A universal impact metric

This week's theme is crucial to any type of enterprise: Impact Assesment. It doesn't matter if the enterprise is purely for-profit, corporate, Non-profit, Not-for-profit, NGO, social venture et al, all these organizations have a core purpose and the best way to assess their impact is to measure how well they serve their purpose or in other words, how effective are they in creating value? Now the value creation may take many forms ranging from dividends to investors, returns on investments to the effectiveness with which their customers are being served. With organizations principally focused on financial gains, there are a plethora of tools to measure the effectiveness of their operations but with social enterprises, this is a gray area. Each social venture has different and unique core values, so it is very important that we take these core principles into account while measuring impact. It is only logical to infer that the most effective yardstick, so to speak, for measuring impact would be assessing the value creation and the process itself i.e. the throughput. This is exactly what has been done by Ebrahim and Rangan in their work titled "What Impact? A Framework for Measuring the Scale and Scope of Social Performance". It's just that they didn't explicitly say that they are measuring throughput.

As I mentioned before, each social venture is unique in its own way and measuring throughput which effectively maps the value created along the vision of the ventures is a monumental task in itself. It is more easily understood by example. Let's take Carnegie Mellon University, it is a corporate, non-profit, educational institute after all (in spite of the exorbitant fees!)! So, how does CMU assess its impact? Well, one would think that the number of students enrolling every year (and not dropping out later) combined with the job placement statistics of that year would be a pretty good metric of how well the university is doing, right? Not exactly, CMU's impact is assessed by contribution it has to the research community vis-a-vis the number of relevant publications, citations to the research, research awards, et al.

Let to summarize, let's take the KaBOOM! case by James E. Austin & Jose Miguel Porraz in the HBR case study pack. The mission of KaBOOM is "Every Child through the participation of their local communities should have healthy play opportunities". KaBOOM! introduces a unique Performance Management System (PMS) for a social enterprise which aids in setting up strategic goals and possibly reshapes the original strategy of value creation through a feedback loop. Their metrics have a cause-effect property which helps in obtaining consolidated, timely, accurate and useful information pertaining to the throughput of their enterprise. This all neatly tied up into a simple formula (derived from the DuPont formula) that measures the throughput as a linear multiplication of Output, Internal Efficiency, and External Efficiency. Thus giving us a generic yardstick which is universal in measuring impact.