March 12, 2018

Measurement Matters: Reflections on Metrics from the Ground Up

Measurement Matters: Reflections on Metrics from the Ground Up

Extending Research Into New Arenas

At FINCA, we have always believed that our clients are the experts at fighting poverty. We see our job as helping them access the tools they need to succeed. This could be a small loan to jump-start a business, or a solar home system to provide clean, reliable energy. We assess our performance by conducting rigorous impact studies that tell us whether our services are really helping low-income people create jobs and income, or to improve their standard of living.

As the work of FINCA International expands beyond microfinance to encompass social enterprises, we need to extend our research into new arenas, including social investment. This raises some tricky questions. What indicators should we measure? How do we use the information to improve the client-level results, or to help grow the business?

Gathering with Leading Experts in Impact Measurement

On February 27-28, I had the chance to explore these issues with some of the leading experts in the field of impact investing and measurement. We gathered in Nairobi, Kenya at a conference titled “Metrics from the Ground Up,” sponsored by the Aspen Network for Development Entrepreneurs (ANDE). The meeting brought together a wide range of stakeholders, including social investors, donors and researchers, all working on the same problems.

In the discussions, it became clear to me that impact measurement should be different for firms at different stages of development. Early-stage investees are busy iterating their business models as they strive for profitability. For their part, fund managers understandably don’t want to burden their investees with extra work. In this scenario, the most rigorous forms of impact measurement (like experimental studies) are simply not viable. With the need for large samples and control groups, such studies should be left to more mature firms and organizations, as well as academic institutions that aren’t under pressure to generate quarterly results.

This doesn’t mean that early stage social ventures (and donors) shouldn’t do impact measurement–only that it should focus on practical insights that help a new business succeed. In the right framework, those practical insights can also tell us about our social mission. Basic customer profiles can tell us if we are reaching people in need. Product uptake and usage data can describe the customer journey, and tell us what benefits and barriers they experience along the way.

A key to this approach is looking at ourselves from the customer’s perspective, which means asking the right questions and listening carefully to the answers. With this approach, customers themselves can tell us whether we are helping them achieve a better quality of life, which is the most important measure of our success.