What does ‘managing to outcomes’ mean and why are small and large organisations alike embarking on this journey?

A few years ago, we were meeting with the CEO and a Board member of an Australian non-profit organisation. We were sharing the results of their Social Return on Investment evaluation, which looked back at the prior three years of operations. The results showed that the program had not delivered the impact expected, and offered some surprising insights as to why that was the case. The CEO left the meeting clearly shocked and disappointed to discover that the areas of focus of the organisation were not necessarily the areas valued by their clients.

… we are seeing an increasing focus on measuring the things that matter most — the outcomes of investments and activities that create social change.

Given the dedication and sheer hard work of everyone involved, at the time the results seemed devastating. However a lot of good came from them. The meeting was a catalyst for a rethink of their ‘theory of change’ and changes in some of their programs, It was also a prompt for the organisation to start more effectively ‘managing to outcomes’. As the CEO said to us later, “I did not want to wait another three years to find out that we are not making a difference in the ways we thought we could.”

The results since then have been notable as the organisation has expanded its work and impact.

This story is part of a broader trend in the social sector where we are seeing an increasing focus on measuring the things that matter most — the outcomes of investments and activities that create social change. But measuring is only one half of the story. Real change comes through building a culture in both service delivery organisations and funders that understands how to use this data to manage to outcomes.

Managing to outcomes

Simply put, managing to outcomes means defining organisational goals, rigorously measuring performance against those goals, and then continuously managing the organisation in line with those goals and measures. It means that organisations have the right information to respond and make better decisions to improve program design and delivery in a timely manner.

… they are not always succeeding because their focus is misplaced.

The term and practice of ‘managing to outcomes’ was comprehensively described in Mario Morino’s monograph Leap of Reason: Managing to Outcomes in an Era of Scarcity. Morino, co-founder of Venture Philanthropy Partners, one of the oldest venture philanthropy funds in America, argues that both non-profit organisations and funders must focus on actively pursuing ‘meaningful, measurable good’ for the clients and communities they serve. Of course, this is exactly what nearly every organisation would argue they are doing, but Morino believes that they are not always succeeding because their focus is misplaced.

Why bother managing to outcomes?

Morino argues that there are five key reasons why non-profit organisations and funders must manage towards outcomes:

1. To sustain or grow funding: Funders are increasingly shifting away from organisations with heart-warming stories towards those that can demonstrate meaningful and lasting impact. Shifts in how government is procuring social services as well as growth in impact investing – an emerging market which requires proof that capital is delivering social and economic outcomes – are signs of the new times to come.
2. To improve the lives of their beneficiaries: By focusing on managing to outcomes, an organisation is much more likely to be effective in achieving its mission.
3. To find new ways of addressing challenging problems: By building knowledge about what works and why, non-profit organisations and funders will be able to develop stronger solutions for the problems they are working to address.
4. To stay competitive and relevant: With increasing transparency within the sector, funders and consumers can start to compare and contrast the services offered by various providers. This in turn increases pressure on all social impact organisations to demonstrate the impact of their programs.
5. Partnerships for big societal impact: organisations need to work together to effect systems change and therefore need to be managing collectively to outcomes.

What is the philosophy behind managing to outcomes?

Managing to outcomes requires an organisation to be very clear about what it seeks to accomplish and how it will measure its progress, and to then use that information to systematically guide organisational decisions. The key part of Morino’s argument is that in order to manage to outcomes effectively, a shift in organisational culture is required. That is, a move away from merely focusing on numbers or technology.

Managing to outcomes is underpinned by five principles:

1. Hear the constituent voice: Individuals and communities served by the program should be involved in the design and implementation of the organisational assessment efforts to ensure that organisation is measuring things that are relevant and valuable to them.
2. Assess to learn and do: Information collected should serve as a guide to future actions.
3. Apply rigour within reason: Overly rigorous assessments result in misallocation of resources. Open dialogues should exist between non-profit organisations and their funders to determine a suitable level of rigour – a level that matches the program’s strategic and evaluation objectives.
4. Be practical – there is no need to do everything: Measurement should be focused on a carefully crafted set of questions and should not overburden the organisations.
5. Create a learning culture: Measurement for measurement sake does not drive impact. A learning culture must exist across the organisation, and must value honest appraisal, open dissent and constructive feedback. Such culture promotes both insight and impact.

SVA has seen how these principles can be applied through supporting New Zealand organisation Te Whānau O Waipareira. Their journey towards managing to outcomes demonstrates the importance of developing a learning culture and is described in the SVA Quarterly article How culture grows effective outcomes.

 A framework for managing to outcomes

To help organisations ‘make a leap’ to managing to outcomes, Morino developed a framework. This framework brings together decades of practical experience from experts across private, government and not-for-profit sectors and is as relevant for small organisations through to large partnerships.

SVA Consulting has adapted and used this framework with great success with many of its clients to diagnose organisational readiness for managing to outcomes and to inform strategic planning. See Figure 1.^[1]

Phase 1. Triggers

To successfully implement a managing to outcomes practice, the organisation has to have in place an engaged Board, leadership with conviction and a supportive performance culture. This means that the Board must develop a deep understanding of the organisation, who or what the organisation supports and the outcomes it aims to achieve. The Board should also keep the executive accountable to delivering on these outcomes.

… the management and staff need to believe in the value of data and have skills to use it to improve results.

A strong and visionary leader is essential to herald change in mindset and behaviours required of most non-profit organisations or funders to transition to managing to outcomes. This kind of leader is not afraid to challenge a status quo and is willing to overhaul the old way of working.

Lastly, the management and staff need to believe in the value of data and have skills to use it to improve results. This kind of performance culture requires an ongoing investment into the learning and development of staff.

Te Whānau O Waipareira is an example of an organisation where the Board, CEO and leadership team are leading the cultural change required; they recognise that this will be disruptive to their staff and the sector, and they have committed to this over the long term.

Phase 2. The why and what

The next step is to clarify the organisation’s purpose. This means being explicit on why the organisation exists, what it does, who it supports and what impact it wants to have, i.e. develop a clear and compelling organisational logic model.

To complete the logic model, the outcomes for the intended beneficiaries through each of the program and/or service the organisation offers must be clearly articulated. SVA uses the ‘Golden Thread’ methodology to identify and prioritise outcomes to develop compelling logic models.

Phase 3. Measurement and data use

In order for organisations to manage to outcomes, they need to collect the right data and use it to make decisions. The next step in the process is to agree on how progress towards each outcome will be assessed. This process will identify a set of indicators that will provide data about progress. The selected indicators should have a clear linkage to the desired outcomes, be validated and practical. If the information collected does not help guide decision-making or inform service delivery, the indicators may need to be reviewed.

 … just identifying what to collect, does not mean that staff will collect and use that information effectively.

However, just identifying what to collect, does not mean that staff will collect and use that information effectively. Starting small, and then promoting and rewarding the use of data, are some of the ways to ensure the culture of data-driven decision-making permeates across the organisation.

YMCA Victoria is successfully implementing this across a selection of its programs. They are also using technology for the collection and analysis of data. The right technology is not a panacea for managing to outcomes, but it will support better and more timely decision making based on evidence. For more information about how YMCA Victoria have done this, see Look before you leap into buying outcomes measurement software.

Phase 4. Managing to outcomes practice

Successful execution of the first three phases will help build the right performance management mindset and systems within an organisation. This in turn will help deliver better results through a disciplined tracking of performance against outcomes, appropriate evaluation and informed decision-making.

This requires investment into infrastructure and people. Data collection, storage and reporting capabilities are essential, as is ongoing training of staff. However, the ultimate success of this endeavour is dependent on the leaders and the staff of the organisation bringing data to life, as part of their ambition to drive continuous improvement.

We are all learning

Managing to outcomes is not an end in itself: it is a way of thinking and doing that should permeate an organisation’s culture. The managing to outcomes framework is a useful guide to create and support the foundations and philosophy of any organisation to make better decisions using data.

As Morino highlights in his book the great benefit of managing to outcomes is that it gives organisations powerful new tools for learning over time, making better informed decisions, and becoming more effective at what they are so passionate about doing.

This is an emerging practice. Whether you’re an investor or a service delivery organisation, we’re interested in hearing about your successes and challenges in how you are managing to outcomes. If you have any questions, please contact Simon Faivel on sfaivel@socialventures.com.au

Endnote

[1] Adapted from, M. Morino, Leap of Reason: Managing to Outcomes in an Era of Scarcity, 2011.