Tracking Social Entrepreneurs Gets Easier

Thursday, September 25, 2008

By Steve Hamm

There’s plenty to love about organizations that focus on solving the world’s poverty and health problems?but their impact is often hard to measure. That can make it hard for philanthropies and investors to tell whether their money is well spent and leaves some of them reluctant to channel funds to the social sector.

A few foundations hope to change that by shedding more light on the track record of organizations that aim to do good. A group led by Acumen Fund, Foundation, and Skoll Foundation has formed to create an online database for use by hundreds of donors, investors, and social enterprises.

The Portfolio Data Management System (PDMS) will focus on so-called social entrepreneurs, or groups trying to bring about social change while also functioning like a business?in some cases even trying to make money. Some social enterprises are nonprofits, while others seek a return on investment. Perhaps the most prominent social entrepreneur is Muhammad Yunus of Grameen Bank (, 10/13/06), the pioneer of microfinance and winner of the Nobel Peace Prize.

Whatever the business approach, social enterprise performance can and must be measured, say investors and foundations. “When you have no metrics, it is difficult to measure impact, and decisions get made based on anecdotes, not real data,” says Jacqueline Novogratz, founder and CEO of Acumen Fund, a nonprofit venture fund that backs social entrepreneurs. “While you can’t measure everything, we need to dig deeper into what works and be equally as honest about what doesn’t work.”

Roughly speaking, PDMS will be to social entrepreneurs what regulatory filings are to publicly-traded companies registered with the Securities & Exchange Commission. The tracking system, to be announced at the Clinton Global Initiative summit in New York on Sept. 25, is expected to be available for broad use in January. Until now, donors and investors have tended to keep their own tracking systems, often using basic spreadsheet software on PCs. The PDMS is better because the data from many organizations can be put in one database that’s accessible from anywhere in the world via the Internet.

A common set of metrics will be recorded for each organization so donors and investors can check regularly and track their progress or spot trouble. Social entrepreneurs will be able to benchmark their results against those for similar organizations around the world. “This provides rigor,” says Robert Kennedy, professor of corporate strategy and international business at the University of Michigan’s Ross School of Business. “It forces companies to be more analytical and honest in assessing their own performance.”

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Source: BusinessWeek (link opens in a new window)