Theory of Change: What Is It And Why Your Organization Should Be Adopting It?

May 26, 2020 | by Brigita Natasha

Theory of Change. As a social organization, you might hear this term a lot more lately, especially coming from your donors or impact investors. Also, more and more big organizations always bring this framework into their impact evaluation, even UNICEF uses the Theory of Change (ToC) for their strategic planning.

Now, you might wonder, what is it exactly and why do I, as an organization, should utilize it into my projects?

What is the Theory of Change?

Based on Impact Management Project, a forum that builds global consensus regarding impact management and measurement, ToC is a comprehensive description and illustration of how and why the desired change is expected to happen in a particular context. 

ToC is a multi-purpose tool that at first was designed to help planning out complex interventions. Since this framework can give more details on how interventions planned could actually work. It helps organizations, from NGOs to social enterprises to charities, to map out or fill in missing links between what a change project does and how it could lead to desired goals being achieved.

Or in a simple way, ToC is a tool that can connect the needs and your path from input to impact. This tool will show the link between important components to understand your impact and even shows the link between your different goals.

Components of Theory of Change

In Theory of Change, there are 5 main components that you should know. They are input, activity, output, outcome, and impact. Since they are very important, it is crucial for you to define all of them in your ToC.

Input

Inputs are the resources that are needed to carry out activities. It is what organizations invest in their project, such as volunteer hours, money, expert skills.

Activity

This is the action you need to take in order to change the input into the output. You can do several different activities to make sure each of your outputs is produced. 

  1. Output

The Output is a direct product from the implementation of your activity. Something that can change or improve as a result of the actions. The output is directly related to outcome, therefore it is very necessary to track output in order to indicate that the outcome will be on track.

Outcome

An outcome is defined as a change that people you want to affect experience because of your intervention. This result could be intended or not, and it can be in a lot of different forms, such as behavioral change as a result of changing actions, awareness from learning, and/or a change in environmental conditions.

A strong ToC should involve short, mid, and long term outcomes. Stakeholders survey that includes baseline, mid-line, and exit-line, is needed to measure these outcomes.

Impact

The Impact is a systemic and long term change that happened to your stakeholders because of your interventions. Since creating an impact takes years, it is hard to measure them. But, we can measure the outcomes within our reach that lead to the impact that we expected.

For example, for the food security movement called Peduli Pangan, the impacts that they would like to create are farmers’ welfare and sustainable food supplies for the demand points (e.g. small food stalls, basic necessities stores, and emergency kitchens for difficult situations like Covid-19). 

Since achieving these impacts take time, they set immediate and mid-term outcomes that will make sure an increase of food supplies received by demand points via Peduli Pangan, which leads to more products that farmers could sell, therefore increase in revenue.

In order to get these outcomes happening, they connect farmers and demand points by receiving the food supplies from farmers then distribute it to demand points via a warehouse. 

From these activities, they will be able to see outputs of the number of farmers that are able to sell via Peduli Pangan and the details of those supplies, also the number of demand points that are able to receive food supplies and the types of supplies they bought.

To execute this movement, they need a lot of inputs, such as logistical resources, a warehouse, fee to pay the staff, also manpower to help distribution, maintain the warehouse, and all related transactions.

How can the Theory of Change help you? 

ToC needs you to first identify your desired long-term goals or impact, and then it requires you to walk back from these goals to identify the outcomes or conditions that must occur in order for the goals to be achieved. 

Defining your ToC can also clarify the underlying assumptions throughout your project. It helps you to figure out what are the supporting evidences you need to find for each stage that could be used to measure and ensure that your actions are on the right track to deliver the goals you are expecting.

Based on IRIS+, that has been used by impact investors to measure and manage their impact, a TOC can do that, because it will require you to:

  • Describe the problem that you want to solve
  • Consider stakeholders that you are trying to affect
  • Define how you will be contributing to solving the problem
  • List your key actions and assets that you will allocate
  • Consider your constraints/limitations
  • Specify your short and long term goals
  • Describe your expected measurable effects

Why should your organization adopt the Theory of Change?

A good ToC will bring you a visualization of your project clearly because it takes into account all the key aspects of your project. Not just that, a good ToC can show you:

  • Whether you are doing the right actions
  • What do you need to create the impact?
  • Any negative or unintended outcomes that do not help you to achieve the goals
  • Way to measure your impact and show success

Strong ToC can lead you to a lot of other benefits. A paper published by NPC, New Philanthropy Capital, stated that Theory of Change is beneficial in 3 different ways:

As Strategy

You can use ToC as your strategic review that brings all of your organization’s members to focus on the goals or impact that you want to achieve, instead of how the organization is doing currently. Because, it considers the causal link, stakeholder’s perspective, and needed evidence to support the initiatives.

Assumptions that might be unnoticed could also be revealed through a ToC. You want to know whether your assumptions are actually based on evidence or it’s just another constraint and whether it can be changed. 

This way, you will know if you are doing the right thing or not. The more evidence-based you are in your ToC, the more likely your approach will work. 

A good ToC also involves all stakeholders in your project, not just your team or your donor, but also the people that you are trying to affect by your actions. Diverse perspectives, backgrounds, and experiences can give you a better direction on what to do and why you need to do it.

Since ToC requires backward mapping, not all organizations are comfortable to do it and will find it difficult. However, it is very crucial to implement it because ToC is a strategy for you to design what is actually needed to reach your goals. 

strategy for ngos

As Evaluation

Theory of Change is an important basis for you to measure and then evaluate. In order to understand your success, you need to start measuring the right parameters. These parameters can be obtained from understanding your key outcomes. Which is exactly what a ToC does.

Then, figuring out whether your outcome is realistic and measurable or not by your organization. By this, it will actually help you to comprehend the resources you have, understand your limitations, and open you up to seek out for collaborations.

By measuring, you know whether there’s a change happening and how it is happening. Also, you will understand how each outcome is connected and affecting the result you are expecting. 

Most importantly, ToC helps organizations become transparent and evaluate the progress towards your final goals. Since, there’s a lot of initiatives that can not be easily measured or take a long time to measure, ToC can help you measure the intermediate outcomes towards the long term outcomes. Or even determine whether these intermediate steps are the ones that an organization needs to achieve the ultimate goals.

Help you consider your place in this social sector

This framework can help you get a bigger picture of how different organizations are working and could work together toward their impacts & create a greater impact together. 

As mentioned in the evaluation section, ToC can help you evaluate as an organization, and figure out if your actions will be able to help you achieve all your outcomes, which you need to achieve to reach the final goal.

By understanding this, it is actually helpful for you to figure out who are the players that can achieve those outcomes and whether you need to work closely with them or not. Then, what are the common strategies you need to build together to create a bigger impact?

ToC is not just a useful tool to measure your own work, your work with your partner, but also the whole sector. This way you can even share resources, knowledge, and techniques in developing your initiatives. 

Besides that, the diagram of Theory of Change can make your Social Return on Investment modeling to become easier. And as we know, ToC allows you to measure then communicate your impact to your important stakeholders, e.g. upper management, volunteers, donors, and the public. 

This is not just to help you gain more support but also helps you to document all your lessons learned, evaluate, improve, then allocate your resources into the right actions. 

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