The “Theory of Change”, for many young social entrepreneurs, remains somewhat a vague and convoluted idea. It almost sounds too complicated for it to be a straightforward exercise, but much like a business model, this is the model by which a social purpose organisation will make a difference. Simply put, what social issues are the organisations looking to improve and how do they plan to do it? What at the critical steps a social entrepreneur must take to bridge the gap between funders and SEs?
A Theory of Change (ToC) is essentially the backbone of any social impact measurement system. It visualises the day-to-day activities of an organisation and how those relate to the overall mission and long-term goals in terms of outcomes. We want to have multiple perspectives when doing this exercise because it will be a group effort – beneficiaries and impacted individuals will not just be yourself and your target population.
The benefits of doing a Theory of Change in a team setting creates an opportunity for each individual to share their assumptions and come to an agreement on what defines success and what the steps are to get there. It becomes a communication tool that captures the complexity of your organisation’s initiatives. Most of all, it is something you can come back to constantly to test your original hypothesis, and see how specific changes occurred and what can make your results even more credible.
As a social entrepreneur, you can use the ToC as a framework to check milestones and stay on course, document lessons learned, and lay out a very transparent process of implementation and evaluation method. More importantly, this exercise can prepare you for meetings with funders, government agencies, and board members.
So How do Social Entrepreneurs Build a Theory of Change?
First, list out the long-term goals of your social organisation. Remember, this can be two-fold. You can include both a social mission as well as a business goal (how much money do you want to make by end of Year 1, etc). This is where you want to clarify key assumptions that you’ve naturally assumed or made at this process with your team
Second, you want to work backwards and think of intermediate outcomes. What sort of preceding steps are needed to get to these long-term goals? What activities, infrastructure, groundwork needs to be laid out in order for this long-term goal to be achieved? For example, we want to build a café that employs the disabled; the first intermediate outcome would be to establish a solid training program.
Third, think of the indicators that will signify “success”. This could be numerical or qualitative. Think of the target population (x% out of 100 have been affected), and think of the threshold reached at which point you can say that your project was successful (ie: what is the retention rates, enrolment rates, etc.)
Lastly, a theory of change can always be crafted into a narrative that consists of the background of your social organisation’s goals, its context and needs, and the intermediate goals surrounding the long-term ones. Include assumptions made and highlight key interventions. It really stands to clarify the long-term outcome and works backward to map out preceding states. It outlines assumptions and trade off made along each step of the way.
Kevin Teo, Managing Director of Asian Venture Philanthropy Network, and Kelly Yen, Senior Associate of Asian Venture Philanthropy Network, will lead a session on Theory of Change to Improve Investor-Investee Relationships at the 2ndSankalp Southeast Asia Summit in Jakarta, Indonesia. The goal of a Theory of Change exercise aims to bridge the gap between stakeholders (funders and SEs) on what defines success and what it takes to get there. It is a tool that Social Enterprises can use as a framework to document lessons learned and check milestones to stay on course. Ultimately, it is a highly powerful reporting tool that will lead to a more sustainable funding process for social enterprises.