Donors give because they want to make a positive difference to a cause or to the lives of others. Understanding the impact of a donation is an important part of the giving process. It helps donors assess whether they are meeting their objectives, helps charities learn from their work, and makes giving more rewarding.
Assessing impact involves understanding the difference that charities make and the change they create for the people they help. Charities can find it difficult to demonstrate their impact, but they need to assess their work to show supporters, funders and beneficiaries what they are achieving, and to enable them to make improvements to their work.
For donors, assessing the impact of a donation is important for knowing whether their funding has been well used by the charity and what difference their support has made; as well as for assessing whether they should continue to fund that organisation. Understanding impact can also be key to keeping donors engaged and excited by their giving.
Social return on investment
Social Return on Investment (SROI) is a framework for measuring social value. It is a measurement approach developed from traditional cost-benefit analysis, in which the social and environmental impacts of an investment are given financial values.
SROI is often viewed as being all about the final financial ratio i.e. the social value created per £1 invested. However in truth it is a process of understanding and valuing impact and should be used to understand where impact is greatest and how to improve. SROI does not have to be seen as an ‘all or nothing approach’; charities should use those elements of SROI that are most useful to running their organisations.
Once you have been funding projects for a while, you should take time to assess whether you’re achieving what you expected. Reviewing objectives may be about ensuring your giving evolves to match your changing preferences, but it is also about considering whether a revised giving strategy could have a greater impact on the areas you care about.
Most people have charitable objectives for their giving, eg. to support dementia research, to provide holidays for terminally ill children, to increase literacy levels within inner-city schools. However you may also have personal objectives related to your family, eg. ensuring the family meets three times per year; to the time and skills you want to donate; or corporate objectives related to your company profile or employee involvement.