09 Jul 2010Working Paper Summaries

The Limits of Nonprofit Impact: A Contingency Framework for Measuring Social Performance

by Alnoor Ebrahim and V. Kasturi Rangan

The social sector is in the midst of a search for metrics of impact. Over the past 20 years, there has been an explosion in methodologies and tools for assessing social performance and impact, but with little systematic analysis and comparison across these approaches. In this paper, HBS professors Alnoor Ebrahim and V. Kasturi Rangan provide a synthesis of the current debates and, in so doing, offer a typology and contingency framework for measuring social performance. Their contingency approach suggests that—given the varied work, aims, and capacities of social sector organizations—some organizations should be measuring long-term impacts, while others should stick to measuring shorter-term results. The researchers provide a logic for determining which kinds of measures are appropriate, as driven by the goals of the organization and its operating model. Key concepts include:

With the contingency framework, organizational leaders and managers can clarify what types of results they seek to achieve, and thus for what they should be held to account. Doing so requires them to articulate a causal logic, or theory of change, that they expect will lead to long-term goals.
This framework suggests that social sector organizations can increase their control over long-term societal impacts in at least two ways: by expanding their operations in order to reach a threshold population or critical mass (scale), and by offering more comprehensive services or partnering with others in order to tackle a problem (scope).
It is not feasible, or even desirable, for all organizations to develop metrics at all levels on the logic chain.
This contingency framework offers some general cautions about performance measurement. First, it suggests that measuring impacts makes sense under a limited set of circumstances—when an organization operates at an ecosystem level, and yet can exercise sufficient control over results to attribute impacts to its work.
Second, many organizations face a double challenge of measuring performance in a variety of areas separately, while also integrating across them in order to gauge possible synergistic effects at the ecosystem level.
Third, funders such as foundations, governmental departments, and international aid agencies are far better positioned than most nonprofits to measure impacts.
Finally, given the diversity of actors engaged in social change, the four broad types of results in the framework should be taken as suggestive rather than as silver bullets. The very basis of the framework—contingency—suggests that there are no panaceas to results measurement in complex social contexts.

Author Abstract

Leaders of organizations in the social sector are under growing pressure to demonstrate their impacts on pressing societal problems such as global poverty. We review the debates around performance and impact, drawing on three literatures: strategic philanthropy, nonprofit management, and international development. We then develop a contingency framework for measuring results, suggesting that some organizations should measure long-term impacts, while others should focus on shorter-term outputs and outcomes. In closing, we discuss the implications of our analysis for future research on performance management. Keywords: performance measurement, impact, nonprofit management, social enterprise, philanthropy, accountability, management control systems. 53 pages