The Price Of Impact: The True Cost of Solving Big Problems

ANDRÉ CHUNG

BY JASON SAUL

This article was originally published in the Chronicle of Philanthropy on September 29, 2020. It has been re-posted here with permission.

It takes a bold claim to stand out on Twitter these days, but @JerseyMike’s caught my attention. A post from the sandwich maker boasted that the company was able to feed at least 20 million Americans by making a $2 million donation to antihunger groups.

Sounds impressive but then think about this: To benefit 20 million Americans , Jersey Mike’s is providing just 10 cents for each meal.

Of course, it not just Jersey Mike’s that is in question here. Companies and organizations of all kinds have been making claims about their social impact for decades, but we’ve never been able to verify how accurate these claims are. In other words, we don’t know the actual cost of what it takes to make a difference in a person’s life.

But now we’re getting closer, thanks to the Price of Impact Index that is being released today.

The index tracks the average cost for a charity to achieve any of 132 most common social outcomes such as hunger relief, academic achievement, arts appreciation, job placement, better mental health, and positive youth development. It was developed by the Impact Genome Project, which I co-founded to standardize outcomes data, with grants from the Bill & Melinda Gates Foundation and leading corporate philanthropies. Think about the index like a rate card for social impact.

Meaningless Measures

Why do we need this index? Because for too long the world of social impact has settled for simply measuring how much money is going in (inputs) and how many people are being reached (outputs). These measures give nonprofit organizations tidy, marketable numbers to display proudly on website counters, but they don’t tell us anything about how many lives are actually being changed. Without that data, philanthropy (and government, too, for that matter) is burdened by waste, uninformed decision making, and the meaningless feeling that we’re doing good when there’s no evidence to support it.

Counting the number of free meals provided is the epitome of oversimplifying impact. One meal is not an outcome. It’s not even a day’s worth of food. So where did the idea of 10 cents per meal as a benchmark for fighting hunger even come from?

Companies like Jersey Mike’s can’t really be faulted for using it. After all, both Feeding America and No Kid Hungry, two of the largest national hunger-relief charities, tout the 10-cents-per- meal number on their websites. To justify this number, Feeding America cites a 2011–2012 federal Department of Agriculture study that states that an average meal is equivalent to 1.2 pounds of raw food (“minus water”). Feeding America says it costs them just 10 cents for those 1.2 pounds because “through large-scale negotiating and nationwide donation programs, we’re able to stretch your donation to make the biggest impact possible.”

Nonprofits like Feeding America and Share Our strength should know that 10 cents a meal is not sufficient to cover the real costs of making a real difference in stomping out hunger.

But oversimplifying does one important thing: It makes it easier to raise money. Donors feel good when they hear how much good every dollar achieves. Still, there’s a more insidious side effect to this strategy: Measuring the wrong thing deludes the public, and donors, into thinking that they are solving the problem when, in fact, they are not. Counting the number of people that get a single meal of 1.2 pounds of food is probably not a good proxy for curing hunger, or even denting it.

The phenomenon of nonprofits measuring the wrong things was spotlighted by John Sawhill in 2001, who observed that the Nature Conservancy, where he was CEO, claimed success by counting the number of dollars raised and acres of land it protected , year over year. It later turned out that those measures, while appealing to donors, had no impact on the mission of protecting endangered species.

What It Takes

Surely we can do better than measuring outputs like pounds of food or protected acres of land.

The first thing we can do is collect self-reported data from frontline charities to determine the actual cost of achieving an outcome. As it turns out, the authentic cost of feeding someone a nutritious meal, according to the charities that deliver those meals, isn’t 10 cents; it is $8 on average. And even Feeding America’s own “Map the Meal Gap” study reported that the cost of an average meal in the United States is $3.09, not 10 cents.

Giving someone a meal is a nice thing to do, but it’s not an outcome. No one’s life will be changed in any meaningful way by receiving one donated meal. If we truly care about solving hunger, and if we really want to make an impact, we’re going to have to aim higher. According to data reported by charities in the Price of Impact Index, the full cost of reducing hunger for one individual (i.e., ongoing access to healthy, nutritious food for at least one month) is $542. Now think about that in the context of Jersey Mike’s $2 million donation. It would relieve hunger for 3,690 people. That’s important, but there’s a pretty big credibility gap between claiming to help 20 million people versus 3,690. Wouldn’t it be more honest, and responsible, for national hunger charities and donors like Jersey Mike’s to acknowledge the actual cost of hunger relief?

The Ripple Effect of a Bad Definition

Using the wrong measure has deleterious consequences. First , it hurts charities. By measuring meaningless things, charities lose an opportunity to educate donors about the true cost of solving the problem. As a result, charities are constantly underfunded and often cannot fully carry out their missions.

Second, donors get lulled into thinking “that’s all we have to do.” As companies increasingly lean on purpose to underpin their marketing, another problem arises: They make false claims (often unwittingly) about how much good they do.

These claims can be easily discredited when based on weak evidence or data. They damage company and industry reputations by perpetuating the argument that social investments are corporate “greenwashing.” And perhaps most problematically, these false claims damage the very nonprofits they’re trying to support, by failing to provide them appropriate resources to achieve their goals, leaving nonprofits to make up the difference or fail to make a real difference.

The new Price of Impact Index is designed to solve that problem. It provides donors with a benchmark price for every outcome — like the antihunger data I cited above — so that donations can be gauged with realistic expectations. These benchmarks can also help nonprofits take back control of the fundraising conversation by establishing the true cost of what it takes to do the work that nonprofits do. By putting a price tag on outcomes, nonprofits can use data to change the power balance in fundraising by selling impact instead of begging for donations.

So, what’s the advice for companies like Jersey Mike’s that are making well- intended, meaningful donations to important causes?

  • Pay for outcomes, not activities. Base the size of your donations and expectations on the cost of the actual impact you hope to achieve.
  • Ask charities to report their cost per outcome. Now that you can compare any charity to a national benchmark, you should. This data can be easily self- reported using the standards defined by the Price of Impact Index.
  • Brag about impact, not donation size. Big numbers sound great. But your customers, the public, and the media will ultimately be more impressed by meaningful impact than large empty figures.

As the Covid-19 pandemic and recession put more pressure than ever on donors and nonprofits, it’s urgent that we talk realistically about what it takes to solve society’s problems. It’s time we use both our hearts and our heads in making decisions about charitable giving.

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One of the world’s leading experts in measuring and solving social problems.

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Jason Saul

Jason Saul

One of the world’s leading experts in measuring and solving social problems.

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