Social impact bonds require rigorous measurement and evaluation to determine if the agreed-upon social outcomes have been achieved and investors should be repaid. For nonprofits looking to utilize this innovative funding mechanism, focusing on measurable outcomes and impact is key.
According to Victoria Phillips, a nonprofit consultant who helps organizations implement social impact bonds, “It’s not just about measuring activities or outputs, but rather the longer-term benefits or results from these activities.” The outcomes must be clearly defined upfront between the investors, nonprofit service provider, and government entity. They should align with the nature of the program and be measurable.
For example, if a nonprofit provides job training for refugees, the outcome could be a target number of refugees finding sustainable employment within a certain time period after completing the training program. By tracking outcomes like job placement rates, wage increases, and job retention, the nonprofit can demonstrate the impact to investors and government partners.
Rigorous data collection and analysis are required to evaluate the success of the program. While this may seem daunting, Phillips says, “focusing on outcomes is one of the strengths of the SIB model. It encourages nonprofits to focus on what truly matters: making a real difference in people’s lives and demonstrating their effectiveness.”
Developing a sustainable program model with ongoing impact beyond the social impact bond is also important for long-term success. Government entities and private funders will want to see lasting change and benefits to the community.
For nonprofits new to social impact bonds, focusing on program outcomes, measurement, and evaluation is the key to attracting investors and partners. Clearly define the outcomes, determine how you will track and analyze progress, build a sustainable model, and demonstrate the lasting impact.
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