Impact measurement for flexible funding

What is impact measurement for flexible funding?

The increase in more flexible and trust-based forms of grant-making are welcome shifts that we at NPC have long been calling for. However, whilst much progress has been made on the first half of the grant-making cycle – the making and managing of grants – we need to give equal attention to the second half of the cycle: impact measurement and learning. New approaches to one will require new approaches to the other.

For most funders, impact measurement is one of the feedback loops that drives grant-making decisions, so we can’t rethink grant-making without rethinking the way we measure impact and learn from our grants.

To help the sector navigate this new terrain, we need better frameworks, tools and resources for impact measurement in an age of flexible funding.

Why flexible funding still needs impact measurement

We spoke to many people who felt that, in the rush towards greater flexibility during the pandemic, measuring and understanding impact had, perhaps understandably, taken a back seat. In this rebuilding period, funders need to establish what this flexible funding paradigm means for how they understand their impact.

Being attentive to the impact we’re having is arguably more important than ever when we’re working in new ways, so that we can understand whether these new ways are leading to better outcomes for those whose lives we are seeking to positively impact. Impact measurement is a tool to aid better decision-making. If overlooked, the virtuous cycle between decisions, information and learning could be broken.

Furthermore, not knowing what good impact measurement looks like for trust-based/flexible funding may discourage more funders from adopting this flexible approach. Alleviating this concern could be the best way of preventing the ‘ping back’ to the less flexible pre-Covid era.

What are the challenges?

In some parts of the sector, we are seeing a swing away from impact measurement, with some funders that are adopting trust-based approaches asking for minimal information on outcomes and resistant to even talk about impact measurement.

Swinging too far risks funders losing sight of the impact of their grants (or lack of it), which makes it harder to know how best to deploy future funds. This could lead to beneficiaries not getting the help they need, or even being harmed by well-meaning but counter-productive activity.

Finding the right balance between flexibility and rigour is challenging, but we believe that rethinking impact measurement alongside rethinking grant-making is critical for ensuring that funders continue to learn from and develop their practice. Ultimately, this will help more flexible and trust-based approaches become mainstream.

What we’ll do next

We want to work with funders and charities to review impact measurement tools and frameworks to achieve this balance. We’ll do this by convening a diverse group of funders and charities at different points on the ‘flexible funding’ journey, to work through practical implications of trust and flexibility for how impact is measured and understood. By involving both funders and charities in the conversation, we can ensure that new approaches work for the whole system.

We’ll be asking:

• How can charities develop impact measurement approaches that can meet a range of funders’ needs as well as their own?
• How can funders keep demands on grantees light and proportional whilst accessing the information they need to understand the impact of their resources?
• Are different approaches needed for types or sizes of grants, or for charities in different sectors?

We will be convening conversations with funders and charities to identify concrete steps and approaches to understand impact without compromising flexibility.

We recognise the need for measurement to be proportional, and that there will be no one-size-fits-all approach, so the outputs are likely to include a range of options to meet different funder needs.

How this idea was developed

Our idea for new ways of measuring the impact of flexible funding is based on conversations, workshops and research with numerous charities and funders who have taken part in our Rethink Rebuild initiative. Here’s what we’ve learnt from this work.

How grant-making is changing

Within the social sector, the systems and cultures around grant-making have been one of the most significant shifts brought about by the pandemic. Our research, workshops and conversations with both funders and grantees have highlighted the significant changes underway in grant-making.

Flexibility: The pandemic emphasised the importance of charities having autonomy and flexibility to use their resources to respond to changing needs as the situation requires. Although accentuated in times of crisis, uncertainty is always a facet of working with complex problems. Therefore, giving charities the agency to respond flexibly to changing circumstances should always be a principle of grant-making. So far, at least 70 funders and charities have signed up to the Flexible Funders initiative which sets out eight principles for adopting more open, trusting, and flexible funding practices. The movement is mirrored in the US through the Trust Based Philanthropy movement.

Shifting power through participation: The murder of George Floyd greatly accelerated the debate about the shortcomings of the sector in addressing racial injustice, something which has been the focus of the #charitysowhite movement for some time. One response has been a growth in more participatory grant-making approaches that directly involve minoritized groups and communities when allocating resources. We have previously profiled the Baobab Foundation’s ambitious and potentially ground-breaking model for this, which is seeking to recruit over 1,000 ethnic minority member organisations from across Britain to make funding decisions and set the direction for the foundation.

Opening up: During the crisis, grantees were pleased to report that funders had increased and improved their communication by having more honest conversations about grantee needs, as well as soliciting and acting on feedback. Many took important steps to be more transparent about their opportunities, limitations, processes and decisions, something grantees had long been asking for. Openness is vital to rebalancing traditional power structures, and we have set out a vision for Open Philanthropy on our NPC Labs site.

Grant-making has sped up and been streamlined: At least in the initial phases of the pandemic, funders made decisions more quickly and reduced the burden of application and reporting requirements on their grantees. This was arguably easier while the pandemic was still in the initial ‘crisis’ phase, and it remains to be seen whether this will become a more permanent change.

Grant-making in collaboration: There was already a movement towards greater collaboration in grant-making. For example, London Funders was already well established, and LocalMotion is a good example of funders collaborating within a specific place. Two notable initiatives from the past 18 months illustrate a further shift in this direction:

• The London Community Response brought together 67 funders, offering charities a single application form. Participating funders decided which charities to support and shared their decisions with the rest of the group. This offers a promising template for continued joined-up grant-making processes.
• ACF’s Funders Collaborative Hub offers great potential for funders to streamline effort, expand networks, reduce duplication, learn from one another, and ultimately increase the impact of their funding.

The shift towards more flexible and trust-based approaches is very welcome, but impact measurement is still a crucial part of the effective grant-making cycle.

Our Rethinking grant-making work will focus on how charities and funders could adapt their impact measurement to give flexibility to grantees while still having access to the data they need to target funding to the people and places who need it most.

We need to strike the right balance between flexibility and rigour.