More and more charities are mapping their theories of change, and for good reason. Whether you’re looking to plan a programme, review strategy or measure impact, having a clear understanding of the change you want to make and the steps involved in making this happen is a vital first step.

So it’s good to see more funders encouraging the charities they work with to develop theories of change—to help them select the most promising interventions to fund, and ensure the grantees they do support have coherent plans for achieving and measuring impact.

But its potential doesn’t stop there. Funders can also use theory of change to help plan, review and evaluate their own work. Some, including the Nationwide Foundation and LankellyChase Foundation, are already using it to guide their funding approach. At NPC we hope 2014 sees many more funders do the same. Here’s why:

1) Strategy

By carefully thinking through each step required to achieve your goal (rather than specific activities you assume you should fund), theory of change will help you challenge assumptions in your thinking and consider the best way to use your resources. Take the Global Polio Eradication Initiative, for example. Directly funding polio vaccinations is an obvious option, but not the best or most realistic way to permanently eradicate polio. By really thinking through what was needed to achieve its goal, the initiative recognised that the US$1 billion annual cost of providing vaccinations globally was not only unaffordable but completely unsustainable. Instead, it’s made huge progress by campaigning to address underlying cultural, behavioural and structural issues, including persuading national governments to take action.

So, whether planning a new programme or reviewing existing strategy, theory of change can help a funder to think to more strategically and creatively about how to make a difference—how to address an issue, the type of support to provide, and where your responsibility starts and ends. You can’t do everything, so identifying how to effectively work with partners is key.

2) Communication

Theory of change is a useful communication tool—it can provide a clear narrative for the rationale behind how and what you fund links to your goals. This provides important guidance for organisations seeking funding to understand if and how their work fits with your mission. And it’s a helpful framework for you to use internally to assess which organisations to support.

3) Learning & evaluation

Understanding the difference your funding makes can be challenging, and theory of change can guide you here too. Firstly it can help you to prioritise what to measure. By measuring what’s really important to your mission and nothing more, you can ensure that the information you ask for from grantees is meaningful. And if you only gather useful data, then it’s easier to assess whether the support you’re providing is having maximum impact. Secondly, once you’ve gathered data on your priority outcomes, your theory of change can help you communicate evidence of your impact against your mission in a structured way.

For more information about theory of change and its uses, see our introductory guide. We’re currently developing an accompanying paper on theory of change for funders, so please get in touch if you’d like to contribute your thoughts and experiences.