If you consider your startup as a social FinTech, or social enterprise in general, then creating a positive impact is at the heart of the company’s mission. What are the benefits of identifying specific aspects of the positive impact that your social enterprise can have? You can understand the characteristics of your social impact more in-depth. Furthermore, you can create metrics to measure them, then create objectives in order to improve each aspect of the company’s overall impact.
The 3 main social impact metrics
There are three main types of social impact metrics, those that measure: output, outcome and impact. We’ll explain the differences below.
Outputs are the tangible goods and services that the company creates. These can typically be measured by the number of people effected or the amount of something saved. The output is seen as the first layer of social impact. This is because it is not clear to what extent the positive change has been made. An example could be the number of students that are using a financial literacy app which aims to reduce student debt. Although 100,000 students may be using the app, it is unclear as to whether the app has actually created a positive outcome or impact on their lives.
Outcomes are the learnings and transformations that have come as a result of the company’s intervention. Therefore, for our financial literacy app example, an outcome could be that 60% of students have opened and are using a savings account. However, what will be the lasting impact which these learnings will create?
Impacts are considered as the longer-term, far-reaching effects which the startup’s product/service has had on the customers’ lives. An example could be that a year after downloading the app, 40% of students are still actively using the methods and features taught and offered by the app. Resulting in 30% of them having less debt than other students (in a similar financial situation who didn’t download the app).
Benefits of using impact metrics
In order to realize the benefits of measuring impact, we will look at this from 3 different perspectives: investors, customers and employees.
Measuring impact is also a big plus for investors. There has been an exponential rise in interest for “Impact Investments”. The total AUM for the Impact Investment sector hit an impressive high of $715 billion in 2020, according to Global Impact Investing Network (GIIN). This total AUM has been more than doubling each year (130% CAGR) since 2015. Investors believe that measuring impact is crucial for a social enterprise looking for investment. This is because investors can truly see, in a quantitative way, what positive impact their money is creating. By clearly displaying a social enterprises impact using metrics, it is easier for investment managers to get the green light, in addition to selling the opportunity to other investors. If you’re curious to find out more from the investors perspective, then check out this previous article about Impact Investment.
By viewing impact metrics with a marketing perspective, it is noted that customers understand the company’s aims more easily. Communicating your work effectively builds engagement with clients. Furthermore, using empirical data as evidence of your social FinTech’s positive impact gives the narrative more credibility. Although testimonials are a great way of getting this message across, social impact metrics are clearer, more credible and get straight to the point.
Employees have also shown to become more motivated when they can directly see what impact their work is having. For example, seeing an increase in customers’ “quality of life” – proven by surveys sent to clients – can motivate employees. Or knowing that there are 100 more ‘microentrepreneurs’ in a rural area. Of which 75% of them state they are now more financially stable, thanks to your social FinTech. This would motivate employees at a higher level, in comparison to solely assuming their work is having a positive effect.
If you’re a social FinTech, or a social enterprise in general that is looking for some examples of metrics to implement, then you should check out IRIS+. IRIS+ was launched by GIIN, which is a non-profit that has the aim of catalyzing the impact investment segment. “Impact investors” and social enterprises consider the IRIS+ list of metrics as the universal standard.