‘No man ought to look a gift horse in the mouth’. The wisdom of John Heywood’s 16th century proverb resonates for many charities today. Our research published last year, Making an Impact, found that 75% of charities measure some or all of their work – but more than half said that funder requirements were the primary motivation behind it.

On the other side of the chequebook, comparatively little is known about the impact measurement practices of funders themselves. We know from our work with the Inspiring Impact programme that impact is definitely on the agenda—but how many funders are proactive in discussing measurement with their grantees, and are they developing ways of measuring their own impact? To put it another way: do gift horses own mirrors?

NPC—in partnership with the London Benchmarking Group (LBG)—has filled this gap in knowledge with a new report, Funding Impact.  Funded by the Baring Foundation, City Bridge Trust,  LBG, Northern Rock Foundation and Trust for London, the research is built on in-depth interviews and a survey of grant-makers and corporate funders.

The findings are comforting in lots of ways. Firstly, funders care about impact: 88% think that impact measurement makes charities more effective and 89% believe it makes funders more effective too. The direction of travel is also clear: 73% say their focus on impact measurement has increased over the past five years, and 72% say they expect to increase their efforts over the next three years. This is especially true of corporate givers, who are the most positive of all our respondents.

Although funders’ appetite for impact measurement is growing, it’s not always matched by what they’re able to achieve in practice. The biggest challenges identified by funders when trying to understand both their grantees’ and their own impact is the capacity (65%) and knowledge (67%) of charities. And there’s an imbalance: only a quarter of funders told us that they do not provide funding for impact measurement, whereas nearly two thirds of charities in Making an Impact (64%) said the same. More investment in the capacity of grantees, and better guidance and tools to support funders with the task, would help enormously here.

We also found that funders could use the evidence they collect more in their work. Few funders are not using the data they collect at all, but less than half of funders are using the data for key elements such as selecting grantees (38%) or compiling programme-wide results (42%), so there is an opportunity for better and wider application of this data.

In order for this increase in activity to generate really useful information, we’ll need impact measurement approaches for different types of funders. And so the report identifies three types of funding—responsive, targeted and goal-oriented—and recommends tailored approaches for each.

Practice is evolving all the time and many funders are only at the start of their impact journey. This new report will help individual funders begin to understand the difference they make, and keep the topic on the agenda for the sector as a whole. As John Heywood also said—Rome wasn’t built in a day.

The full Funder Impact report is available to download here. If you’d like to talk more about how NPC plans to take this forward, please get in touch.