Believe it or not, the year is 2023. Technology has permeated literally every aspect of our lives as we generate—and collect—inconceivable amounts of data every day. As a result of this transformative shift brought on by the fourth industrial revolution, expectations for how the nonprofit sector embraces data collection has also changed, with funders expecting to see sophisticated, data-driven stories of measurable outcomes and true social impact. Likewise, grantmaking philanthropies are also expected to illustrate the returns on their own giving strategies. The unfortunate reality is that a massive gap often exists between how foundations and grantmakers collect data and how they effectively use it to demonstrate their social impact. In essence, organizations often struggle to find the right data to tell the right stories of how they’re realizing their mission. How can grantmakers overcome this challenge?
In philanthropic organizations, an important nuance of the funder-grantee relationship often involves a critical review of the grantee’s theory of change as a critical aspect of the grantmaking process. Simultaneously, philanthropies develop their own, broader theory of change that guides their giving strategy. The problem of aligning these theories from both sides of the funding partnership is complex, and each organization will have their own unique hurdles to tackle in doing so. Resolving that complexity starts with a crucial first step: developing an information systems strategy linked directly to your grantmaking theory of change.
Aligning with the theory of change
There is no denying that it takes tremendous commitment and a clear strategic focus to shift an organization’s maturity from collecting data to reporting effectively on impact and outcomes. A critical aspect of this maturity evolution is having a clear understanding of your organization’s theory of change and then ensuring that information systems are in complete alignment with demonstrating progress towards that mission. At Exponent Partners, we help nonprofit organizations to map clear logic models connecting resource inputs and grantee programmatic activities to clear outcomes and impact indicators, all of which should align with and support the foundational grantmaking theory of change. This facilitates better funder decision-making and allows your organization to close that gap between data collection practices and the real goal of philanthropic impact measurement.
All technology and tool-related decisions, though important, should come secondary to this primary objective of understanding how the data you collect from grantees will be transformed into meaningful impact reports.
This practice is not unlike enterprise performance management, where organizations condense silos of data so that the information is easily digestible information and delivers value by demonstrating the organization’s performance against its mission objectives. For the purpose of impact measurement, the theory of change is central to the enterprise-wide discipline of monitoring and evaluating impact. Technology is a critical piece of this exercise, but only connects the dots between granted funds and measurable impact when implemented as part of a thoughtful information systems strategy built to connect grantee-reported data to demonstrable impact mapped along these lines. All technology and tool-related decisions, though important, should come secondary to this primary objective of understanding how the data you collect from grantees will be transformed into meaningful impact reports, which in turn inform inspiring stories of how your organization is truly driving change through philanthropic funding. Unfortunately, getting to this level of maturity and sophistication can be daunting for a number of reasons. Our work with grantmakers guides them through this challenging journey of designing highly functional, mature impact-measurement systems that help changemaking funders tell the story of their impact.
People, processes, and tools
There’s no denying that tools and technology to manage the grantmaking lifecycle and collect grantee reported data are widely available. Some are even able to report on aggregate consolidated impact. The real challenge faced by foundations and grantmakers more often relates to internal capabilities and staffing resources to make the most of the systems that are in place. This reflects a bigger trend in the nonprofit sector where organizations often lack the training or internal resources to take full advantage of information system investments and use their data effectively toward the goal of demonstrating their impact.
The real challenge faced by foundations and grantmakers more often relates to internal capabilities and staffing resources to make the most of the systems that are in place.
The good news is that there is an ongoing shift in the philanthropic sector to focus on breaking down data silos and functional barriers through system consolidation and overall effectiveness, with less organization-specific customization and more solutions built on industry-wide best practices. But even with the right internal capabilities and technologies in place, it’s not unusual for organizations to shortcut the data management part of the process, which undermines the overall sustainability of these systems. In addition, often overlooked is the critical practice of building and executing a feedback loop to learn from the collected grantee data and your consolidated reporting in order to fine tune the logic model and processes based on what can be learned from the data analysis. For example, are the outcomes you expected from the logic model actually being realized? If not, what grantee activity data points or program funding strategies need to be adjusted? At the end of the day, grounding in a strong foundational information systems strategy tied logically and cohesively to your organization’s theory of change will help you prioritize operational and funding decisions in order to optimize resource allocation for effective grantmaking.
Eyes to the horizon
Long-term strategic capacity-building efforts can tackle some of the challenges related to adequately sustaining impact measurement objectives. Unfortunately, even the most well-resourced, capable, and nimble organizations will struggle if they don’t have a clear roadmap in place to inform information systems design, operational use, and data collection practices in support of the organization’s theory of change and vision for grant-fueled impact. This type of change certainly doesn’t happen overnight, but mapping your implemented technology and data collection practices to your organization’s theory of change will help your organization to clearly and accurately demonstrate its progress in making an impact and outcomes measurement. This important journey starts with a simple first step: a conversation.
About Exponent Partners
Exponent Partners is a social enterprise committed to helping nonprofits in philanthropy, human services and education drive radically better impact. Learn more at exponentpartners.com.
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