If you ask pretty much anyone from the business community what the Theory of Change is about they’ll most likely look blank. The same applies to those in government. For the concept is largely restricted to the development world, including NGOs and those who fund them.
Having worked with NGOs over the years I have become familiar with not only what it’s all about but why it’s a good idea to apply it. Figuring out the Theory of Change (ToC) comes in as one is developing one’s strategy, and it links cause-and-effect relationships between what one does and what the outcomes are.
Its focus is on the long-term impact of a whole organisation and of its programmes and projects, and it ensures that the indicators or measures used go beyond those that merely assess intermediate output. This ensures robust performance management – or as NGOs prefer to call it, M&E (Monitoring and Evaluation) – which insists on having answers to the repeated “So what?” question probing the consequences of one’s actions.
As I have mentioned in other articles, measures of intermediate output are usually much easier both to define and to achieve, and too many planners and leaders adopt this shorter, easier path to performance management. My usual example is the objective of developing the capacity of one’s people, where the measure is simply the number of training programmes and how many attended, without looking into the much more challenging task of assessing the consequences of them having done so.
With the application of ToC, there’s no choice. One is forced to think about what change resulted from having done what one has done. Like, did developing the staff capacity change how effectively one operated in achieving the purpose, the vision, of the organisation?
When I was introduced to the Theory of Change I was already familiar with the Balanced Scorecard’s way of carrying out strategic planning. The Balanced Scorecard has strategic planners identify objectives in a “balanced” way, focusing on the four pillars of Customers and Products; Learning and Growth (or “Our People” as I prefer to call it); Systems and Processes; and Financial Sustainability.
Over the three decades since it was launched as a methodology, the Balanced Scorecard has evolved in a number of ways. When it was first introduced it was only intended for use by for-profits, but it has since expanded to not-for-profits and to government (in both of which I and my colleagues have applied it). This was enabled through its evolution from emphasis on shareholders of companies to the inclusive perspective of all stakeholders to any entity, bringing on board the contemporary ESG – Environmental, Social and Governance – issues that any kind of organisation must take into account.
Another vital evolution of the Balanced Scorecard was the introduction of Strategy Mapping. This, just as one does in plotting the Theory of Change, spells out cause-and-effect linkages between objectives – within and between the four pillars, and building up to achieving the ultimate long-term aspiration.
An example I like to describe to illustrate this is the relationship between the Balanced Scorecard’s financial pillar and the other three. One will only reach financial sustainability if all the other pillars are in good shape. They are described as the “lead” factors, with the financial one being the consequential “lag” factor. Having said that, unless the finances are available for the other three they will not be able to deliver. See my point about cause-and-effect relationships?
So whether we’re talking about the Theory of Change or about Strategy Mapping within the Balanced Scorecard framework, my advice to you all is to think hard about how in your organisation, be it for-profit or not-for-profit, private or public sector, large or small, you define the cause-and-effect links between the different elements there. Find out how to do so graphically, so all the links are easily visible.
This will help remove the silos, the walls between functions or levels, between programmes or projects, and that everyone has the whole picture, aware of whose enabling influence they rely on and who they in turn are enabling. And all this so they know how they can best contribute to delivering on what the whole organisation is all about.
