(Illustration by Adam McCauley)
Editor’s Note: In June 2016, the Stanford Center on Philanthropy and Civil Society hosted its third Junior Scholars Forum. The following article covers a not-yet-published research paper presented there. To learn more about the research, readers can contact the paper’s author, Julia Morley ([email protected]).
Over the past decade and a half, business-oriented language has become commonplace in the social sector. Terms that once belonged only in corporate boardrooms—“impact,” “scalable,” “return on investment”— are now routinely heard in the hallways and cubicles of nonprofit organizations. The same point applies to business-inspired ways of reporting impact. “Social impact reporting has moved away from largely anecdotal storytelling to more clearly defined outcome objectives that are measurable and reportable,” says Nick O’Donohoe, former CEO of Big Society Capital and now a senior advisor to the Bill & Melinda Gates Foundation.
According to Julia Morley, a lecturer in accounting at the London School of Economics, this development has had a far-reaching effect on the sector. “If a social purpose organization wants to attract investment, it can no longer rely on the moral legitimacy afforded by its charitable status,” she says. “Instead, it needs to be able to demonstrate its investment readiness through the use of business-style language and performance reporting.”
In her research, Morley focuses on the role that an elite group of social investors has played in driving that shift. Using publicly available sources, such as the Big Society Capital website and LinkedIn profile pages, as well as data from interviews with 35 social investment professionals, Morley generated a set of 219 people in the UK social investment field. (O’Donohoe was one of her research subjects.) She then developed a network analysis that shows various forms of connection between members of that set. They are, she discovered, linked to one another through multiple professional and educational affiliations.
“Social investment professionals are a tightly connected bunch of people,” Morley says. “They typically have very similar backgrounds.” More than 52 percent of those in her sample previously worked in finance. Many of them have worked at blue-chip financial firms such as Goldman Sachs or at elite consulting firms such as McKinsey & Company. About 37 percent of them attended top-tier undergraduate or postgraduate institutions, such as Harvard Business School. And today many of them sit on boards of directors along with others from the same set of social investors. In addition, a large proportion of them belong to organizations such as the Global Impact Investing Network. “As a result, they form an extremely powerful group that can bring about significant change,” Morley says.
This network of social investment professionals, Morley argues, is the mechanism by which the language—and the mind-set—of business have come to dominate the social investment field. From her interviews, Morley learned that social investors now generally expect organizations in which they invest to demonstrate business rigor as well as social impact. “For these social purpose organizations, speaking the same language as potential investors may be a critical factor in appearing worthy of funding,” Morley says.
Still, Morley suggests, there is a cultural gap between social sector professionals and the former finance professionals who make up the social investment field. These two groups, she says, are “almost speaking different dialects, and that allows for miscommunication on occasion and the development of pockets of mistrust.”
One consequence of this gap is that social sector groups may neglect to take impact reporting seriously. “Organizations that adopt new methods simply in order to appear businesslike— without internalizing the process and acting on uncomfortable findings about effectiveness— will fail to achieve potential benefits beyond that of marketing to funders,” Morley says. Tanyella Evans, cofounder and CEO of Library for All, a nonprofit that provides children in developing countries with access to digital books, offers a similar cautionary note. “There is a dangerous trend of ‘vanity metrics’ emerging in the [social investment] space.” If that trend continues, Evans says, then “impact reporting becomes nothing more than a façade.”
To avoid this danger, O’Donohoe suggests, social purpose organizations should include groups of people who approach impact reporting in different yet complementary ways. “They need business-minded, numbers-driven professionals, but they also need people who really understand the issues they are trying to solve and the people they are trying to help,” he says.
Video: Morley talks to the London School of Economics about her work.
Julia Morley, “Elite Networks and the Rise of Social Impact Reporting in the UK Social Sector,” 2016.
Read more stories by Corey Binns.