In conjunction with the Social Capital Conference held this week in San Francisco, I’ve been reviewing the industry’s latest and most comprehensive attempt to quantify the “value” or impact of social enterprises. The IRIS Standards were developed through collaboration between Acumen Fund, the Rockefeller Foundation, Google.org, the Salesforce.com Foundation, and other highly respected “Impact Investors.”
On the first day of the conference, everyone from Sonal Shah, leader of the White House Office of Social Innovation (yes, things have changed in Washington!), to Willie Foote of Root Capital, cited the emerging IRIS Standards as an important step towards accountability, transparency and visibility in social enterprise that will give individuals and organizations the ability to compare projects within and across sectors to identify what really works.
Consisting of 200 distinct measures plus an additional 152 “submetrics,” the IRIS Standards provide a comprehensive list of qualitative and quantitative metrics across six broad sectors of social enterprise – Energy & Environment, Education, Healthcare, Agriculture, Microfinance and Community Development. There’s only one problem. Despite all this complexity, the IRIS metrics fail to define social value or capture the essence of what it means to “impact” an individual’s life. Let me explain by way of example.
In 2004 I supported a couple of students from Stanford and UC Berkeley in a project looking at the core issues of poverty in the United States when more than 12% of the population has been below the poverty level since 1960. In conjunction with the Annie E Casey Foundation, these students interviewed a wide range of individuals across the US who were currently living in poverty or had been living in poverty and had made the transition to become self supporting members of society.
The students heard a wide variety of heart wrenching. Single mothers who had been raised in poverty, former rock stars who had achieved great financial success then fallen into the downward spiral of drug addiction, factory workers whose jobs had gone overseas, and many more.
The stories of people who escaped poverty were no different from those still trapped in the downward cycle except for one common thread. Everyone of the “escapees” had had an “AHA” moment where they went from being the one receiving assistance to providing assistance to someone else. In one case, a mother feeding her children with foodstamps started showing other mothers how to shop wisely – buying potatoes and powdered milk instead of chips and soda so that their foodstamps lasted the whole month and their children didn’t go hungry. In another case, a former convict enrolled in yet another job training program started acting as a mentor to students just entering the program.
Whatever the details, the same pattern emerged. When an individual helped someone else, they soon found themselves working their way out of poverty. Sometimes this moment came after years of cycling from one failed job to another or repeated bouts of drug addiction. In other cases, it happened within a few months of finding themselves at the bottom rung of our rugged capitalism.
So what’s the secret? What is it about these success stories that fails to show up in the IRIS metrics? Well, if you’ve ever been in a position to apply for government aid, you know how humbling this can be. Faced with an “AID worker” who represents a seemingly all-powerful government, you are almost forced to prove that you are destitute and have nothing of value to offer in exchange for some food and shelter.
This relationship between Aid worker and beneficiary is often toxic. Despite the best of intentions, the message sent to the recipient of aid is that they have no value. It’s only when they stumble into a situation where they can help another that they find some value within themselves. That kernel of self worth provides a building block upon which they can, with lots of hard work, become a full fledged, productive member of society.
In a pure market exchange, the money paid by the buyer to the sell provides a direct measure of the relative value of a transaction. Aggregating these sales becomes the revenue or “Top Line” for a companies financial balance sheet. In order to calculate impact, we likewise need some notion of the value of an exchange between the provider and a client or beneficiary that can be aggregated into a “top line” of impact. The IRIS Standards do include measures for number of employees, student enrollment, amount of purchases from small producers, and a few other indirect measures of opportunities for individual participation in the economy. However, none of the current measures comes close to tracking the fundamental social concept of helping another.
I agree that the IRIS Standards represent a step forward for the emerging social capital markets, but until we find some way to talk about and aggregate this most basic unit of social capital, the self value that comes from being able to help another, we as individuals and organizations, will likely remain unsatisfied with approaches to “measuring impact.”
