Free download included at the bottom of this post.
If you spend any time talking about social enterprise, you'll quickly bump into the notion of the so-called "double bottom line", referring to financial and social bottom lines by which social enterprise performance is measured. You will also come across the idea of a "blended rate of return", referring to the mix of profit and social impact that social enterprises can generate. While both of these terms provide some insight into the unique nature of social enterprise, I find they lack precision and actually can be somewhat misleading. "Double bottom line" suggests that financial performance and social impact are equal in terms of defining the ultimate goal of a social enterprise. I remember reading Greg Dees' excellent article, "Social Entrepreneurship is About Innovation and Impact, Not Income" several years ago, and this section particularly stuck with me:
"From a management point of view, the financial 'bottom line' is certainly important, but it is not on the same level as social impact. Social entrepreneurs have only one ultimate bottom line by which to measure their success. It is their intended social impact, whether that is housing for the homeless, a cleaner environment, improved access to health care, more effective education, reduced poverty, protection of abused children, deeper appreciation of the arts, or some other social improvement."
What Dees was saying, and what I support, is that financial sustainability is a critically important means to the ultimate end of creating a social impact, of improving the wellbeing of the community and broader world. A perhaps more pragmatic view that nonetheless keeps things in proper perspective, is from Peter Brinckerhoff, which I would paraphrase as, "Mission before money. But, no money, no mission." So, yes, financial sustainability and positive cash flow are essential, but only as a means to support the real mission of the enterprise.
My concern with "blended rate of return" is similar, in that in that it opens the door to any blend of financial and social return being acceptable for a social enterprise. And this, in turn, would suggest that they're really of equal importance, when financial plays an essential but supporting role to social impact in a social enterprise.
Whether you completely buy my premise or not, I think you'll agree that social impact is a critical consideration for social enterprise leaders and managers. Yet it often is not supported by the clear measurement framework that financial performance benefits from. As the saying goes, you get what you measure. So, in the absence of a clear evaluation framework, social impact can end up playing second fiddle to financial sustainability. What is needed is a simple yet effective tool to define and measure social impact. Enter the "Impact Model".
Inspired by Jason Saul's "Success Equation", the Impact Model is a simple, one-page tool that anyone can use to clarify and confirm the impact that their social enterprise, nonprofit program, or initiative will make. It has at least two critical uses:
Internal planning and alignment - As an internal planning tool, the impact model can help a team to literally get (and stay) on the same page regarding the most important aspects of their shared initiative. Teams will often put an enlarged printout of their success equation on a wall in their workspace, to provide a ready reference-- “This is why we’re doing what we’re doing!”.
Engaging stakeholders - Whether enlisting the board of directors, senior staff, or any of a number of external stakeholders (funders, community partners, the media, elected officials, et al.), the impact model can be an invaluable tool for simply and clearly conveying the initiative’s value to the community.
For a detailed description and step-by-step instructions on how to create your own impact model, download my free article here. With this tool and the discussion it will trigger, you and your team will gain much greater clarity about both what you're actually trying to do and how, specifically, you're going to measure it.
As always, feel free to leave a comment below, or if you need help, contact me directly at firstname.lastname@example.org