By Ben Mangan

(This article is adapted from an article by the author on LinkedIn.)

If you ask fifty smart people how to measure social good, I would bet that you’ll hear fifty very different answers. Defining social good is an incredibly complex endeavor that requires a thoughtful approach.
Despite that complexity, I believe there are three clear guidelines to measure social impact at a foundational level.

To be sure, I don’t believe in cut-and-dry, formulaic approaches to solve complex problems.  But you can spark a robust and essential conversation by examining your efforts through three particular lenses: the three E’s – Effectiveness, Efficiency and Equity.

The three E’s will guide you toward solutions that have high impact but are also appropriately priced.

Effectiveness is simply whether what you are doing actually works, and to what degree. Effectiveness may be a clear concept, but the bar for really proving effectiveness is high. Randomized control trials (RCTs) – analogous to the clinical trials for new pharmaceuticals — are the gold standard for proving that your efforts are effective. We do a great deal of this evaluation here at Haas. For some outstanding examples, see these studies by Paul Gertler, David Levine, and the team of Ernesto Dal Bó and Frederico Finan.

If you can’t do RCTs (and most of them are very expensive), you can still gauge your effectiveness by other means, such as by leveraging the proof points established by others doing similar work.

Efficiency is how much it costs to deliver your work. To understand efficiency, you need honest, transparent financials and a way to really price what it costs to deliver your products and services. Many enterprises in the social sector claim ownership for indirect “influence,” but this is notoriously difficult to accurately measure and cost out. Want a simple, eye-opening test of how much it costs you to deliver the products and services you directly provide? Take your entire budget and divide it by the number of people you can truly claim to impact very directly. (This might hurt.)

Equity is a far more normative measure, and it requires an ongoing discussion among leaders and managers about whether the blend of cost and quality is appropriately balanced. Measuring equity also involves benchmarking – how do your contributions to creating value compare in cost and quality to others in your field? Don’t give in to relativism, but do take a hard-headed look at the good you are delivering. One question I don’t hear nearly often enough is whether there’s a cheaper alternative than our own to deliver the outcomes we seek. If there is, why haven’t we pivoted to that alternative?

The dollars used by the social sector to pursue our missions are heavily value-laden and literally reflect the aspirations, priorities and preferences of the institutions and individuals who invest in our efforts. To be a good steward of these “sacred” dollars, we need to bake measurement into culture and strategy. The three E’s are a powerful way to do just this.