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How can variance analysis improve your social impact reporting?

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Social impact reporting is a way of measuring and communicating the positive effects of your organization's activities on society and the environment. It can help you attract and retain stakeholders, demonstrate your accountability and transparency, and improve your performance and decision-making. But how can you ensure that your social impact reporting is accurate, relevant, and useful? One tool that can help you is variance analysis.

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Edwin Samu FCCA,FMAAT, BSc (Hons),MSc. PGcert
Ammar S.

1 What is variance analysis?

Variance analysis is a technique that compares the actual results of your operations with the planned or budgeted results. It helps you identify and explain the differences or variances between the two. By doing variance analysis, you can understand the causes and effects of your performance, and take corrective actions if needed. Variance analysis can be applied to different aspects of your organization, such as costs, revenues, profits, outputs, outcomes, and impacts.

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2 How can variance analysis improve your social impact reporting?

Variance analysis can improve your social impact reporting in several ways. First, it can help you monitor and evaluate your progress towards your social impact goals. By comparing your actual impact with your expected impact, you can see how well you are achieving your mission and vision, and what factors are influencing your results. Second, it can help you communicate and justify your social impact to your stakeholders. By showing the reasons and evidence for your variances, you can demonstrate your credibility and accountability, and address any questions or concerns. Third, it can help you improve your social impact strategy and management. By learning from your variances, you can identify your strengths and weaknesses, and adjust your plans and actions accordingly.

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3 What are the types of variance analysis?

Different types of variance analysis can be used for social impact reporting, depending on your needs and preferences. Budget variance analysis evaluates financial performance and efficiency by comparing actual income and expenses with budgeted ones. Output variance analysis looks at actual outputs vs. planned outputs to measure productivity and quality. Outcome variance analysis compares actual outcomes to expected outcomes in order to evaluate effectiveness and relevance. Impact variance analysis measures long-term or systemic effects against intended impacts to estimate social return on investment and attribution. All of these can help you manage resources, optimize processes, enhance value proposition, amplify social innovation, and more.

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Edwin Samu FCCA,FMAAT, BSc (Hons),MSc. PGcert
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All these types are not mutually exclusive. Budget variances could influence output variances, which in turn affect outcomes and impacts. Analyzing them holistically provides a broader perspective on your social impact journey. The important thing is to align the chosen variance analysis with your specific goals. We can then use the insights gained from each type of analysis to inform decision-making. For instance, budget variances might reveal resource allocation inefficiencies, prompting adjustments to funding strategies. Similarly, outcome variances could lead to program modifications to maximize impact.

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4 What are the steps of variance analysis?

Variance analysis is a process that involves several steps to achieve its goals. First, objectives and indicators need to be established as standards or benchmarks. Then, reliable and relevant data needs to be collected and compared to measure the variances between actual and planned results. It is important to analyze and explain these variances, classifying them as favorable or unfavorable, and controllable or uncontrollable. Afterward, the variances and their explanations need to be presented and shared with stakeholders in appropriate formats. Finally, actions should be taken and improvements should be made on the variances, while monitoring and reviewing their effects.

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Ammar S.
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Variance analysis improves your social impact reporting by measuring your KPIs where you can gain insights into your social impact in terms of the strengths you excel at, and the weaknesses you avoid.

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5 What are the challenges and best practices of variance analysis?

Variance analysis can be challenging, with potential issues such as data availability and quality, interpretation and attribution, and presentation and communication. To overcome these difficulties, it is best to align objectives and indicators with a theory of change and logic model, using SMART criteria. Additionally, mixed methods and sources of data should be used to triangulate and validate results. Variance analysis frameworks, tools, templates, formats, principles, and techniques should also be employed. Finally, stakeholders should be engaged in the process to solicit their feedback and input.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can variance analysis improve your social impact reporting?

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1 What is variance analysis?

2 How can variance analysis improve your social impact reporting?

3 What are the types of variance analysis?

4 What are the steps of variance analysis?

5 What are the challenges and best practices of variance analysis?

6 Here’s what else to consider

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