Friday, May 15, 2009
Making an impact: Farron Levy
Boston Business Journal

Link to Article

Farron Levy grew True Impact, a software company and consulting firm that helps organizations measure the social and financial value of their corporate citizenship programs, out of the frustration he felt in graduate school as he watched budget bickering on Capitol Hill over the value of AmeriCorps. Levy had worked with City Year, an AmeriCorps program, and he had seen its social impact — and the business value to corporate supporters — firsthand. But few objective measures existed to quantify those social and business impacts, to help prove the value of such programs. Levy’s frustration drove his master’s thesis, which investigated ways to measure social and business value, which ultimately became the foundation of his own firm.

Today, True Impact works mainly with for-profit companies, helping them analyze and calculate returns on their community involvement and environmental practices. True Impact’s clients have included Allstate, Cox, Deloitte, The Home Depot, PNC Bank, and Verizon, among others. Moving forward, Levy plans to move True Impact in the direction of working directly with nonprofit organizations and government agencies as well, to help them evaluate the impact of their missions. Levy recently sat down with reporter Mary Moore to discuss the importance of measuring social impact and what led him to this work.

Who are your influences?

My parents have been most important in inspiring me with core values such as fairness and justice and creativity — all those really crunchy progressive things. You do for other people. It’s a really nice way to be — and when you find yourself surrounded by other people like that, the world is a more enjoyable place. Also, family is really important to me, as my whole family is pretty close. That’s how my grandfather built things — being there for each other and appreciating each other.

Are there books you have read that have made a difference for you?

I don’t get to read books nearly as much as I want to — mostly on vacations, which also don’t happen as much as I want. The last one I read was “Founding Brothers: The Revolutionary Generation” by Joseph Ellis, which I really liked. The American Revolution was a time of extraordinary ideas, challenges and opportunities — like today. People had to take risks and there was a grand vision of what the country should be. But it was a complex vision — and pulling it off was an amazing feat given that you had to come up with a vision that would actually work and then have a lot of stakeholders buy into it.

If you could have dinner with anyone, who would it be?

George Washington and Thomas Jefferson come to mind, given the Ellis book. You can only get so much from books, so it would be great to have the real inside scoop from them.

What’s on your nightstand?
Two things — an Amazon Kindle e-reader, which has subscriptions to the New York Times, the Wall Street Journal, the New Yorker and some blogs. And then there’s the Sonos music controller, for smooth jazz or NPR, depending on the mood of the room.

How do you relax?

On the sports side I love to snowboard, scuba dive, and play basketball and squash. That’s all seasonal, and depends on the weather and the state of my joints. Also, my wife and I have subscriptions to the Huntington Theatre and the SpeakEasy Stage Company, which is a great way to get relaxation time into our schedules. And we also love to head up to Vermont and down to the Cape, and pretty much anything you do in either place is relaxing.

What’s your favorite restaurant?

Home. Because my wife is an excellent chef and I’m a great sous chef and cleaner-upper. But when we’re too tired to do that, we do a Fugakyu run for sushi. And when we go to the Huntington Theatre or to the SpeakEasy, we try to go to a new restaurant as part of the entire night-out package.

What prompted you to start your company?

I see a lot of exciting opportunities to improve society and the environment by harnessing business resources and tying them to business self-interest. It’s the classic win-win opportunity. And one of the main obstacles to that has often been a lack of measurement, which helps you identify those opportunities, take advantage of them and then manage them effectively. That’s a pretty exciting prospect.

CSR Performance Summit: Opportunity in a Time of Transition (Global Strategic Management Institute)
May 11-13, 2009, New York, NY

Align strategy & corporate responsibility to survive and thrive in difficult times and beyond.  Farron Levy, CEO of True Impact, joins summit speakers to present practical techniques measure, manage, and demonstrate the ROI of your CSR program.  (Receive 15% off registration using discount code “trueimpact15″.)    Learn more.

What influence does breakfast cereal have on a baby’s gender, or one’s astrological sign on susceptibility to heart failure?  Both showed statistically significant links in scientific studies—yet both may be completely random findings.  This may make your life easier.

Using these studies as illustration, a recent Wall Street Journal article explores how the traditional mathematical standard for statistical significance is not infallible; and that much depends on study design and sometimes repeated implementation.

The point for CSR practitioners is not that controlled experiments or statistics lack value.  In fact, they can be extremely useful tools.  But it’s a cautionary tale that the “ideal” approach to measurement isn’t always perfect, and may be even more time-consuming and costly to get right than anticipated.

So, what do you do if you don’t have the time or resources for such an effort?  First, recognize this is par for the course.  Your colleagues in other functional areas, such as sales, marketing, and recruiting have similar limitations.  So, use the techniques they use: sampling, pilots, or estimates based on similar implementations from within (or outside) of your organization.

The trick is to develop sufficient, if not perfect, information.  Remember, very few new product launches, advertising initiatives, or other highly consequential business decisions would be made if everyone waited until they had bullet-proof statistics in hand for guidance.  Business can’t afford to work that way.  And neither can CSR activities.

Brandeis University and the National Academy Museum’s plans to sell art assets as a way to survive the economic downturn have sparked furious debate about the propriety of museum “deaccessioning.”  But what value does art create, and how do we know it’s being created?

Arguments over deaccessioning turn mostly on high-level principles: critics see art sales as undermining the core purpose of a museum, a betrayal of the public interest, and a slippery-slope practice that endangers cultural centers worldwide; defenders see a practical option for ensuring an institution’s survival, enabling it to continue delivering on its mission using remaining assets.

But what’s largely missing from these discussions—and, for that matter, how museums and their sponsors tend to manage general operations—is attention to specific performance measurement.   And that means going beyond common measures like number of shows, amount of foot traffic, and size of membership (all outputs), and focusing on outcomes.

So, what is the purpose of showing art?  What value does it create?  Art can be entertaining, enlightening, provocative and emotional.  It can bring fulfillment through immediate consumption, and through the creativity, expression, and scholarship it inspires.  It, like any useful good or service, can improve quality of life.

Any evaluation of museum performance should therefore include an assessment of how well it enables the public to engage with its art and realize those benefits.  That is, not only how many people are served, but the result of the experience.  Surveys can, for example, capture changes in appreciation, understanding, or even “resonance and wonder.”  Over time they can also capture longer-term ripple effects of enlightenment and creativity, if you have the resources for a longitudinal study.  If you don’t have such resources, try to find existing research to extrapolate the ripple effects.  (Same for economic ripple effects.)  As long as you are clear about your sources and assumptions, and the research is truly relevant, then your estimates will be credible.

Yes, most people will agree that art is valuable – just as most will agree that education, philanthropy, healthcare, and endless other categories of goods and services are valuable.  But whether a particular institution is effective at delivering that value is a separate question.  As always, outcome measurement will tell you the answer.

Economist Edward Glaeser’s recent New York Times blog posting on “how ethical should businesses be?” is yet another example of the disconnection between public debate and what companies really need: help with implementation.

While briefly surveying arguments for and against CSR, Glaeser allows that “Even the harshest critics of corporate social responsibility are not advocates of sacrificing long-term profits by acting unethically today,” but quickly moves on to the “hard problems” of defining corporate roles beyond profit-maximization, as if companies already had the win-win items covered.

Not so fast.  According to recent research by Boston College’s Center for Corporate Citizenship, most corporations have not yet integrated CSR with their sales, marketing, HR, government affairs, or other core functional areas.  Corporate citizenship practitioners remain siloed and under-resourced, and still struggle to operationalize the classic CSR win-win.  As usual, implementation is more easily said than done.

What’s needed – at least until sustainability and corporate responsibility become part of mainstream corporate culture and decisionmaking – is greater cross-functional interaction, so CSR managers can tap and guide the expertise within their companies to identify and operationalize opportunities.

Identification is important because there is no “one size fits all” list of strategic CSR programs: a volunteer program may develop new, relevant skills for one type of company and not another; a ride-sharing or telecommuting policy may significantly increase productivity and reduce environmental impact for one type of industry and not another; a cause-marketing program may give a significant boost to one type of product but not another.

Simply getting the relevant functional managers at the table to review or brainstorm ideas can be a surprisingly easy way to identify truly relevant and impactful opportunities (often involving only minor adjustment or coordination of existing activities).  And if these opportunities are truly a win-win, then everyone will be motivated to help operationalize them.

For CSR managers struggling to make progress within their companies, try one step at a time.  Develop a relationship with the recruiting department and see if any of your community engagement activities or sponsorships can be designed to attract the attention of potential recruits, or create opportunities to interact with and better vet current candidates.  The results (and ROI) of any program you agree on can usually be monitored and measured through minor adjustments to existing application tracking systems or new-hire interviews.

Or start with marketing, or professional development, or any other department that your programs might be able to help.

Meanwhile, don’t get too distracted by public “debates” over CSR.  They may be intellectually interesting, but often they offer little assistance in creating real value: that is, actually implementing this stuff.

Q. We have many anecdotes that suggest our programs positively affect our company’s brand.  We track PR impressions, but how do we calculate ROI?

Companies spend billions of dollars a year on advertising and PR to build and protect their brands.  And for good reason: brand can communicate value to customers, recruits, or business partners — and thus prove vital to increasing (or protecting) sales or reducing costs.

The key insight here is that brand strength is not an end in itself; rather, it is valuable only to the degree it influences behaviors that in turn benefit the bottom line.  It is these bottom-line outcomes that you’ll need to track (or estimate) in order to monetize the value.

So, your tracking of media impressions is a good start.  Your goal, however, should be to gather more information along the chain of assumed cause-and-effect: Are these impressions reaching your target audience?  Are they generating awareness or changing attitudes?  And ultimately, are they changing behaviors among customers, recruits, business partners, or other stakeholders in ways that either increase revenues (e.g., increase margins or sales volume), or reduce costs (e.g., decrease recruiting costs, training costs, or issues management costs).

Impractical?  Not necessarily.  Keep in mind that “more information” doesn’t mean “perfect information.”  Indeed, try the following exercise: map out your cause-and-effect “logic model” and then make up estimates for each juncture point.  You had a million impressions.  What percentage was your target audience?  Put 50%.  What percentage of those people reached now gained new awareness of your company?  Put 50% again.  And so on.  At the end of the chain will be a number the represents how many people have changed a sales- or cost-related behavior according to your logic model.  Multiply this number by average sales increase or average cost savings, and the result represents the monetary value of the particular brand impact.

Of course, this calculation is meaningless because you’ve put arbitrary numbers in your model.  But now consider how you might improve your various estimates.  Does the PR, advertising, or marketing departments have results from past campaigns, research reports, or pilot tests to inform your model?  How about industry averages?  Even pure speculation by experienced colleagues can be valuable.  Often a bit of scavenging can surface valuable data, and create useful ballpark estimates.  And if more precise data are required, your logic model can help guide a more formal data-collection process.

(NB: Macro-level brand valuation methodologies – such as pioneered by Interbrand – deduce the earnings value attributable to a company’s brand overall.  Although useful in certain contexts, such methodologies are not capable of measuring the impacts of specific programs or activities.)

As usual, Jed Emerson pushes the ball forward with his cogent article on assessing program performance, “But Does It Work?” (Stanford Social Innovation Review, Winter 2009 - subscription required).

By describing the Edna McConnell Clark Foundation’s three-level hierarchy of effectiveness, he shares a valuable roadmap for outcome measurement among nonprofit programs: apparent effectiveness (tracking outcomes), demonstrated effectiveness (comparing the outcomes to those of program non-participants), and proven effectiveness (comparing participant and non-participant outcomes via formal, randomized controlled trials).

However, for the vast numbers of nonprofits that forgo evaluation entirely because such concepts seem overwhelming and beyond their capacity, perhaps codifying a concept of “estimated effectiveness” as a preliminary assessment stage might help.

In our experience, encouraging such organizations to at least estimate their own outcomes based on the results of programs successfully implemented elsewhere promotes the kind of critical thinking and “logic modeling” that too often goes ignored.  The simple process of mapping cause-and-effect assumptions not only does worlds of good for strategic planning and program design, but frequently also simplifies what inputs, outputs, and outcomes might be tracked to achieve that first – often surprisingly accessible – stage of measuring effectiveness.

Clip books, impression numbers, web hits: who believes them? Maybe no one, according to a study reported on by AdAge. Such metrics are commonly used as indicators of ROI, but, according to survey findings, “the problem is that CFOs don’t seem to buy the CMOs’ claims” and meanwhile, “marketers don’t believe their numbers either.”

One example: “Only one in 10 marketer respondents said they could forecast the effect of a 10% cut in spending.” Why? Most approach marketing as an art, rather than a science. Sure, who wouldn’t want to know the relative value of a radio spot vs. a TV campaign vs. a guerrilla marketing effort. But, there are so many variables: how to separate out the power of the message itself, the state of the economy, or the impacts of other campaigns running at the same time? Hard stuff. As a result, many simply default to familiar strategies and metrics, making adjustments around the edges based on logic or intuition.

Indeed, “perfect” ROI evaluations can be demanding and costly. But opportunities abound for “good enough” approaches that are practical to implement, more likely to earn respect from executive management, and actually provide useful marketing insights. A few examples:

• Simple tracking. Charting discrete marketing efforts against contemporaneous sales can, over time, reveal valuable trend information to guide decisionmaking and estimation.
• Replace “reach” with “customer value.” When considering a marketing investment, weigh the cost against the value of the desired sales outcome. Even if this requires highly speculative assumptions about response rates, engaging in “what-if” scenarios can be a powerful tool for revealing weaknesses of traditional strategies.
• Targeted testing. Tracking trends and modeling what-if scenarios will often reveal key questions worth spending some additional resources on answering. Designing “surgical strike” pilot studies or sampling efforts will limit their cost and complement your tracking and modeling efforts

Q. I want to make the business case for our CSR activities. Are there any studies that can help me calculate the value on stock price?

Academic research on this topic has been plentiful, but with inconclusive results. Some studies^{1, 2, 3} (but by no means all) have found a positive correlation between CSR and profitability or stock price. However, correlation means only that the two conditions tend to exist at the same time. None has been able to establish that CSR causes profitability, as opposed to the reverse: that profitability “causes” (enables) CSR.

And don’t expect that to change. One reason is stock price is simply too blunt an instrument to value typical community or environmental initiatives. Consider a million dollar investment by a Fortune 500 company that yields $10 million to the bottom line. This heroic return would almost certainly gain senior leadership (and media) attention, yet remain a drop in the bucket as compared to the company’s overall revenues and profitability. This dynamic – where significant department-level value can disappear when using company-level metrics – tends to exist regardless of company size.

So forget about Wall Street, and start building relationships with your colleagues in sales, recruiting, HR, regulatory affairs, and so on. Coordinating with them (and tapping data they’re likely already collecting) is the easiest way to track your revenue- or cost-related impacts, and the most promising road to a compelling business case.