Why funders should take an impact-driven approach to their funding

Harriet Pearce Willis is a consultant at NCVO Charities Evaluation Services. She leads independent evaluations, helps small and large organisations improve their monitoring and evaluation systems, and runs training courses for voluntary organisations and funders.

We are in a time of continued and increasing austerity, and of public and media scrutiny of charities.

To help counter this, we at NCVO Charities Evaluation Services (CES) argue that funders – trusts and foundations, investors and commissioners – should focus on the difference their money makes.

But why should they bother? What can funders gain from understanding more about the outcomes of funded projects and the impact of funded programmes?

We explore funders’ experiences in our new article ‘Why take an impact-driven approach to funding?’, and identify a number of key benefits to funders.

1. Greater clarity about what you want to achieve as a funder

Clarifying the specific changes and benefits you want to bring about for people and communities can help focus your funding programmes. Asking your funding recipients for their views on what you should prioritise can help make sure your strategies are based on what’s most important for beneficiaries.

2. Better targeting of funding

Funders regularly take difficult decisions about where to allocate their money. Having greater clarity about changes you want to see can help you target grants, commissioning or investments to organisations that share your ambitions. Asking those organisations to tell you about outcomes they’ve achieved can help you understand which types of project work best to secure change, and how you might best fund in future.

3. An improved relationship with funded organisations

Funders who support funding recipients to measure their outcomes – via training, and online or verbal guidance – often build strong relationships with them. To help with this, we encourage funders to be proportionate in their requests for information, and to recognise that funding recipients are best placed to identify their outcomes.

4. More powerful communicating and influencing

Collecting outcome data puts funders in a better position to communicate the difference their money is making, which can be particularly helpful for funders with a fundraising remit. Some funders are sharing what they’ve learned to improve sector practice beyond the scope of their funding programmes.

Next steps: tips for funders

1. Use a planning tool

A theory of change model, for example, can help clarify what difference you want your money to make.

2. Get buy-in from staff

Senior staff can help make sure you have a strategic focus on outcomes, while funding officers can equip funding recipients to gather good quality outcome data.

3. Support funded organisations

Providing training, written guidance or consultancy support can help them improve their outcome measurement.

4. Make good use of outcome data from funding recipients

Ask them for information in a format you’ll be able to analyse – do you want numbers, words or both? And make sure that your database or IT system will allow you to extract what you need.

5. Encourage funded groups to share learning

Ask them about what has gone well and not so well. In a competitive funding environment, they may be nervous about this – so you’ll need to help them feel supported.

Just like front-line organisations, funders need to spend their resources wisely. Taking an impact-driven approach can help them ensure their funding achieves the best possible benefits for beneficiaries.

For more suggestions, including case studies of the approaches taken by BBC Children in Need, Comic Relief, National Foundation for Youth Music, Trust for London and the London Borough of Hounslow Council, read our full article.