Defining and Managing Impact: A Systematic Approach and a Research Agenda

Organizational scholarship has long acknowledged the importance of taking consequences of firms’ activities on society more seriously, yet progress on this topic remains limited. In this article, we propose a systematic approach towards studying and managing impact. Defining ‘impact’ as the difference between the states of the world with and without a given initiative, the authors propose a two-step approach for managing impact. The first is an analysis step, where the impact of the initiative is evaluated descriptively on three dimensions—(a) stated impact realization, i.e., to what extent the initiative produces changes in its stated outcomes; (b) spillovers, i.e., to what extent it also causes changes in other outcomes; and (c) opportunity cost, i.e., how the effectiveness of the initiative compares to the other means of achieving the same change in outcomes—drawing on concepts and insights from organizational scholarship. The second is an assessment step, where the authors present three different perspectives for normatively evaluating the full set of benefits and costs of an individual initiative and comparing across initiatives: (a) using Pareto improvement as a basis for assessment, (b) calculating an aggregate measure of net impact, and (c) confronting the nature of trade-offs. The authors thus provide researchers and practitioners alike with a shared approach to systematically and rigorously define and manage impact, while also offering a rich impact-related research agenda for applying established streams of strategy and organizational scholarship to new questions of societal importance.