Often, when we think of increasing performance, the image that comes to mind is working harder. But more often than not, it’s a case of choosing the right things to work hard on. For impact-oriented organizations, we have found that the Theory of Change (ToC) is a great tool to ensure that effort is directed where it is most impactful. The Theory of Change is a framework that enables organizations to clearly articulate how they use resources and connect their activities to their impact through hypothesis-driven pathways. It forces you to choose, and for many organizations, that is its greatest power.
Theory of Change pathways are about articulating why. Like that inquisitive toddler asking you why, why, why, it forces you to step through the logic of why you are doing things in a certain way. In the example below, we showcase a simplified example of how a vehicle company could try to achieve its impact ambition to improve urban public health by reducing air pollution through two different impact pathways.
This ToC focuses on a traditional, market-driven approach. It uses the company's core business model to achieve the impact, emphasising profitability and operational efficiency as the primary drivers.
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Inputs |
Activities |
Outputs |
Outcomes |
Impact |
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Developing and marketing a new line of electric delivery vehicles for its logistics fleet. Partner with other businesses to help them transition to electric fleets. |
The company's fleet emissions decrease by a certain percentage, and a number of partner companies adopt electric vehicles. |
Short-term There is a measurable reduction in localised emissions in key urban areas, and public awareness of the benefits of electric commercial vehicles increases. Long-term The market for electric commercial vehicles grows, and the company's brand is strengthened as a leader in sustainable logistics. This contributes to the ultimate goal of improving urban public health. |
Improved urban public health by reducing air pollution. |
This ToC focuses on a more systemic and collaborative approach. While it leverages the business, its primary drivers are its purpose and values, emphasising social and environmental change alongside direct commercial gains.
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Inputs |
Activities |
Outputs |
Outcomes |
Impact |
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The company partners with city governments and non-profits to co-design and implement pilot programs for low-emission delivery zones. It might also use its expertise to lobby for policy changes that support cleaner transportation infrastructure. The company could even offer open-source data from its fleet to help urban planners optimize for air quality. |
The company successfully launches a pilot program in one or more cities, influences the passing of new policy, and publishes a public dataset. |
Short-term Long-term |
Improved urban public health by reducing air pollution |
This approach is highly versatile and applicable across diverse contexts. Examples include a not-for-profit striving to alleviate loneliness among the elderly, a government department working to decrease re-offending rates, or a purpose-driven bank seeking to generate both impact and profit by financing the shift towards regenerative agriculture.
Impact can feel elusive across organizations of all shapes and sizes, from long-standing conglomerates to startups at the beginning of their journey. Our large corporate clients don’t lack plans; they have too many. They have multiple projects and teams operating in silos, with their own roadmaps and KPIs, but with no unifying story about how it all fits together.. This lack of unity can lead to wasted time, effort and resources as organizations spend millions without being able to effectively report on the results. Others are not able to deliver the impact they want to have because of a fundamental misalignment between their business model and their impact ambition.
In start-ups, the passionate founders we work with often have the opposite problem - they have a brilliant vision, but they can’t prioritize. They are trying to do everything at once and are worried that they are burning through their initial funding without a clear way to measure their progress.
The public bodies and large charities we work with can fall into a middle ground; busy with multitudes of programmes, reporting vast outputs, but ultimately struggling to connect these with the impact society needs.
With all of these cases, the overarching theme is that not having a clear vision or roadmap towards your desired impact often leads to wasted money and time, hindering your organization’s ability to achieve its goals.
In order to resolve the challenges above, organizations need a framework, or a strategy plan, which allows them to map the work they are doing, the resources they have, and the money they spend, all the way to the impact they are actually having.
One method that we use with clients to do this is the Theory of Change. Theory of Change is a strategic framework first developed by Carol Weiss, which is widely used in the not-for-profit, government and NGO sectors. It is a strategy method which directly links the capital your organization has access to and the activities your organization does with that capital to the impact you want to have.
Each organization is one part in a large, complicated, interconnected system. In order for organizations to have a successful strategy, they need to understand the complexities of the system they operate within, their place within that system, and a clear vision of the impact they want to have on that system. A good Theory of Change can provide a clear direction by looking at the system you are operating within, being rooted in evidence, and being adaptable and testable. By having a framework which allows for both quantitative and qualitative measurements, organizations are then able to track the extent to which they are achieving their desired impact based on the activities they have. They can then adapt in response to these measurements, lessons learnt, new information gained, and changes to the system it is operating in. This can enable organizations to move beyond simply being busy, to being genuinely effective and ensuring every effort contributes to a measurable and meaningful challenge.
In order to build a high-quality Theory of Change that will give your organization the most value, it needs to be rooted in knowledge of the system, co-created with system partners, and easily communicable. It should be viewed as an adaptable roadmap that needs to be revisited and reiterated upon. There are some common pitfalls which organizations can fall into when developing and implementing a Theory of Change which will hinder the usefulness of the framework. It is important to remember that it is a linear framework in a complex systems world. It can take a long time to construct, and, if it is not revisited and updated, can quickly become out of date. Rather than being viewed as a rigid plan, it should be viewed as a testable hypothesis that adapts. Organizations need to be able to incorporate their learnings, respond to changes in their environment, integrate new information and knowledge, and ensure ongoing stakeholder alignment. This will enable the creation and maintenance of a robust and high-quality Theory of Change framework that will allow organizations to have a clear understanding and line of vision between the capital, resources and activities through to their impact.
Used correctly, a Theory of Change can become an integral part of even the longest-standing organizations, providing a new way to align and amplify the impact you are already having, and increase your performance. An example we have seen of this is through our work with a major financial services provider.
They knew the impact they wanted to have, but were unclear on how their current strategy and activities were delivering on this impact. By defining a robust Theory of Change, they were able to clarify their intended outcomes and the pathways to achieving those outcomes. They were able to align multiple ongoing strategic efforts into a coherent framework, so that teams across the organization, and wider stakeholders, could understand the connections between the different pieces of work and their overall impact and company performance, whilst effectively measuring their progress.
With the clarity brought about by the Theory of Change strategy framework, this organization was able to unify the delivery of its work, measure the impact it was having in a meaningful way, and increase stakeholder engagement and collaboration, both internally and with external partners.
If your organization:
then the Theory of Change is definitely a discipline worth adopting or revisiting. It can drive performance across diverse contexts and align complex, siloed efforts.
It is not a cure-all; it takes time to develop and keep updated, but it can provide a North Star and a roadmap, ensuring that efforts are aligned, priorities are clear, and everything your organization does is a step towards your desired impact.
Ready to apply the Theory of Change to your organization? Contact us today to discover how we can help you bridge purpose and performance for lasting impact.