Performance Measurement: The Social Enterprise Dilemma

‘A Framework for Measuring the Scale and Scope of Social Performance’ discusses the dilemma of measuring the impact of social enterprises. Ebrahim and Rangan claim: “every organization should at least measure and report on its activities and outputs, as these results are largely within its control.” However, this is obviously the easy part. Unlike conventional for-profit business ventures, social enterprises can not solely look into their cash flows and generate a measure of the total profit made.

The link between output and outcome is not easy to establish for a lot of social ventures. The article highlights the example of Aravind Eye Hospital, where this is a relatively simple task. In a nutshell, the amount of corrective surgeries performed efficiently will translate to more patients with better vision. However, this process gets complicated when a social enterprise is tackling a wide variety of issues. For instance, how does a school measure its impact? How does one quantify the knowledge being imparted to students? One might turn to analyze students’ grades; but it is my personal belief that simply looking at grades does not accurately determine the true value of education or the success of a school. Students’ aptitudes vary on a case-to-case basis. Measuring the impact a school is having on its students depends on a variety of factors such as student enrolment, student retention, the overall behavioral change in a student’s beliefs. Some of these changes are quantifiable, some are not.

The article points out scale and scope as important determinants of measuring impact. The greater these two metrics are, the harder and more complex it becomes to measure impact. This is primarily why the articles states that “assessing impact requires a level of research expertise, commitment to longitudinal study, and allocation of resources that are typically beyond the capabilities of operating organizations and sometimes even their funders.” This is why a growing approach to measuring performance of social enterprises involves the organizations clearly delineating their operational mission, scale and scope. This helps the organization and funders to be on the same page since day one and set clear-cut objectives according the nature of the work being carried out, instead of a one-size-fits-all approach.

In my opinion, while this method of measuring performance sounds feasible on paper, it places a significant amount of power in the hands of the social enterprise – the entity being evaluated. In many cases, the grantees are not aware of the ground realities of the processes being carried out in the field. There can be multiple ways in which Task X could be performed; and when left to the whim of the social enterprise, it may or may not be performed in the optimal and least costly manner. Hailing from a developing country, I have seen many social enterprises pocket excess cash by bloating their budgets. The method pointed out by the article may not work if an organization is bent on embezzlement. This leads to the question: what exactly is the most effective way of judging impact? While the article’s approach may be a step in determining the best possible approach, it is definitely not the most effective way of measuring performance and leaves room for improvement.