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How to Measure Impact

image-4Step 1 – Measure What Matters

Begin by reviewing the Gates Foundation’s Guide to Actionable Measurement. It’ll get you in the mood to measure what matters. Here’s the cliff notes version.

  1. Measurement should inform specific decisions and/or actions.
  2. Do not measure everything, but strive to measure what matters most.
  3. Gathered data should help you learn and adapt your initiatives and strategies.

 Step 2 – Determine What You’re Measuring

If you are results minded (and not a fluffy-feel-good-social-investor) the objective is to measure outcomes, not impact. Outcomes are what we should be measuring since they are easier to define and quantify. Impact is a vague term and often challenging to define, particularly across sectors. Keep in mind, it is good to talk to your portfolio companies and find shared outcomes. 

Determine if you are measuring outcomes or if the real purpose of your measurement is to know your Social Return on Investment (SROI). If it’s SROI, refer to this guide on calculating SROI. If you know you’re outcome focused continue to step 3.

Step 3 – Determine Your IRIS Metrics

Determine the Impact Reporting and Investment Standards (IRIS) metrics for your investments by using the IRIS taxonomy. By using IRIS metrics you’ll be working with the closest thing to an industry standard for impact investing. Here are the high level categories for the IRIS metrics.

  • Company
  • Product
  • Financial Performance
  • Operational Impact
  • Product Impact

Naturally, knowing your outcomes and customizing your IRIS metrics is your secret sauce in your quest to measure impact. Remember what we talked about in Step #1 and measure what matters most to you and your stakeholders. Refer to the standard IRIS metrics or download the full taxonomy excel file to get started.

Step 4 – Collect Data, Accelerate and Optimize

Now that you have your outcomes and metrics it’s time to add some muscle to the equation. Integrate your outcomes and metrics with software for social impact investors like PULSE and AIM. Begin collecting data and accelerating and optimizing the outcomes of your investments.

Step 5 – Become a B Corp

Now that you have verifiable data and results for your company and your portfolio companies the next thing to do is to apply to become a B Corp through B Lab. Visit here to learn how to become a B Corp.

 Step 6 – Get a GIIRS Rating

JP Morgan report labeled impact investment as an “emerging asset class” with profit potential in the hundreds of billions over the next decade. Global Impact Investing Rating System (GIIRS), an organization backed by B Lab, accepts IRIS data and issues companies and funds a rating that is analogous to Morningstar investment rankings or S&P credit risk ratings. An official rating helps your work to measure impact pay off with LPs and other stakeholders. All B Corps receive a free GIIRS rating. Visit here to learn how to get a GIIRS rating.

Posted 9-12-12

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