Historically, we have seen businesses and investors focusing on financial value creation while governments and the not-for-profit sector deal with the social and environmental impacts, or market externalities. In the emerging economic environment, there is a realignment of resources to support the co-creation of financial and nonfinancial value by organizations.
Businesses and commercial organizations, in particular, have improved the art of performance management in pursuit of the principle of profit maximization. But, in the past few decades, this limited perspective of “value recognition” has been challenged by a growing number of purpose-led organizations that have begun to take notice of a growing body of evidence that supports integrating intangible value, expressed through alternative nonfinancial valuation techniques, performance measurement models and reporting frameworks. These pioneering organizations, led by disruptors, are reaching a tipping point in making outcomes measurement a mainstream management consideration.
At a fundamental level, the term “outcomes measurement” refers to the measurement of the difference that an initiative, program or organization makes to its stakeholders. It provides evidence on whether initiatives and programs are making a difference, and shows organizations what works and what doesn’t work.
How outcomes measurement is currently used
The rise in interest in outcomes measurement has been consistent across organization types including businesses, not-for-profits, donors and development aid agencies, a wide spectrum of investors, government and social enterprises, to name a few.
The growing language around “purpose” and “shared value” and the convergence of global reporting standards and frameworks supporting organizations as they evolve from one-dimensional financial reporting to include other forms of capital and value, are significant trends driving the uptake of outcomes measurement.
In addition to the need for organizations to be accountable for their outcomes and impacts, recent versatile and bespoke models are gaining ground and are steadily fueled by their use as a basis to value a previously unvalued set of organizational assets. These values can be used to design and monetize innovative investment models. The combination of the convergence of new organization models and purpose-led agendas, the maturity of outcomes measurement and the attention of capital markets demanding a wider definition of capital performance calls for a market approach augmented by an outcomes focus.
Community-sector organizations and their funders have a growing interest in outcomes measurement. This is leading to more of them implementing systematic outcomes measurement frameworks for their organizations and their funding programs. They are also beginning to use the outputs from outcomes measurement to inform strategy development and performance improvement.
For decades, the international development community has used the principles of outcomes measurement to inform program design, delivery and evaluation. Similarly, governments have increased their reliance on the outcomes approach to evaluate investments in public spending to ensure greater transparency and returns are achieved.
The biggest shift in the users of outcomes measurement has been in the business community. Capital-market-driven, for-profit enterprises, both large and small, have begun to use the outcomes evaluation techniques and leverage a richer, deeper analysis of value drivers to support better decision-making.