Factors in Organizational Failure to Measure Impact

The implementation of impact measurement and reporting has yet to have a regulatory umbrella. The reason is that this condition is used by individuals to unilaterally recognize a company or organization that is able to have an impact without objectively measurable evidence. This mistake can indirectly provoke other organizations that are fomo (fear of missing out) to the trend of impact and sustainability. Instead of compiling impact reports in a measurable and tested manner by third parties, these conditions can actually become evidence to overthrow the company due to greenwashing activities.

Quoting from Vox, he emphasized that the marketing strategy carried out by TOM Shoes is clearly only concerned with profit – not really solving the problem. TOM Shoes, a shoe company that implements a marketing strategy through a “buy one for one” offer under the pretext that every purchase of one shoe will provide one shoe for poor children. This issue immediately drew harsh criticism from various parties who considered TOM Shoes to simplify poverty through giving shoes. Whereas if examined further, poverty is a systemic problem, so that to produce solutions that are able to provide long-term benefits, it is necessary to analyze various considerations of solutions with related parties.

Read also: Philanthropy: An Alleged Shortcut for CSR to Complete the Task

TOM Shoes’ failure to identify the problem showed negative consequences, not only for the company, but the beneficiaries and the community as a whole. However, TOM Shoes is just one case of misusing impact claims. Various misconceptions that often occur in the process of measuring and reporting impact by companies and organizations include the following:

• Failing to Determine Impact Indicators

Indicators that are not relevant to the company will only lead to failure in measuring impact. Because this will never lead the company to the objectives it wants to achieve. For example, a company that measures the success of a training program through the participation rate without taking into account the improvement of the participants’ skills will only be a ceremonial activity. As a result, even though the participation rate is high, the impact of the program cannot be ascertained. This is the case with many companies that ignore the validity of impact measurement, thus making their programs fail to achieve their goals.

• Overclaiming Impact

Overclaiming occurs when organizations exaggeratedly claim that their programs have achieved great impact, even though the impact may not actually be felt by participants or beneficiaries. This is the case with TOM Shoes, which held a promotion where the purchase of one shoe equals a donation that claimed to overcome poverty. In fact, not having shoes is only a speck of the problems that occur in poor communities, so the promotional program does not have a significant impact on solving poverty structurally.

• Data Inconsistency

Further investigation revealed that the data used in company/organization impact reports is often inconsistent. Data collected using different methods in different regions can lead to inaccurate conclusions. These data inaccuracies can lead organizations to make the wrong decisions, which in turn lowers the value of the program’s effectiveness in the future. To avoid this, it is important for companies and organizations to ensure that data is collected with consistent methods across regions and programs, and to use standardized analytical tools to maintain data validity and reliability.

• Non-transparent Reporting

The next misconception is that impact reports published by companies and organizations lack transparency. Transparency in impact reporting is crucial, as when an organization does not provide complete information on the data collection methods and analysis used, it can raise suspicion among stakeholders. This lack of transparency can damage an organization’s reputation and make the public question the validity of the impact claims made. Transparent information includes data collection methods, analysis, and parties involved in the preparation of the report such as the author and researcher.

• Misinterpretation of Impact Results

Misinterpretation of impact results often occurs when organizations attribute positive outcomes to their programs without sufficiently in-depth analysis. For example, an organization claims success because there was an increase in sales of local products after a small business development program was implemented. However, an in-depth and comprehensive analysis is needed to assess the increase in sales of local products.

Moreover, this kind of misinterpretation can lead to a series of organizational losses, ranging from errors in assessing the effectiveness of the program, to errors in decision-making on next steps. It can also lead to over-investment in programs that are not fully effective or neglect of the need to improve existing strategies.

The consequences of being transparent in presenting data in impact reports can increase the credibility of companies and organizations, as long as the indicators compiled are relevant, can ensure consistency in data collection, and transparency in reporting impact results.

The fundamental requirement for success in impact reporting starts with the willingness of companies and organizations to ensure accurate impact measurement results. The consequence of being transparent in presenting data in impact reports can increase the credibility of companies and organizations, as long as the indicators compiled are relevant, can ensure consistency in data collection, and transparency in reporting impact results.

Increase your insight and build strategic steps in measuring impact through Impact Academy Class. This class will support your learning process in preparing impact reports through impact measurement using Social Return of Investment.

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