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To manage impact effectively we must get better at measuring what really matters to people, which is changes to their wellbeing. Standardised impact measures and ‘comparable’ metrics have stifled innovation at an enterprise level to the point that impact measurement is mainly at the ‘output’ level, making it meaningless and a burdensome exercise. Good impact management is an essential part of business improvement processes. Enterprises that think deeply about impact, by measuring changes to wellbeing, will reap the rewards. This article exposes the flaws in current impact measurement practices, and illustrates how they are inadequate for improving the wellbeing of women and tackling gender equality in the workplace.
The major risk and limitation of standardized output measures is that they offer no insight into the actual changes in wellbeing that people experience. We know that women suffer from worse wellbeing in workplaces, yet few companies are systematically capturing and reporting the levels of wellbeing among their employees, disaggregated by gender. A recent report from the UK government outlines barriers and challenges for women in workplaces. These barriers and challenges, including hostile and isolating organizational cultures, are nuanced and point to structures and norms that cannot be addressed by output metrics.
Let’s look at the issue of sexual harassment in workplaces and in our broader society – its urgency and gravity exposed by the #MeToo movement. A popular standardised metric for this issue is ‘number of sexual harassment complaints made’. This metric has been used by investment research firm Morningstar, discussing the business risks of sexual misconduct. Morningstar reports that “firms in the top 2% of sexual harassment complaints saw declines of 4% on return on assets.” The assumption here is that: more claims of sexual harassment correlate with worse financial performance.
Few companies are systematically capturing and reporting the levels of wellbeing among their employees, disaggregated by gender.
But there are several problems with this output metric. To begin with, if there are zero claims made of sexual harassment – which should supposedly be an indicator of a ‘good company’ as implied by the Morningstar research – is this because there is no sexual harassment, or is it because people live in fear of making the claim? Without a deeper understanding of what is happening, we risk conflating two groups of very different companies – one group may genuinely have a gender equal workplace without incidences of sexual harassment, and another group with very poor gender equality where everyone is fearful of speaking up against rampant sexual harassment.
This metric can be dangerous. Perversely, companies are incentivized to drive down the number of sexual harassment claims to be seen as more favourable by investors. This may have the opposite effect and actually hinder gender equality. If a workplace is creating a good culture about gender equality – there is an argument to say that there should be more claims as people recognize the harassment and feel confident to call it out. Using output measures, without understanding the context and how they are linked to people’s wellbeing, may have a detrimental effect on the very issues we want to tackle in the first place.
Not all output measures are bad. Some aspects of wellbeing are objective such as income, physical health, and housing. Easier to measure with helpful standardised metrics, they enable benchmarking across companies, organisations, and even countries. A good example is Equileap, which has devised a scorecard with 19 indicators based on UN Women’s Empowerment Principles to measure companies and countries’ performance on gender equality (see their latest 2021 report here). Gender pay gap is an output indicator which is simple and effective – it exposes the inequality and should force behaviour change.
While it is good that there is more benchmarking on gender equality issues, enabled by standardised metrics from fantastic organisations such as Equileap and GRI, there is a risk that over-reliance on these metrics creates perverse incentives. As investors adopt these indicators to positively screen for companies, companies can fulfil these indicators without creating any actual positive change for women. For example, companies can promote women to sit on governing bodies so that they appear to have a more favourable gender balance, but the women on boards may not actually have any power in decision-making or feel respected in these roles.
Firstly, we need to acknowledge that the existing measurement practices are not fit for purpose. There are too many assumptions and risks attached to standardised output metrics. We’re still not measuring all the things that really matter to people. In relation to gender equality, the facts are clear; women face declining prospects in the workplaces, accelerated by the Covid-19 pandemic. Whilst it is important to measure the gender pay gap, we must put equal effort into measuring the more subjective aspects of wellbeing like respect, dignity, and agency in the workplace.
We’re still not measuring all the things that really matter to people.
Secondly, we need to be braver with our measurement, and commit to ‘wellbeing’. We need to acknowledge that measuring what really matters (including subjective aspects of wellbeing) is not as hard as it sounds. (As a species we have developed ways of measuring many more complex things) Commit to a definition of impact that is rooted in wellbeing. The most recent Impact Management Project (2021) definition of the word impact explicitly references wellbeing: Impact = a change in an aspect of people’s wellbeing or the condition of the natural environment caused by an organization.
A good example of thinking deeply about impact comes from the International Finance Corporation (IFC), which cited examples of how exploring impact (as defined by Impact Management Project) led to them asking the question: if companies were to provide more assistance with childcare support, would it make a difference in women’s work experiences? By focusing on this question, they were able to support an investee to provide childcare, subsequently improving the retention rate of women from 28% to 78%. This is not rocket science.
Thirdly, develop an impact management practice that relies on open dialogue with stakeholders. Meaningful stakeholder engagement sits at the heart of all IMM frameworks. Guidance on this is provided by OECD, UNDP, SVI, and so many others (including this project led by Social Value US). Holding conversations, asking questions, and listening to what matters to people may sound like hard work (much harder than a quick survey to collect output data) but we must embrace qualitative data and relish the opportunity to discover what is unique to your stakeholders and how you can optimize impacts on wellbeing.
These three steps will take us all to the next level for managing impact and tackling gender inequality. The companies that take these next steps will benefit with a more sustainable business; impact will be managed better, leading to improved levels of wellbeing and increased productivity.
Regina "Gina" Kline
Founder & Managing Partner, Enable Ventures
October 27 - 12:00 PM EST
Founder & CEO, Acumen
November 3 - 12:00 PM EST
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