Guest Blog Post written by Francisco Preusche during TBLI CONFERENCE™ LATIN AMERICA 2015. Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE™.
“Things that are not measured just don’t happen”.
Regardless of what kind of impact initiative you are working on, whether it is an ESG improvement project, a social enterprise start-up, or any other initiative related to improving a social and/or environmental situation, metrics are essential.
The question is: should we have a unique standardized approach for such projects?
In order to analyze this question, allow me to divide the existing and future impact projects into two categories: start-ups, and mature businesses. Even though in both categories we can find very different industries, and business models, there is one thing that binds each group together:
- Aside from its difficulty, in a mature business, we can usually quantify externalities, and then understand the cost of internalizing them in order to be able to put a financial value to each metric. Why do I say this is possible? Because the business model is already working, its externalities are already there, and alternative business models against which to do a benchmark usually exist.
- On the other hand, though start-ups usually have a business plan, this plan almost never becomes a reality due to the fact that either the context changes or the entrepreneur understands new barriers or better ways to achieve his goal. So defining the project’s externalities is something quite sensible to do (you don’t want to neither overpromise, nor to underestimate), because you don’t know yet if you are going to really follow the path drawn by your business model, and even less you don’t know the surrounding society and/or environment is going to react.
Having made this differentiation, I wanted to share a couple of thoughts/recommendations and questions for each category that stayed in my mind after this wonderful panel I attended:
- When communicating a business’ impact, metrics should be consistent on whether they reflect a relative or absolute value. Why? Simple. If not consistent we could relativize a positive metric in order to make it look huge, while showing the absolute value of a negative one that seems small, but that could be the worst value when benchmarked, or vice versa.
- The metrics should include the big picture in every sense, otherwise we could mistake positive with negative impact. How?
Well, a possible mistake could be that a company develops a local service provider, but what would be the real sign of that impact if for every new job created in the local community, two jobs were lost on the neighboring community? Metrics should avoid making this historical mistake the result is actually in a joblessness transfer, not in a genuine job creation.
- Questions & related beliefs:
- Should there be one unified standard for mature businesses?
I don’t believe there should be, especially when comparing two companies in different industries (i.e. extractive and consumer goods). I personally think that if there is a unified standard, we will be comparing oranges with apples.
- Will a standardized adoption improve the current situation?
I think it is necessary, but not sufficient. If not done, then how can we improve what’s not measured I believe that even if some auditing system were set in place, real improvement wouldn’t be an obvious outcome. I think creating such a structure will move us one step further to where we need to go, but the rest of this journey will depend on global consciousness and commitment.
- In my prior job in operations consulting & implementation) we had, as the “first amendment”, enough analysis to make a decision. We were not paid for nice colorful analysis; our job was to get results, to improve the base line. So once a problem was identified, and the possible solutions assessed from a relative perspective among them, risks contemplated, and simple but effective metrics put in place, then we simply engaged. Whether that impact was going to give a 10 or 12 extra units per day didn’t matter at the starting point. The only thing that mattered was that genuine improvement was on its way
- Developing new metrics is like learning a new language – you first learn the basics in order to make sure that you understand others, and that they understand you, once you are there, you start a refining process.
- Questions & related beliefs:
- Do all the so called Impact investors truly understand our place in this industry?
Sometimes, when talking to Social entrepreneurs, I get the feeling that not all Impact Investors do. Please comment below if you do not agree, but I understand that, except for some particular projects, almost everything is yet to be discovered, and therefore what the industry needs is belief from the investors’ side. They should understand that, due to the fact that we are talking about innovation, we can’t be certain how a project’s surrounding context is going to react. Please, do not miss interpret this either. I am not saying close your eyes and give your money away to the entrepreneur, I am just suggesting that investors also assess when the analysis done is enough to make a decision.
As a final global thought on the subject I wanted to say that metrics are:
- Intended to be at service of the project/company not the other way around (is the project about measuring, or is measuring a tool)
- Easily misleading when not consistent (relative vs absolute values)
- Essential for improvement to be achieved (how can we navigate without tools? – “Things that are not measured just don’t happen”)
To view more photos from TBLI CONFERENCE™ LATIN AMERICA 2015 please click here.