often an effective way to launch implementation and refine the design. How to approach the work: The figure below describes key five steps to follow to effectively redesign internal processes: 1. Identify inefficient processes 2. Map current processes (high-level) 3. Evaluate current processes, prioritise challenges, and identify where re-design makes sense 4. Re-design process with key stakeholders 5. Develop implementation plan; if possible, begin piloting new process Figure 9: Process redesign framework Source: Aleron Third Sector Consulting Section1:Layingthefoundations 19
  20. 20. Building resilient, high impact charities Study from Aleron Third Sector Consulting Change management 20 Findings Many have undergone some kind of organisational change in the last 12 months, from change in senior management and governance to organisational restructures. One senior manager commented that change management is not a temporary process, but is a continuous cycle as organisations try to improve their performance. However, as the pace of change accelerates, managing change successfully has become even more important but also more difficult. Some respondents strongly believe that their approach to change is too timid and staged, whereas a more courageous, focused and wholesale approach could yield more effective results in a much shorter time. “The pace of change is just too slow – we need to take bigger leaps forward, more frequently, instead of inching along.” Additionally, many spend too much time preparing for change and find it difficult to implement bold changes quickly and effectively. Since there is a focus on planning, risk management, and justifying change, there can be an energy deficit by the time it comes to actually implement the change. There seems to be a lack of holistic frameworks to drive joined up change across the organisation. As mentioned before, respondents feel a successful change programme must be driven by the CEO. While the whole organisation looks to the CEO for leadership, there is also a need to engage with staff during the entire change process. There is a danger of changes being designed at management levels without being piloted with staff, which can result in processes and tools not being fit for purpose or, worse, poor compliance from the members of staff who are needed to drive change. A large number of respondents also feel that pressure to change has led to a great deal of change without improvement. This is partially due to ill-designed change programmes and a failure to monitor and track progress, but also a failure to communicate a cogent story to both external and internal parties on the reasons for change and its expected results. Figure 10: Organisational changes in the past 12 months % of respondents Source: Aleron Third Sector Annual Impact survey, 2013 5.4% 10.8% 6.5% 10.8% 19.4% 49.5% 57.0% 33.3% 38.7% 5.8% 6.8% 11.7% 12.6% 29.1% 35.0% 51.5% 60.2% 60.2% Other (please specify) Merger with another charity Scaling down in operations Change in mission or vision Change in Senior Executive/CEO Scaling up in operations Process Improvement Initiatives Changes in Board of Trustees Organisational Restructure Past 12 months Next 12 months Section1:Layingthefoundations
  21. 21. Building resilient, high impact charities Study from Aleron Third Sector Consulting Change management 21 Managing change The key lessons from successful transformations are: 1. Change comes from the top and needs to be communicated as an organisational priority. 2. Realistic budget and timeframes need to be established. Several CEO’s recognise that setting money aside for process improvement would be unpopular as it would increase their overhead; however, it is necessary to improve efficiency and better serve their cause. 3. Cultural change needs to happen at all levels of the organisation, from frontline to head office support. 4. Having the right internal and external expertise is fundamental to ensure that the process is well run. 5. Clear communication of the process for managing change, from inception to implementation is key to ensuring buy- in and clarity of responsibilities. A high-level process with some of the essential steps is below. Prepare for Change • Engage staff and determine appetite for change within organisation • Perform diagnostics on organisational structure and gather evidence • Determine objectives • Produce high-level time line Sustain Change • Manage performance and measure success of change against metrics • Establish a review process to gain and incorporate feedback • Identify areas for improvement and celebrate successes Implement Change • Roll out change programme, supported by tools & systems changes • On-going communication and engagement with staff • Train and develop staff • Pilot changes before embedding Plan Change • Set goals and objectives and detailed time line • Determine change team/key stakeholders • Set communications plans • Develop technical plans and management strategy • Identify risks Figure 11: Change management cycle Source: Aleron Third Sector Consulting 1 23 4 Prepare for Change Plan Change Implement Change Sustain Change Change Management Section1:Layingthefoundations
  22. 22. Building resilient, high impact charities Study from Aleron Third Sector Consulting 22 “We now have the clearest organisational strategy we have had in some years. Challenges in the external environment have forced the organisation to think about how we are structured, how we function and how we need to measure our performance. This means we now have a case for making changes that have been required for many years.”
  23. 23. Building resilient, high impact charities Study from Aleron Third Sector Consulting Section 2: Performing as a charity 23 As discussed in the previous section, to be resilient charities should align themselves with best practices in terms of strategy, operating model and implementation. Although this will help towards guaranteeing a degree of efficiency and effectiveness, it is not enough. Charities also need to address the specific structural and cultural characteristics that are inherent to the third sector. Commercial organisations use profit and shareholder value to inform decision-making. This means that at any point in time, businesses can make fact-based decisions to improve performance against financial targets. However, it is much harder for charities to assess and improve the work that they do in such a straightforward way. To address this challenge, it is increasingly important for charities to have: • Clear strategic objectives, underpinned by a cogent theory of change – charities typically have a vision of the impact that they hope to achieve, but also need to develop a robust theory of change to explain not only what they want to achieve but how they will do it. • Financial sustainability – as one respondent said, “when something has demonstrable impact, it needs to be sustained.” In order to ensure sustainability, charities need to become agile, efficient and de-risk their income streams. • Strong leadership and governance – charity leaders need to have the leadership skills to motivate staff and volunteers as well as providing assurance to the trustees that the organisation is fulfilling its purpose. Both the trustees and the management need to have a clear understanding of their areas of responsibility and levels of engagement. • Cross-sector collaboration – as charities focus their activities and look for innovative solutions, partnerships and collaboration with other organisations provide an opportunity to improve and scale impact. Our survey results and interviews help to better understand some of these imperatives. We have also identified some of the symptoms of an ineffective organisation, related root causes, and potential solutions, which can be found in the diagnostic (page 5). Section2:Performingasacharity
  24. 24. Building resilient, high impact charities Study from Aleron Third Sector Consulting Theory of change 24 Findings The first step of any successful strategy is for an organisation to clearly define what it wants to achieve. However, there is often a failure to properly define and communicate intended impact. Larger organisations can lose focus of the impact they want to deliver. This is particularly true when growth has been a strategic imperative over the past few years, as the organisation attempts to scale its impact. For example, some older charities have now refocused their activities to a limited number of priorities that complement their mission and capabilities. Any given charity cannot be good at everything and needs to define where it can bring the most value. Some have tried to address this through strategic retrenchment, including withdrawal from contracts and cessation of activities that no longer fit strategic vision. Conversely, some smaller organisations often have difficulty expanding their vision of impact beyond the services or activities they currently deliver – they have defined inputs and outputs, but not expected outcomes. Lacking a clear idea of the specific impact they want to achieve, they struggle to scope what additional activities they need to deliver impact. Communicating intended impact throughout the organisation can also be challenging. As seen in figure 12, trustees, CEO’s, and managers feel that there are clear objectives and targets for impact. However, this clarity diminishes the closer one gets to the frontline. Without a clear definition of intended impact, it is challenging for charities to create strategies and plans that are focused and targeted towards their beneficiaries. It is also difficult to identify what they need to measure in order to monitor and improve their performance, or to build a comprehensive theory of change for their target impact. Figure 12: Perception of impact measurement targets and communication % of respondents Yes To some extent No We communicate externally about our social impact achievements We have objectives and targets for social impact Trustee CEO Management Staff Trustee CEO Management Staff Source: Aleron Third Sector Annual Impact survey, 2013 Section2:Performingasacharity
  25. 25. Building resilient, high impact charities Study from Aleron Third Sector Consulting Internal Factors External Factors Children eat healthier foods. Improved nutrition in children aged 5-7 in London. Healthier school lunches. Parents receive training on healthy eating for children. Changes in school food policies. Health & Nutrition classes for parents of children from 0-7. Long-term outcome Short-term outcome Output Input Intended Impact Children aged 5-7 in London lead healthier lives. This is not a complete theory of change, but demonstrates the general structure and the causal links that charities should provide. Theory of change 25 Building a theory of change Many are daunted by the idea of building a theory of change, given the complexity of terms and potential resource requirement. However, it is critical to demystify the theory of change as it can be an effective tool. At its heart, it is simply an articulation of how you will achieve your intended impact – what you will do, how you will do it, and what you expect to happen. There are no hard and fast rules – each organisation must find a process that works for them. Practical Tips Here are a few practical tips to help develop a theory of change. A simplified example of a theory of change is displayed on the right hand side. • Start with intended impact. There needs to be a very clear idea of what the intended impact is. • Create clear links between inputs, activities, outputs and outcomes. The power of a theory of change is that it demonstrates what you believe to be the causal link. • Leverage existing research and evidence. Funders increasingly want evidence based programmes and projects, but some lack the resources to conduct research. Leveraging existing work ensures there is a body of evidence supporting the theory of change. • Think about external factors. Accounting for external factors will improve evaluation and also help to strategically assess the external environment. • Prioritise. A theory of change should not map out all possible iterations, but should help identify ways that the organisation can provide the most impact. • Do not try to create a “perfect” theory of change. Theories of change are a continuous process. Definitions • Inputs: the people, finances, or other resources or assets used to execute activities. • Outputs: the products of an organisation’s efforts (volumes, activities, headcounts, etc.) • Outcomes: benefits realised by beneficiaries. These can be short-term (i.e. occurring during or shortly after the programme) or long-term (i.e. occurring several years after the cessation of a programme). Some outcomes can be directly attributable to a given intervention, but most will be difficult to categories as such. • Impact: the ultimate desired change, effect or benefit that results from an organisation’s activities or services. The organisation’s impact should be the outcome assessed minus the changes that would have happened anyway (the counterfactual.) Figure 13: Excerpt from high-level theory of change Section2:Performingasacharity Source: Aleron Third Sector Consulting
  26. 26. Building resilient, high impact charities Study from Aleron Third Sector Consulting Financial sustainability 26 Findings Financial sustainability is a recurrent cause for concern among organisations. Many charities can only cover a few months of expenditure with their reserves. Both public and private funders have reduced the length of their financial inputs, favouring shorter term contracts and grants. The issue may be more acute for services than for grant making charities as they need to cover larger operations. That said, all charities need to work on their financial sustainability. Trusts, lottery, foundations and corporates are major sources of income (see figure 14). However, there is increased competition to gain funding from these sources, and charities need to prove how they will make effective use of the money. This requires clarity in funding proposals, especially around impact, and proof that the organisation is efficient and sustainable. With regards to financial sustainability, the reaction from our respondents has been to: 1. Focus on ways to grow income and find innovative ways to attract new funding. This also includes more robust relationship management to establish stronger relationships and secure long-term funding commitment. 2. Work on balancing income sources to reduce risk for those that have been more dependent on a type of income (e.g., commissioned income vs. fundraising). 3. Refocus their activities to maximise impact and have clear messages for donors and funders. 4. Review their operating model to reduce costs and make it more agile and flexible. 60% have undergone a restructure in the past 12 months, and 38.7% plan to restructure in the next 12 months. Additionally, 47% of respondents plan to cut spending in the next 12 months. 5. Become more financially efficient to better manage cash, risk and sources of funding. Figure 14: Most important sources of income Average of ranking from 1-3, 1 being least important 0 0.5 1 1.5 2 2.5 3 Membership Investments Trading Public sector (services) Public sector (grants) Gift Aid Other public fundraising Major private donors Legacy Committed giving Corporate Trusts, Lottery & foundations Source: Aleron Third Sector Annual Impact survey, 2013 Least important Most important Section2:Performingasacharity
  27. 27. Building resilient, high impact charities Study from Aleron Third Sector Consulting Governance and role of trustees 27 Findings The relationship between management and trustees and the role of the board have been highlighted by our respondents as critical elements for the effectiveness of their organisation. Most feel that their governance is effective but insist on three key elements: Involvement versus supervision – in addition to their supervisory function, boards should also provide adequate support to the organisation and its management. Potential areas include: • Strategy and planning: Effective boards support the organisation to articulate its vision and develop strategies to achieve it. 75% of trustees feel that their most important role in supporting the organisation is developing the strategy. This means that trustees need to have a good understanding of how the organisation delivers activities and realises impact. • Relationship building and networking: Trustees can leverage their external networks to benefit the organisation. This can include helping reach out to potential funders, partners, employees and volunteers. The board should also promote the organisation within their own circles of influence and communities. • Fundraising: Trustees can make a significant contribution to fundraising, whether this is as donors themselves, soliciting funds, or helping staff identify fundraising opportunities. Clear rules of engagement – support from trustees needs to be explicit so that board and management are clear about each others’ responsibilities. The division of roles will depend on the needs of the charity. Another important element is working practice and decision-making within the board. Efficient boards are characterised by high participation among its members and a culture of open and rational debate. Right skills and expertise – trustees should have the right mix of skills, which creates a diverse and dynamic board and enables them to effectively support management. Contributions of expertise (e.g., finance, finance, HR, marketing) can be extremely valuable as long as trustees do not get overly involved in the day-to-day operations. Figure 15: Which of your responsibilities are most important to your organisation? 12.5% 12.5% 25.0% 25.0% 25.0% 25.0% 25.0% 62.5% 62.5% 75.0% 75.0% Ensuring compliance with the law Respecting the role of staff Establishing and monitoring policies Ensuring compliance with governing document Ensuring accountability Maintaining proper fiscal oversight Promoting the organisation Setting up and maintaining vision, mission and values Selecting, managing and supporting the chief executive Developing strategy Maintaining effective board performance Source: Aleron Third Sector Annual Impact survey, 2013 Section2:Performingasacharity
  28. 28. Building resilient, high impact charities Study from Aleron Third Sector Consulting Governance and role of trustees 28 Building an effective board of trustees To build an effective board, there are 6 key recommendations: 1. Strategically elect trustees – though certain elements can be delegated to staff, trustees are ultimately responsible for the recruitment of new members. Trustees need to ensure that the board is diverse, so that it is open and fair, and that new trustees will provide skills and knowledge that are required by the charity. 2. Align trustee contribution to skillset – the chair or vice-chair should engage with all trustees personally to check whether they have development needs or want to contribute in additional ways. 3. Have a deep understanding of external factors – keep up-to-date with contextual information that is relevant to the charity. Trustees should understand how the environment and beneficiary needs are changing, and what impact this should have on strategies and plans. 4. Act as a public ambassador for the charity – trustees should make the most of their existing networks, and actively build relationships in the community. 5. Have clear oversight of the charity – trustees need to request the information they need to help them in their strategic, decision-making role. Whilst specialised committees can help support the board by making better use of time and expertise, they can also lead to loss of focus and prolonged decision-making. 6. Hold efficient, targeted meetings – the rules of engagement must be clear for trustees, but meetings should also have clarity and concision. The purpose and content of meetings should be agreed upon prior to the meetings, and their format should be reviewed by trustees. Below is a framework for how to strategically elect trustees when reviewing or setting up a board. Analyse skill gaps • Engage with existing trustees to determine what skills, knowledge and experience current trustees have • Identify gaps in current board in relation to strategic requirements of the charity • Create a unique job description for trustee position • Candidates should have the following core skills and behaviours: - Strategic thinking - Performance management - Budgeting and finance - Risk management - Recruitment - Teamwork - Networking and relationship building - Accountability to beneficiaries • The position should be advertised more broadly than just word of mouth • Successful applicants should have: - strong ties to the local community - knowledge of the thematic area of the charity’s activities - the necessary time and energy to devote to their role as trustee • After appointment, provide all key documents relating to the trustee’s work and the charity’s activities • Induct trustee into responsibilities and how the board works • Invest in learning and development of trustees where possible and ensure that they receive on-going support, with one-on-one meetings with the chair Create new trustee role Advertise and select Induct and support Figure 16: Electing a new trustee Section2:Performingasacharity Source: Aleron Third Sector Consulting
  29. 29. Building resilient, high impact charities Study from Aleron Third Sector Consulting Cross-sector collaboration Findings Many organisations are actively looking to form collaborations and partnerships. 51.4% of CEO’s surveyed claim that engaging in more partnerships will be one of their key strategic goals in the next 12 months. Our respondents typically engage in two types of collaborations: 1. Collaborations with public or private sector organisations, including universities 2. Collaborations with other charities – 75.8% of our respondents engage with other not-for-profit organisations to embed innovation. Many organisations have specialist expertise in certain areas, and consolidating this expertise by partnering with voluntary and public sector delivery partners can create a more holistic offering for beneficiaries and lead to better outcomes. Partnering with universities or think tanks allow charities to use research to inform decision-making and programme design in a cost-effective manner. Additionally, charities use partnerships with commercial organisations to build internal capabilities. These partnerships are also used to improve services for beneficiaries by widening the range of resources that a charity can provide. For example, some large financial institutions have provided coaching, mentoring and work placements for beneficiaries. There is also an increasing trend wherein funders are encouraging more cross-sector collaboration between charities and businesses, to scale social impact. Whilst cross-sector collaboration can be fruitful, it should be approached with caution. Since many charities have started to refocus strategies around core activities, any collaborations must be closely aligned to their strategy or there will be risk of mission drift. Figure 17: How do you embed innovation into your strategic plans? % of respondents (multiple choice) Other includes: suggestions from volunteers and stakeholders; market research; action research 18.2% 24.2% 36.4% 36.4% 42.4% 69.7% 75.8% Other Partnerships with think tanks Partnerships with universities Engaging external consultants Internal research team Employee suggestions Collaboration with other not-for-profits 29 Section2:Performingasacharity Source: Aleron Third Sector Annual Impact survey, 2013
  30. 30. Building resilient, high impact charities Study from Aleron Third Sector Consulting Cross-sector collaboration 30 Building successful partnerships Partnerships between charities and businesses can be successful. An example is the partnership between Unicef and Procter & Gamble, which has raised enough funds to buy 300 million vaccines against maternal neonatal tetanus with the "one pack of Pampers = one vaccine” campaign. A good partnership enables the organisation to convert resources into high quality outcomes and sustainable social impact. Looking at some of the lessons learned from these partnerships, we have identified seven critical elements for building and sustaining successful partnerships. An organisation that has these components in place will maximise its chances of attracting the right partners and sufficient resources for its initiatives. 1. Clear vision and objectives Common reasons for failure are partnerships with over- ambitious goals or lack of agreement on outcomes necessary to achieve the shared vision. It is important to define a shared vision that identifies tangible objectives and clearly shows target outcomes for beneficiaries. 2. Appropriate partners and strong case for involvement Choosing the right partners is difficult. The organisation needs to start by defining the outcomes that it can deliver, and then identify the gaps that need to be addressed. Appropriate partners can then be selected based on their individual capabilities, so that respective competencies can be leveraged. This could include: • Private sector investment • Project management skills • Local firms’ knowledge and ability to deliver • Government or university engagement in research and innovation • International expertise from an NGO The programme objectives need to align with the interests of partners in different sectors to ensure sustained engagement. It is important for each partner to articulate a clear rationale and case for involvement that is tailored to their individual interests and capabilities. This is will prevent unrealistic expectations and misunderstandings. A thorough due diligence process is also required to ensure that partners have the right competencies and will bring credibility to the partnership. Figure 18: Key elements to a successful partnership 7. Stakeholder engagement 6. On-going evaluation & improvement 5. Governance 1. Shared vision & objectives 2. Appropriate partners & strong case for involvement 3. Sustainable funding model 4. Clear commitment & plans Section2:performingasacharity Source: Accenture, The Guardian, McKinsey & Co, World Economic Forum, Aleron Third Sector Consulting analysis
  31. 31. Building resilient, high impact charities Study from Aleron Third Sector Consulting Cross-sector collaboration 31 3. Sustainable funding model To achieve a balanced funding model, successful partnerships: • Attract funding from a broad set of stakeholders • Distribute funding targets in a fair and equitable way • Provide compelling value propositions tailored to stakeholder needs Strong partnerships also pursue alternative revenue streams, including parallel investment models. This is especially important given the limitations of donation- based funding. 4. Clear commitment and plans It is imperative to have a clear business plan that defines the partnership’s purpose, operating model, governance, and implementation plan — along with clearly outlined risks and benefits for all stakeholders. This plan ensures that all partners understand the key success factors in the implementation, and that the partnership is prepared to address potential challenges. 5. Governance Effective governance ensures alignment on major strategic issues and coordination of multiple partners within the programme. The most efficient partnerships create strong governance structures that: • Ensure transparency of all operations and governance activities • Establish policies and procedures for overseeing the partnership’s design and implementation • Engage stakeholders and funders to ensure input and representation • Communicate progress to relevant stakeholders Large initiatives should consider having: • A Programme Management Office (PMO) for coordination and communication between partners. • A steering committee with representation from each partner, and individuals with sufficient seniority and time to actively participate. The mandate of the steering committee should be clearly defined, with meetings focused on key issues. 6. On-going evaluation and improvement Processes are required to monitor the programme’s inputs, outputs and outcomes, and to enable action when needed. For inputs, the nature and level of contributions from each partner should be actively monitored and communicated, with inactive partners removed periodically. This will highlight and incentivise major contributions, clarify the activities of each partner, and maintain a strong programme brand. For outputs, a limited number of performance indicators should be established to communicate progress and identify challenges. For outcomes, evaluation frameworks and processes should be designed at the start, and integrated into an on- going performance improvement model. 7. Stakeholder engagement For an effective partnership, it is important to understand who the active influencers, funders and competitors are and how the programme should engage with them. This understanding should be shaped into a holistic strategy for stakeholder engagement. Having such a strategy can enable the partners to: • Better leverage their own networks • Distinguish the programme from other initiatives delivering similar activities • Influence key external stakeholders for the benefit of the programme. Section2:Performingasacharity Source: Accenture, The Guardian, McKinsey & Co, World Economic Forum, Aleron Third Sector Consulting analysis
  32. 32. Building resilient, high impact charities Study from Aleron Third Sector Consulting 32 “As a charity, accountability presents us with a big problem. Unlike businesses, who are solely accountable to shareholders, we are accountable to a much wider group – donors, funders, beneficiaries, the public… And, given that our work is mostly qualitative and projects long-term outcomes, we cannot substantively demonstrate our impact in the same way.” Programme Director, medium-sized charity
  33. 33. Building resilient, high impact charities Study from Aleron Third Sector Consulting Section 3: Measuring to improve 3333 Findings 32.4% of CEO level respondents confirm that their organisation has established processes to measure impact, with the same percentage confirming that they have objectives and targets for impact; however, only 20.6% of CEO level respondents agree that impact measurement is used effectively in their organisation. Respondents highlight the following challenges in impact measurement: • Lack of clear definition of intended impact or a theory of change – the absence of a robust theory to underpin work can make it hard to identify drivers and activities that should be monitored • Delivery of services or activities that are challenging to measure – activities such as preventative services or campaigning make it difficult to measure and quantify success. • Measuring long-term impact vs. short-term impact – if short-term outcomes are typically easy to measure, long-term impact is more challenging to measure on an individual basis, as organisations may not still be in touch with the beneficiaries. • Identifying the contribution of the organisation among other factors – as a theory of change demonstrates, many factors contribute to an outcome, and it is sometimes difficult to identify the impact of a single intervention or organisation. • Ineffective tools and processes to support the recording of impact – having relevant and easy-to-use tools to record and monitor impact is difficult and many organisations are struggling to develop them. • Lack of analysis and use of the data that is collected – some respondents report that they collect a great deal of data but do not necessarily use the data to improve or inform their work. 2. Select assessment methods & measurements 1. Establish clarity of purpose for measurement 3. Collect data 4. Analyse data 5. Use learning to communicate & improve Strategy Operating Model Change Management Figure 19: Key steps in measuring and improving impact Measuring and assessing impact As discussed in section 2, having a strong, well-developed theory of change is a critical first step in assessing social impact. A theory of change enables an organisation to articulate its “impact value chain”, or how the investment of time and resources into specific activities will ultimately lead to impact. Once a theory of change has been established, it can be the foundation for effective impact assessment. The key steps are laid out below and described in more depth in this section. Section3:Measuringtoimprove Source: Aleron Third Sector Consulting
  34. 34. Building resilient, high impact charities Study from Aleron Third Sector Consulting Demonstrating our achievements and value to donors and funders, and fulfilling contractual requirements for impact measurement. Clarity of purpose 34 Holding ourselves accountable for the quality of our work, measuring inputs, activities, outputs, and immediate outcomes for our activities. Track progress and improve performance Testing assumptions and tracking achievements by measuring outputs, outcomes, and impact. Using information to understand why we have succeeded or failed. Inform strategies and plans Improve impact for beneficiaries by accomplishing shared goals, sharing our results and collaborating with partners. Sharing results and successes Be accountable to donors and funders Figure 20: Clarity of purpose • Intermediate outcomes, strongly linked to inputs, activities and outputs • Comparability across different activities • Intermediate outcomes, strongly linked to inputs, activities and outputs • Strong evaluation frameworks • Shared measurements and standard outcomes • Clear communication of outcomes process and system • Reporting on external systems • Contractually driven outcomes and measurements Requirements Why measure impact There are four typical reasons for measuring impact: to track progress and improve performance, to inform strategies and plans, to share results and successes, and to be accountable to donors and funders. These are not mutually exclusive. Each purpose will have different implications on how impact should be defined, measured and analysis. By clarifying from the start why impact needs to be measured, the indicators, process, and analysis can be defined to be fit-for-purpose from inception to conclusion. Figure 20 below shows the typical reasons and some of the requirements to consider. Section3:Measuringtoimprove Source: Aleron Third Sector Consulting
  35. 35. Building resilient, high impact charities Study from Aleron Third Sector Consulting Assessment method and measurements 35 Determine how data will be assessed Identifying the methodology for impact assessment will inform what data needs to be collected. While methodologies for assessing social impact are mostly in nascent form, many have already been adapted from economics, social sciences, and health research. These methods will generally fulfil one or more of the following functions: • Evaluate the efficiency of the process – some methodologies will look particularly at the links between inputs and outputs, to see how efficiently different projects are delivering their stated outputs. • Evaluate the impact – other methods focus on the impact of the work being done, by measuring or evaluating the achieved outcomes and often adjusting for the counterfactual. • Comprehensive evaluation – following the theory of change, some methodologies will attempt to link the inputs and outputs to the ultimate impact so that specific activities and interventions can be identified as being effective. Before embarking on an assessment journey, each organisation or programme should understand the benefits and limitations, as well as the costs and functionality, of each type of assessment. A sample structure of some of the key questions is below, using SROI as a high-level example. Whatever method is chosen, it is critical to incorporate the voice of the beneficiary into all aspects of the assessment process. This could be through feedback, but also through active participation of beneficiaries in the design, implementation and evaluation of programmes. Type of evaluation What are the benefits? What are the limitations? What is the cost? What function will it serve? Example: SROI Evaluate outcomes through monetisation • Highly feasible for many organisations, and generally low cost if much operational data is already collected • Method has high credibility among some social scientists and funders • Provides clear metrics that are easy to understand and use • No counterfactual established to assess net impact • May not help organisations to replicate and improve interventions • Difficult to attribute monetary values to outcomes • Does not demonstrate causal link between activities and outcomes • Dependent on strong research design • Dependent on efficiency and scope of existing data collection • Includes cost of gathering data, on- going monitoring and data collection, and fees for consultants or third parties Figure 21: Example of evaluation scoping structure Section3:Measuringtoimprove Source: Aleron Third Sector Consulting
  36. 36. Building resilient, high impact charities Study from Aleron Third Sector Consulting Findings Whilst 78.5% of respondent organisations have some kind of established processes to collect and analyse their data, the general consensus is that there is still work to do around improving efficiency and quality. The right tools and processes for collecting data will vary by organisation, depending on: • the scope of activities and the work environment • the type and volume of data • the skills and capabilities of staff and volunteers • the maturity of the performance management model Improving data collection Organisations looking to improve data collection should ask themselves the following questions: • What type of data will be collected? (quantitative and/or qualitative) • What are the sources of data? • At what level(s) will the data be collected (individual, group, etc.)? • What tools and instrument(s) will be used? • How frequently will the data be collected? • Who will collect the data? What skills are required? • Who will analyse the data? How much can be automated? Data collection and analysis 36 CollectdataAnalysedata Uselearningto communicate&improve Central Storage Quantitative data Data cleansing & validation Qualitative data Automated analysis Qualitative analysis Draft report Final Report Inform strategies and plans Track progress and improve performance Sharing results and successes Be accountable to donors and funders Key points • Use technology to make recording easier – use tablets or laptops to take notes, reduce manual data entry, scan and index documents • Store all relevant information in a central place, so that it is easy to analyse and triangulate different data types and sources • Analysis should link back to why the organisation is measuring and should yield actionable information that can help shape decisions • Sense checking reports and ensuring that analysis is sound will create confidence that decisions can be made based on the content • Automating quantitative analysis, and making sure that reports can be produced easily and in an accessible format removes manual work from the process • Qualitative analysis can add dimension to reports Data cleansing & validation Figure 22: High level data collection process Section3:Measuringtoimprove Source: Aleron Third Sector Consulting
  37. 37. Building resilient, high impact charities Study from Aleron Third Sector Consulting Measuring to improve 37 Findings Our respondents report that their outcomes or impact measurements are not integrated into existing performance measurements. They are therefore unable to link impact data to input and output measurements, such as costs or staffing time. More importantly, as most organisations struggle with measurement, few have managed to use measurement to increase operational efficiencies and impact. One respondent said: “We keep asking our staff to collect all these data but I have never seen anyone reviewing it or making any decision based on it”. Data measurement should not only be about communicating achievements. Performance measurement should be used to drive better results, reduce costs and promote rapid innovation. Optimising performance measurement is not easy and is typically a long process (3 to 5 years). The ultimate objective is to align data collection and production with the theory of change and then use the analysed data to adjust the intervention model so that impact and efficiencies are maximised. Example of correlative analysis between impact, interventions, and predictive indicators* Through regular impact assessment, monitoring of intervention efficiency, and identification of predictive factors, it is possible to identify the most effective interventions. Below is a simplified example of how tracking performance in several different ways and triangulating the results can help identify the most effective mix of interventions and the best indicators for predicting success. x x x x Time (months) MixofactivitiesImpactAssessed Assumptions: • Impact assessment is adjusted for the counterfactual • 2 month lag between impact delivered and assessed Conclusions • Optimal mix of activities occurred between months 5 and 6. Future interventions should be composed of the same activities to achieve best results. • Predictive factor A is strongly correlated with impact delivered, with a 1 month lag. Key Impact projection Output A Output Bx Impact assessment Predictive Factor A Predictive Factor B PredictiveIndicators *Simplified version for illustrative purposes 2 month lag Correlation coefficient = 1 Correlation coefficient = 0 Section3:Measuringtoimprove Source: Aleron Third Sector Consulting 1 2 3 4 5 6 7 8 109 Highest Impact
  38. 38. Building resilient, high impact charities Study from Aleron Third Sector Consulting 38
  39. 39. Building resilient, high impact charities Study from Aleron Third Sector Consulting About Aleron 39 About Aleron We work in partnership with organisations, applying rigorous analytical frameworks, solving complex problems and developing practical solutions to achieve greater impact. • Operating model design • Internal and external benchmarking • Internal processes and tools redesign • Staff and volunteer development • Change programmes • Growth strategy • Strategic partnerships • Impact framework design and implementation • Statistical outcomes modelling • Intervention unit costing analysis • Performance management design and implementation • Change management • Stakeholder analysis and engagement • Implementation of change initiatives • Learning and development • Communications planning • Governance models • Market and environment analysis • Internal benchmarking • Articulating vision, mission, objectives and impact • Strategic and operational planning • Value proposition development • Business case development • Programme governance Developing strategies and plans Building an efficient organisation Improving impact and performance management Managing change Partnership working In today’s environment, external support needs to be lean and targeted. We develop partnerships with our clients, integrating our people into their teams to bring the specific skills and expertise they require. Together, we build practical and sustainable solutions, creating internal capabilities, and empowering our partners to achieve greater impact. For more information about Aleron and our services, please visit: Or contact Katelyn Cioffi: Email: Phone: +44 (0)20 8834 1033
  40. 40. Aleron Third Sector Consulting 26-28 Hammersmith Grove London, W6 7BA t: +44 (0)20 8834 1033 © Aleron Partners, 2013 All rights reserved