Our thinking on theory of change: for funders

Earlier this year I blogged about the benefits of theory of change for funders—for developing strategy, communicating how and what you fund, and supporting learning and evaluation. Today I am glad to say we have published Planning to make a difference, which sets out how funders can go about realising these benefits.

I should warn you that, as a funder, developing a theory of change can be a tough task—even more so than for charities. A theory of change helps you to articulate the assumptions that underpin your approach. A charity typically works towards a particular goal for a certain beneficiary group; its theory of change sets out all the outcomes and activities required to achieve that goal. Funders tend to have a wider remit—they often fund multiple organisations and projects to deliver different services to different beneficiary groups, and because they achieve their mission through intermediaries, they are one step further removed from the end social impact. Altogether, this means a lot of assumptions.

In this context, mapping out and questioning the logic of what and how you fund may seem a daunting prospect, but there are big potential pay offs. What your theory of change looks like really depends on what kind of funder you are. As a starting point, consider:

• Focus: how much do you focus on a specific goal? The more focused your strategy is (either as a funder overall, or at a programme level), the more theory of change can be useful in articulating what changes need to happen to achieve your intended social impact. For example, if you fund youth sports projects to develop young people’s employability skills, your theory of change would map out the intermediate outcomes (such as improved team work and confidence) you think it can bring about to help young people find work. This kind of theory of change allows you to identify what projects to fund to help achieve your goal, and means potential applicants can see if they fit with your strategy.

• Engagement: how engaged are you with the goal you aim to achieve? In addition to grants for project delivery, do you support organisation development, fund research, or campaign about the social issue directly? The broader the range of support you provide, the more theory of change is helpful in articulating assumptions about why these other aspects help you achieve your goal. You may have a broad aim, like reducing poverty, but have a clear strategy for how you achieve this within your area of benefit—for example, you use your trustees’ local knowledge to identify funding priorities, provide core funding to help organisations through times of crisis, and use the intelligence you get from these crisis grants to help you develop more preventative funding programmes and influence other funders. In this case, your theory of change can map out how different elements of your work link together.

If you’re a highly focused and engaged funder, your theory of change can encompass both these aspects. At the other extreme, if you have a very broad aim and only provide grants for project delivery, we’d encourage you to think about tightening up your strategy so you’re able to set out more clearly what you want to achieve and why you think your approach is the best way to go about it.