I resonate with most everything that Katya Andresen writes, including her recent trend alert post, Impact is the new black.

Says Andresen:

For a select group of funders and major donors – and perhaps mainstream givers, someday – you must show real, measurable impact in a way that enables you to be judged on a social ROI or compared to other causes in effectiveness.

And further:

All funders want reporting. Some foundations and major donors want data on nonprofit impact organized in a way that allows them to compare and contrast charities – or to choose high performing nonprofits.  They are interested in social ROI.  But this is a small demand relative to overall giving.  Most individuals are far too lazy and rushed to want that degree of information.  The vast majority of people give because they care (it’s emotional) and only need basic confirmation that their money will make a difference.  They aren’t going to spend a lot of time analyzing their charity’s performance – heck, they may not even do that with their 401k.  The desire for data on impact or ratings will only gain traction on a grand scale if the insights on performance are reduced to a simple star system or Consumer Report-style bubbles.

My reply:

Necessary…and yet not sufficient.

• Habitat for Humanity continues to grow not only because of impressive social ROI but because they stick a hammer in your chest and tell you it’s your responsibility to build a home for those in your community who don’t have one…and they can show you how to do just that.
• Kiva.org continues to grow not only because of low overhead and high impact but because they create a platform where you can be an international lender…something you can’t be anywhere else.
• Even in child sponsorship for organizations like World Vision and Compassion International, sponsors are clearly making a choice for a kind of impact that can’t be fully quantified through social ROI…but that extends into personal ROI as well.

Impact, in other words, must be measured on two axes. One is social. The other is personal. A nonprofit can attend to first supremely well, providing reports that prove that it is at the head of its class in social impact…and still go out of business. Happens every month, especially in this recession. No one has yet postulated that impact and funding are directly correlated, despite how much our common sense might like to believe they are.

After all, plenty of inefficient (and sometimes even dishonest!) nonprofits are still doing quite well these days, thank you very much. We could chalk this up to slick advertising and the gullibility of some donors in the general public. But far more likely is the possibility that there are a group of nonprofits that fare poorly on the social ROI axis but quite well on the personal impact axis. Such charities can–and should–be exposed, and usually are.

But while we should condemn such charities, we should not praise ones with high social ROI but negligible personal impact. Donors don’t. The law of the donor jungle says that over time, such charities will fall by the wayside as well.

What’s necessary and sufficient for future nonprofit success?

High social ROI plus high personal ROI. Two forms of impact, not just one–that’s the new black.