The use of data for social good has become a major interest in the social sector and will continue to see growth in the foreseeable future as organizations place an increasing amount of focus on data as it relates to evidence of impact. Jim Fruchterman, a leading social entrepreneur and CEO of non-profit tech firm, Benetech, wrote a piece that explores the use of data for social change and how firms can make better use of it to inform decision-making and evaluate performance.

In the article, “Using Data for Action and for Impact,” Fruchterman addresses the challenges that many nonprofits and social businesses face when managing data. Fruchterman goes on to detail two important ways in which organizations can harness the data explosion.

First, firms must use data to respond to today’s needs, manage their teams in a more effective manner, in addition to improving efficiency. He calls this approach “data for action.”

The next critical approach, “data for impact”  (or what he also calls the “Holy Grail” for donors, policymakers, and social leaders) includes the use of data to implement interventions that will lead to lasting change.

By linking both approaches, organizations will then be able to make a significant gain in unlocking the true power of data, while also moving forward in delivering evidence of lasting impact.

When collecting data, nonprofits are confronted with three essential question – how much did we spend, how much did we do, and the most difficult question perhaps, how much did it matter? The first question pertaining to the cost can be answered relatively easily, as financial accounting standards are well-established.

“How much did we do” becomes a bit more complicated as this requires active responses to acute needs, as explained by Fruchterman. Organizations can however, begin to answer this question by collecting information about the issues at hand, which are then used for measuring program activities and continual program improvement. While this process is straightforward, problems arise when aggregating activities and assessing their overall effectiveness.  

Measuring the effectiveness becomes a focal point in the third (and most challenging) question, “How much did it matter?” While the reasoning behind social action is commonly understood, measuring the ultimate impact of a social program is not. Answering this question is difficult for a number of reasons, but Fruchterman lists five challenges in particular that need to be addressed when evaluating impact. The reasons are as follows:

·      Timescale – “When we ask about the ultimate impact of an intervention, we have just leapt past the timeframe of most programs. It is hard for a program such as job training, which touches an individual for an hour, a day, a month, or even a year, to know whether that person was measurably better off five or ten years later.”

·      Difficulty of identifying and measuring direct, causal impact – While the “gold standard for measuring impact is a randomized controlled trial,” this can become an expensive process. Measuring effectiveness also becomes difficult when attempting to assess trade-offs, rather than evaluate straightforward variables.

·     Privacy -  “Nonprofits often collect information about society’s most vulnerable people, usually about what makes them vulnerable. It is important to safeguard information about an individual’s status.”

·     Resistance – “Staff members might feel that data collection or analysis activities are a diversion from their primary role of delivering products or services.” An additional issue is the uncertainty that results from questions about how the data will be used and consequences that could occur if the activity in question is perceived to have minimal impact.

·     Lack of money – “Measuring impact over longer timescales, developing randomized controlled trials, collecting data, and protecting privacy all cost money.” While the social sector demands evidence of impact, it has been found that funders typically prefer to spend their resources on buying more activities.

Fruchterman notes that as stakeholders expect more from their collective actions, measuring effectiveness has become more important than ever; this means that organizations will have to invest more into impact research. The investment will require a mindset shift, as impact research will have to be seen as an essential program cost, necessary for ultimately delivering social innovations more effectively.