One of the healthiest shifts we’ve seen from this pandemic has been the rise of more flexible trust-based forms of grant-making. But this shift carries risks. How do we know if the money is making a difference?

Having made great progress on the first half of the grant-making cycle – the making and managing of grants – we need to give attention to the second half: impact measurement and learning. New approaches to one will require new approaches to the other.

At NPC we’ve been leading a collaborative initiative, Rethink Rebuild, to understand what philanthropy’s post-pandemic future looks like. We’ve published five ideas for rethinking how we do strategy, collaboration, grant-making, data, and policy. Of all of these, the grant-making cycle is perhaps the most pertinent to the basic mechanics of how our sector works.

For most funders, impact measurement is a key feedback loop for driving grant-making decisions, so we can’t rethink grant-making without rethinking how we measure impact and learn from our grants.

Many of the people we’ve spoken to for this project felt that in the rush towards greater flexibility during the pandemic measuring and understanding impact had, perhaps understandably, taken a back seat. In some parts of the sector, we are seeing a swing away from impact measurement, with some funders that are adopting trust-based approaches asking for minimal information on outcomes and resistant to even talk about impact measurement.

This puts us at a crossroads. Either we go back to the old way of complex criteria and rigid reporting requirements, or we think big about what this flexible funding paradigm means for how we understand impact.

We believe that being attentive to the impact we’re having is more important than ever when we’re working in new ways. We need to understand whether these new ways are leading to better outcomes for those whose lives we are seeking to change. Impact measurement is a tool to aid better decision-making. If overlooked, the virtuous cycle between decisions, information and learning could be broken. We risk losing sight of the impact of grants (or lack of it), which makes it harder to know how best to deploy future funds. This could lead to beneficiaries not getting the help they need, or even being harmed by well-meaning but counter-productive activity.

The other danger is that we conclude that impact measurement for flexible funding is impossible. This would be a disaster, as it would discourage more funders from adopting flexible approaches and tempt others into reverting to old ways of working.

For flexible funding to become mainstream, we need to find the right balance between flexibility and rigour. It’s going to be challenging, but we believe that rethinking impact measurement alongside rethinking grant-making is critical for ensuring that funders continue to learn from and develop their practice.

To this end, we’re going to be working with funders and charities to review impact measurement tools and frameworks to achieve the right balance between flexibility and rigour. We’ll be convening a diverse group of funders and charities at different points on the flexible funding journey to work through the practical implications of trust and flexibility for how impact is measured and understood. By involving both funders and charities in the conversation, we can ensure that new approaches work for the whole system and achieve the best results for beneficiaries.

We’ll be asking:

• How can funders keep demands on grantees light and proportional whilst accessing the information they need to understand the impact of their resources?
• How can charities develop impact measurement approaches that can meet a range of funders’ needs as well as their own?
• Are different approaches needed for types or sizes of grants, or for charities in different sectors?

We’d love to work with you to answer these questions together. To get involved, and to explore our other ideas for the future of charity, head to thinkNPC.org/resource-hub/Rethink-Rebuild.

Sarah Denselow is Principal: Effective Philanthropy for the charity think tank and consultancy NPC (New Philanthropy Capital). Seth Reynolds is NPC’s Principal: Systems Change.