Interactive resources for incubators and accelerators
Interactive resources for incubators and accelerators
Interactive resources for incubators and accelerators

Theory of Change

This section looks at the Theory of Change (ToC) tool and how it can be applied to the ventures that you support in your programs. It looks at the different stages of the ToC, their purpose and how they are useful. It also explores some of the more challenging concepts and ideas within the ToC such as what constitutes a logical link, and how to tell the difference between symptoms and causes.

  • Theory of Change is an impact tool social enterprises can use to map out, in a logical flow, how their activities are achieving long term, beneficial outcomes and impact over the longer term.

What It Is

The ToC identifies the intended logical links between a social enterprise’s activities, outputs, outcomes (short, medium and long term) and impact. Outcomes may be positive, negative or neutral; intended or unintended.

There is no one way to represent a logic model – the test is whether it is a logical representation of the activities’ causal links.

Other similar tools to measure impact are: program logic, logical framework model, program theory causal model, outcomes hierarchy, results chain, and intervention logic.

The Theory of Change forms part of an Impact Measurement Framework (along with indicators and data collection methods). It is developed early on in the Impact Measurement process.

How it is Useful

The ToC model is a great resource and tool for helping your team figure out what the change is that your organisation wishes to create over the long-term.

This is an ever-evolving process that needs to be evaluated on a regular basis (annual or bi-annual) to ensure that your goals for impact and pathways remain the same as your organisation grows (or to modify if growth leads to different changes).

It can also be an incredible marketing tool to use with donors and investors because it shows the overall mission and vision of your organisation and how you are going to reach the impact you wish to create.

It also shows a commitment to impact on the organisational-level and can help keep your whole team on the same page when it comes to organisational goals and long-term aspirations for impact.

Reflection

A ToC isn’t just for ventures. It is also useful for:

  • Companies that want to demonstrate that they are sustainable and are having a positive impact
  • Teams
  • Charities

ToC is Good for all Stages of a Social Enterprise

  • Idea

    Idea stage ventures need to work out if they are planning to do the right thing and if they should even get started. They need to really understand the community they intend to work with.

     

    Does the community have the particular problem that  the proposed solution is supposed to address? Do they want it from the venture? If the community is receptive to the approach then is this the most effective intervention that can be done? Is there evidence that it has worked elsewhere? Are there partnering opportunities for the venture to either support an existing initiative or take a successful model from somewhere else?

  • Start-up

    Useful to have a refined story (via a ToC) to tell people they are seeking funding or investment from. Start-Up stage ventures need to test and measure if their approach is working.

     

    Are they achieving the outcomes that the theory of change says they should be? What isn’t working and needs to be changed? They also need to start thinking about how to scale their approach. If it’s working on a small scale, will it translate to other areas or more people? Are there business model limitations that would stop the impact scaling?

     

    For example, is the target market big enough to support a larger organisation and impact?

  • Growth

    A ToC is the foundation for gathering evidence to show the work they do is having the intended impact. Growth stage companies need to be demonstrating their approach can scale and affect a large number of people. This may be done through expanding the number of people supported or moving into new territories.

     

    Growth stage companies should also be collecting high-quality data that they can use to prove the impact they are having. This data is key to being able to tell a credible story about the impact they are having.

     

    To support their expansion, growth-stage companies will need to be creating relationships with funders and impact investors. These  investors will be looking carefully at the business and its impact plans and data to test the social enterprise’s ability to grow its impact. The more complicated the venture, the more complicated the theory of change.

The Stages of a ToC

If you are finding that the theory of change is starting to look too complicated, you can simplify it by showing different streams of impact on separate diagrams. You can roll it together later.

 

The stages of a simple ToC

The stages of a more complicated ToC

In the complicated ToC below, the golden threads are the most important outcomes.

Arrow links must be supported by primary data and/or other academic or governmental research.

The Process of Developing a ToC

STEP 1: DEFINING THE ISSUE

What is the issue or problem? Why is there an issue or problem?

It is not uncommon for a social enterprise not to really understand what issue or problem it is trying to address and whether this problem is a big enough one that people want solved. So:

  • Figure out what you don’t know and what you need to know
  • How have other people solved this issue? Has it been dealt with successfully elsewhere? Is there evidence of what works to solve this issue? (Peer-reviewed literature)
  • How has your organisation’s activities operated in the past to respond to this issue and have you seen change as a consequence? What have you done in the past that has worked or not worked?
  • What causes the issue and at what level of the problem do you want to work?

STEP 2: WHAT LEVEL OF THE PROBLEM?

Are you seeking to address the symptoms or the causes? You may need to engage partners to achieve goals.

Dig deep into the root causes of the issue so that your partners have the clarity with what you are doing and they know values are aligned.

Example: homelessness

  • Why are they on the street?
  • Because they don’t have a house – WHY?
  • Because they don’t have any money- WHY?
  • Because he doesn’t have a job – WHY?
  • Because no one will hire him – WHY?

Because he has no work experience – good place to stop – clear foundational problem that you could tackle.

 

Practical Tip

Ask ‘WHY’ five times as a starting point.

This process helps to bring complexity to the surface.

STEP 3: USING A PROBLEM TREE

A deep understanding of the problem helps to formulate the impact the venture is trying to achieve.

  • Put the core problem at the top of the page
  • Consider direct causes to the problem
  • Place the direct causes below the core problem. Here, each cause needs to be written in negative terms.
  • Think of other secondary causes linked to direct causes
  • Place them under each relevant direct cause

Issues: Costs, availability, and behaviour.

  • Are you addressing all 3 causes?
  • Are there people out there addressing them already? Call them in as partners if you’re going to solve ⅓ or ⅔

STEP 4: ASK WHO IS INVOLVED

Who are your stakeholders? Who is impacted in a material way?

For example, with homelessness, the obvious answer is the people who are experiencing homelessness, but there are many other stakeholders:

  • Families of those experiencing homelessness
  • Shopkeepers
  • NGO’s supporting people experiencing homelessness
  • Police

Group your stakeholders into those who (1) benefit, (2) support and (3) do the work → Are they impacted in a material way? Are they contributing to the change, to support in the refinement process?

  • Customers, but may not necessarily include them
  • Significant funder or government agency (if you have a demonstration model – need them on the journey for change)

 

STEP 5: IDENTIFY ACTIVITIES

List out the core activities that describe what you do.

If your organisation has identified a big issue and wants to start doing something about it (i.e. it doesn’t have any activities yet), you should develop a hypothesis and guess which activities you want to do based off research, your own observations or by talking to the community about what they want.

 

STEP 6: IDENTIFY OUTPUTS

Identify your organisation’s key outputs. These are usually things that are easily seen/counted.

For example, with homelessness, this may be that 100 people attended a work readiness program.

STEP 7: IDENTIFY OUTCOMES

You should spend time thinking about all of the outcomes that your organisation achieves in the short, medium and long term.

Short-Term: Demonstrate potential – quantitative

Medium-Term: Show progress that you are moving to your long-term goals – needs survey to see if there are behaviour changes/opinions

Long-Term: Proof that you’ve achieved your goals – quantitative

Outcomes, particularly longer-term outcomes, are more difficult to identify than outputs. To identify outcomes, you need to understand what changes due to an activity.

Practical Tip

In order to measure the long-term impact, try to build relationships, build it into your program so that you can also collect data.

Observing or asking stakeholders can be a great way to directly identify outcomes.

You may also want to look at research to see what has changed in the past.

The image below shows an example of a reading program involving parents being trained to read to their preschool children.

The outcomes have been mapped out over the short, medium and long term.

Remember to:

  • Note down any actual or potential, unintended outcomes (good or bad)
  • Consider the counterfactual i.e. What if we did nothing? Would the outcomes have happened anyway without our work?

Example: Your program provides free food for children. What impact might that have on local shops, or the general market for fresh fruit and vegetables? Will you take business away from local shops? Will you distort the prices in the market by paying or buying too much?

 

STEP 8: IDENTIFY THE IMPACT

This end-point should be within the realm of possibility that the organisation could have an impact on.

For example, although an organisation cannot end poverty in their lifetime, this can be a part of their impact story. Make sure they know their limited scope.

STEP 9: MAKE THE LINKS AND CHALLENGE THE LOGIC

Make the links between the underlying problem/issue, your activities, outputs, outcomes and impact.

Identify the Golden Thread i.e. the outcomes that are the most important for achieving the desired impact and what activities lead to those outcomes

Practical Tip

Make sure you don’t have magic in your Theory of Change! In other words, there are no significant gaps in the logic model because of missing outcomes.

Look at whether there are some outcomes and activities that aren’t really that important to achieving the desired impact and consider whether they should be dropped.

Key Questions to Ask Your Ventures

  • Is it a logical flow: cause and effect?
  • Do the connections make sense?
  • Have you got to the root of the problem?
  • What is assumed and what is known?
  • Which of the activities and outputs are critical to achieving the outcomes and impact?

Practical Tip

Respect the voice of the people who are experiencing the change. Did you speak to them to get their insights? International data may not be relevant to the unique context.

Next:

Teaching a ToC

How to facilitate a theory of change workshop