14/11/2013 10:16 GMT | Updated 23/01/2014 18:56 GMT

Funding Impact

Funders in the charitable sector give their money to good causes, so it can seem churlish to say that they need to think more about the impact of their giving. But surely this is true. The way in which funders support their chosen cause can mean they have a lesser or greater impact. All things being equal, funders want to make a greater impact with their money. To achieve that, they need some assessment of how well they are doing--some way of measuring their success.

NPC's new report Funding Impact shows that most funders agree with this sentiment. Nearly nine out of ten use information about the impact of applicants and grantees to make decisions about whether to give funding, and the same proportion are keen to try and understand what difference they themselves are making. Funders sense that the sector is moving further this way, with nearly three quarters expecting to be doing more on impact measurement over the next three years. The direction of travel is clear, even if there is a long way to go.

This is important not only for funders themselves, but also because of their role in driving change in charities. Last year NPC's Making an Impact report showed that charities often only start down the impact measurement road under pressure from funders--even though when they get into it, they do find that it helps them improve what they do and therefore to help more beneficiaries.

But this would not be the sector we know and love if there was a uniformity of views. Some voices caution against all this going too far, saying that it leads to funders or charities avoiding projects and causes that are tricky to measure, or a bias towards only funding what has already been proved to work. Nothing can be further from the truth.

Of course, funders vary widely in what they are trying to achieve and how they go about this. Some are very reactive; a few are extremely strategic. Some expand successful charities; others go for innovation and describe themselves proudly as iconoclastic. Some focus on service delivery; others on advocacy. All of this funding has its merits and a rightful place in our varied sector. But none of that means that the search for improved impact should be outside any funder's brief. There are principles and techniques that help in measuring impact, but there are no rigid rules. The key is to try to get a handle on how you are doing to help you improve. That is as true if you want to fund innovative, one-off projects as it is if you are looking to scale up existing interventions.

This research reveals that more could be done to help funders with the task of impact measurement. Funders are looking to each other and to the sector for guidance, learning and action. The Inspiring Impact programme, run by NPC and with an ACF-led strand for funders, is already trying to produce guidance and tools to help funders understand what they should be doing. This report gives both the Inspiring Impact team and NPC valuable insights on how we can help the sector move forwards.

We lay out three distinct funding types and look at what they could each do to better use evidence of impact for themselves, their grantees and the sector. There really are few excuses left for funders to go slowly on this exercise. Those that distribute funds--which often benefit from the public purse via the tax advantages they enjoy--surely must make efforts to show that they are trying to allocate funding in a sensible and rational way, and should share what they have learnt to improve the evidence base of the sector.