Grant makers are often concerned about using grant-making as a tool to achieve social impact. They may choose to utilise grants to:
This differentiates grantmakers from other funders like venture capitalists and credit financiers who focus on profitability. Even when grant makers ask questions about financial sustainability, that is because they want to find out if the impact is long-term. As a result, for your for-profit business to secure grant funding, you must have a clear narrative of how your product, services, and/or operations create positive change within your environment. This is where you will need a winning theory of change.
When I first started designing projects for social impact, one of the scariest and most confusing concepts I came across was theory of change. Over time, I realised that I was not the only one that faced the challenge: many project managers and grant writers still break a sweat when they have to attempt creating a theory of change. Yet, whether or not the grant proposal you want to apply for directly has a question on "theory of change", you will still need to have a foundational knowledge of your project’s theory of change inorder for funders to fall in love with it!
That is because a well-crafted theory of change can help to increase the competitiveness of your grant application by demonstrating that you have a clear and evidence-based approach to achieving your desired outcomes. Additionally, a theory of change can also provide a useful framework for monitoring and evaluating your progress, and for making adjustments as needed. This way, you will be able to successfully execute the project and gain more traction that could further attract more funding.
According to the Centre for Theory of Change, a theory of change "is a comprehensive description and illustration of how and why a desired change is expected to happen in a particular context.". To break it down, a TOC provides the "missing middle" or missing link between your business activities and the impact you wish to create. It achieves this by first recognizing the long-term objectives or effects that you desire to attain, and then retraces these to determine all the necessary conditions (outcomes) that must be established (and how they are interrelated causally) for the goals to be accomplished.
For instance, your business may provide rentals for heavy-duty vehicles in order to ease transportation within a particular region. The long-term impacts of your business, of course, could include encouraging food security (by strengthened food supply chains), job creation (for drivers), and reducing climate change (by using LPG as fuel). Your TOC would then involve a step by step description of how your resources and activities can achieve those impacts within a given period.
Moreover, a well designed theory of change is logical, evidence-based, and systematic. In the context of grant applications, a theory of change demonstrates to funders that your approach is likely to be effective.
Creating a winning theory of change involves a combination of critical thinking and brainstorming, research and evidence-building, and interaction with stakeholders. It can be crystallised in the following steps:
Albert Einstein said:
"If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions."
There is no way that you can understand how to create impact if you have limited knowledge of the problem you want to solve. In fact, in creating a TOC, you must be able to define what I will call the 3 levels of a problem: the primary problem, the reasons for the primary problem (secondary problems), and the root causes of the secondary problem.
Let's say that the problem you're trying to solve, based on the earlier illustration of a business that provides rentals for heavy-duty vehicles, is food insecurity in Nigeria. To understand it, you will need to find out the root causes that relate to what your business is solving. Perhaps, smallholder farmers and smaller traders are not able to move their perishable crops to market early, which results in much spoilage (secondary problem). This could be because they are unable to afford cold storage trucks (tertiary problem). So, by providing a direct solution to solve this root cause e.g. an instalment payment structure for renting cold storage trucks, you will be able to ultimately solve the challenge of food insecurity.
Moreover, you should find evidence to show how the problem you want to solve aligns with the funder's priorities, and why it should be solved. This will help you build a stronger logical case. With our previous example, you could say that food insecurity threatens the health and livelihoods of a particular group of people; with evidence to back it up.
You should be able to define what change you hope to achieve through your work. Once you have clearly specified the problem you wish to address, your outcomes should begin from how you are addressing the root cause(s).
How will your solution achieve your outcome? The step by step description of this is what leads up to the causal chain.
With our cold storage truck rentals business, our causal chain could look like this:
(Strengthening supply chain of perishables from farm to market).
Like every other theory, there are hypotheses or assumptions that you are making about the causal chain and the conditions under which your desired outcome is expected to occur. That would include economic, social, technological, and environmental assumptions.
Within our illustration, that could mean that there are road networks for trucks to use, and that small farmers and traders even have the money to make down payments.
When these assumptions can potentially be thwarted, that forms your project risks. You should be able to (all things being equal) anticipate these risks and innovate ways to solve them.
It's called a theory because it is largely empirical. So, you will need to provide evidence to support your assumptions and causal chain. This includes qualitative and quantitative research based secondary and primary sources, case studies, and the experiences of other organisations working in similar areas.
Share your theory of change with relevant stakeholders, especially beneficiaries and experts, and seek their feedback and input.
As new information becomes available, refine and update your theory of change to ensure it remains relevant and evidence-based. Also, make sure that your theory of change is realistic and feasible, given the resources and constraints you face.
Here's a sample theory of change from our illustration:
Developing a winning theory of change that secures grant funding requires a lot of thinking and research and ultimately, work! Grant Master is here to help you ease the stress of securing grant funding, including by developing a worthy theory of change. You can start here.
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