Now I think about it, I suspect it was mainly that they (recognising that we were all a bit spoilt!) were fed up with having to adjudicate every time my siblings and I argued about who got to drink from a favourite mug or who should be told off for a fight that the other had started.

They were right of course; the world isn’t fair – sometimes we do just need to keep calm and carry on. And yet, none of that should stop us trying to make it fairer.

One reason the impact sector exists, is that so many of us believe that social justice rests on a more important form of fairness amongst children. A child’s future capabilities, opportunities and freedoms shouldn’t be contingent on the lottery of birth. We are a long way from fairness defined in that way, but the goal is so important that work towards any other end feels insignificant. Millions of people are driven by a shared mission; that more of the next generation should grow up with the most valuable capabilities and freedoms.

The challenge, is that the market for impact is dysfunctional. For a variety of structural reasons, funders and doers committed to making the world fairer, end up frustrated, cynical and unable to generate as much impact as they might.

My posts so far have isolated specific causes of the dysfunctionality. This one looks at how the dysfunction is a self-reinforcing equilibrium which, by definition, is incredibly hard to escape. Until we understand the dysfunctionality and solve for it, we will remain trapped in an unhappy status quo.

Imagine the typical path of a newly created philanthropic foundation. The foundation enters the market with a clear mission: reduce injustice through better education. They start looking for great grantees to back. But what they find disappoints them. Organizations are struggling financially, spending half their time fundraising just to survive. The best ones are already fully funded. The rest feel mediocre—not because the people or ideas are mediocre, but because they’re exhausted by financial insecurity. Some of the stronger organizations can’t even prove their impact because so much of it is indirect or long-term.

Unsurprisingly, the new funder struggles to find enough highly effective doers to back and becomes frustrated. The funder then loses trust in the market of potential grantees and misdiagnoses the issue. He or she thinks grantees aren’t making good, impact-maximising decisions. What the funder doesn’t see is that the doers are making rational decisions given their constraints. Without reliable, long-term funding, of course you chase short-term wins. Of course you focus on what funders want to hear.

So, the funder establishes a team, evaluative approach and grant agreements that set themselves up as a principal in a principal-agent arrangement in which they are effectively commissioning the grantee to deliver widgets of impact or to develop in a certain way. This compliance-based management leads to control over strategy, line-item budget approvals, even vetoes over hiring

But what feels like solving the problem, ends up reinforcing it.

The vicious cycle works something like this:

· Insufficient funding for organisational development leads to low capability grantees focussed on delivering the lowest hanging impact fruit or ‘widgets of impact’

· Funders (quite reasonably) lose trust in the average grantee. The problem is compounded by funders (again, reasonably) seeking attribution for the impact of their grant

· Funders set themselves up for compliance-based management and direct most funding to organisations set up to meet funder needs

· Compliance based management introduced to reduce risk, end up increasing it by reducing adaptability, intrinsic motivation and crucially, accountability

· Most grantees remain hand-to-mouth. Financial insecurity reduces focus on ‘total impact’, long-termism, ‘systems engineering’ and other upstream problem solving

· The organisations that we need to thrive – mission driven, high conviction charities dedicated to maximising long-term, total impact grow more slowly

· While in a market of zero-sum competition, the fastest growing organisations are often the most biddable or funder centric

· Grantees (quite reasonably) lose trust in funders and misdiagnose them as being primarily interested in control

· Grantees don’t give funders honest feedback when their finances are fragile

· Insufficient funding for organisational development leads to low capability grantees

Or to put it more concisely: Trust erodes, control increases, motivation dies and capability stagnates, trust erodes …

In international development, the issue is exacerbated for local organisations. Local NGOs struggle against the phenomenon of path dependency. Local leaders start with fewer networks and less trust with Northern funders. International MEL providers reflect and exacerbate this problem. The presence of effective iNGOs and international MEL providers reduces the incentive for funders to invest in local entities. Why do so, when you can produce impact today through a trusted iNGO or validate impact through an established international evaluator? A self-fulfilling prophecy ensues.

This stuff is real and it creates so much waste. A few years ago, I got to know one brilliantly led Kenyan organisation that had been forced into a completely incoherent strategy as funder after funder commissioned it to run disconnected programmes through restricted grants. It ended up doing lots of work badly. An organisation that could have grown quickly into a valuable and permanent Kenyan institution, had far too little money and time to hire the core team it needed to focus on that vision.

None of this is to question the impact or value of iNGOs. Many are highly effective. I regularly encourage funders to back the best iNGOs. The issue is simply that, over the long-term, locally led organisations, with a deep, long-term commitment to place and an understanding of context are a critical part of the mix. For now, the impact market invests far too little in growing that pipeline.

In the market for impact, a few NGOs grow large either through elite networks, being brave enough to stick to their guns over decades or simply by being funder centric and biddable.

The asymmetry of information challenge I looked at in my last piece means it’s hard to judge NGO effectiveness. That leads to ‘herding’ which concentrates support on established, superstar organisations and leaves others with restricted grant scraps. Even where these superstars are truly impressive, there is a point at which the impact per marginal dollar they receive drops below the marginal dollar given to less well-known, riskier, early-stage entities.

Zero-sum competition also reduces impact through transaction costs. These are highest when grant competitions involve high application costs for each doer whether they win funding or not. On occasion, the total impact generated from any eventual grants is lower than the total costs of the application process and the funder ends up having a net-negative impact on the system. As the transaction costs of compliance-based grant management are higher than for longer term, unrestricted funding, efficiency drops yet further within a vicious cycle of distrust.

To be clear, these issues arise mainly from an insufficient supply of unrestricted funding rather than the finite nature of funding overall. Where organisations have sufficient unrestricted funds, their primary focus on impact kicks in and the negative incentives created by zero-sum competition reduce. They can focus on ‘total impact’ over ‘my impact’. Often, growing charities experience a shift in these incentives as they establish themselves and access more unrestricted support over time. I experienced this while running PEAS; the same CEO became more focussed on collaboration and total impact simply because we had more financial security. This is why the solution isn’t more money, it’s different money – patient, trusting, long-term.

Sadly, once a sub-optimal equilibrium is in place, it is hard to change course. It’s a coordination failure in which acting alone seems futile. The result is that too few organisations reach maturity and even fewer can build strategies truly dedicated to maximising long-term impact.

Over these pieces I’ve tried to show how ‘incentive traps’, ‘information asymmetry’, ‘principal-agent problems’, ‘zero-sum competition’ and ‘path dependency’ combine to produce a seriously dysfunctional impact market.

To make progress, we need everyone in the sector to do three things. The first is to understand the causes of the dysfunction. The second is to accept that most of it is the result of good people with good intentions making rational decisions in an inadequate equilibrium. There are very few villains out there, but the system itself is a demon. The last is to begin thinking about what we can each do shift that equilibrium. I hope what I’ve written so far goes some way to helping achieve the first two. Next time, I’ll look at ways the most enlightened organisations are bravely going head-to-head with the demon itself.

Staff at the funder were considering a large commitment to the charity but the board needed persuading. The board wanted assurance that any contribution - potentially running into millions of pounds – would have an impact and albeit less explicitly, an impact that could be attributed to their support. But many on the board had never been to the countries involved and didn’t know the team leading the potential grantee.

What happened? You guessed it. While the grantee desperately needed long-term, unrestricted funding to allow it to focus on maximising total impact, the funder was incentivised to partner with the charity through heavily restricted grants and the direct engagement of funder staff. Most people are motivated by autonomy but it’s a particularly strong driving force for founder CEOs - for many, it’s one reason for launching their own organisation. As the partnership developed, its contradictions began to grate on both sides, and it wound down having achieved far less than it might have.

Not a failure but a missed opportunity and an emotionally draining process. As you can imagine, it might take the grantee in this scenario many years before they could reflect objectively on what happened …

Who was at fault? Everyone and no one. Everyone, in as much as we all have secondary agendas that aren’t squarely centred on maximising total, long-run impact. And no-one, in as much as the apparent irrationality of restricted grants was caused principally by market structure issues far more than by a moral failing on the part of any participant.

While this is a specific example, it’s not atypical. Most people in the sector can point to partnerships that followed a similar path. Everyone acted rationally and everyone was left frustrated.

Structural issues are boring but they’re real

It’s far more fun (and human) to moan about a person or an organisation than it is to complain about market failure, structural issues and misaligned incentives. But the truth is, when it comes to dysfunction in the market for impact, structural issues are the real baddy.

The structure of the impact market incentivises doers away from maximising long-run impact. This is a ubiquitous problem and until we understand it and tackle it, we will be leaving ‘impact points on the pitch’ while growing ever more cynical.

I’ve found that undergraduate economics 101 comes in handy when working out what’s going wrong. In the rest of this piece and the one that follows it, I use some basic micro-economics to explain why good intentions in the sector don’t translate into ideal outcomes. Today, to consolidate ideas I shared in parts one and two of this series, I’ll look at ‘incentive traps’ and ‘information asymmetry’. Next time, I’ll look at the concepts of path dependence, zero-sum competition and principal-agent problems. Once I’ve done that, it’ll be time to look at what (if anything) we can do to re-structure the market to help doers refocus on the long game.

Incentive Traps

In the impact market, incentive traps are occasions where the secondary drivers of doers and funders get in the way of the shared, primary goal: impact.

Where prestige, status or a need for certainty matter to funders, they focus on obtaining attribution for impact. This encourages restricted funding and the search for ‘widgets of impact’. The approach tends to undervalue secondary, ‘spillover’ effects. It also means too little funding flows ‘upstream’ to fix root causes as such efforts don’t always translate into measurable gains. The combination carves away at impact as programmes take too little time to consider unintended consequences while wasting money on the many inefficiencies of restricted grants. Many NGO CEOs value unrestricted (flexible) funding at twice or more the value of a restricted grant. If you aren’t already an unrestricted funding convert, please check out: Trust, Unrestricted Grants, and the Golden Rule for Funders | The Center for Effective Philanthropy

Another incentive trap is myopia. Born of moral urgency, myopia can drive philanthropies to favour quick wins and existing, known quantities versus early-stage efforts. Funders and doers, bias towards picking the low hanging impact fruit leaving too little funding for efforts that ‘tend the impact orchard’. This creates a philanthropy paradox: the funder in the best position to take greater risks, instead focuses on quantifiable, quick wins. Funders focus on widgets of impact over 3-year grant cycles. The highest impact interventions like behaviour change, policy and systems work are systematically underfunded because of their relative uncertainty and long-term horizons.

Information Asymmetry

This is the big one and it’s pervasive. Funders and doers have different information. Because funders hold the power, doers face a strong incentive to please. Funders need assurance – no one likes to waste the money - so doers are incentivised to tell them what they want to hear. That means building monitoring and evaluation strategies to suit the assurance needs of funders, rather than to assess and improve programmes for maximum impact. Knowing funding can move elsewhere, doers are also incentivised to spin results rather than to share the ‘warts and all’ picture. In a competitive market, with asymmetric information, the doer with the best spin can outcompete one with the greatest total impact - at least in the short-term.

Some strategic funders try to solve for information asymmetry in another way. By agreeing ‘what works’ up-front, these funders find partners to implement proven approaches. But again, as a form of restricted funding, this can undermine the motivation of partners while disincentivising innovation. It also encourages ‘isomorphic mimicry’ (as articulated by Lant Pritchett) where doers attempt to roll-out generic programmes in new countries with insufficient sensitivity to context or implementing capacity.

The need for assurance in a world of uncertainty also biases international funders towards international NGOs. iNGOs tend to be better placed to ‘talk their language’ in the metaphorical rather than literal sense. They also have better access to relevant networks through which to build trust. Sadly, trust itself tends to flow more easily to ‘people in our own image’ and that image is usually Western, with high English fluency and professional credentials.

What a mess

I’ve spent years in the impact sector. I used to think partnership failures were about incompatible personalities or conflicting visions. I was wrong. They’re usually just people responding rationally to broken incentives.

Impact markets are particularly prone to this dysfunction. It is the predictable result of misaligned secondary agendas and incentives and from information asymmetry. As if that wasn’t enough, there are other causes of dysfunction too. If it’s not too depressing, my next piece will look at those before taking a more positive turn to run through ideas for how to improve things.

If you find these notes interesting or helpful, please do subscribe and share them with friends and colleagues.

This week, I’m looking at the second big cause of impact market dysfunction: Impact measurement is very hard.

I recognise this isn’t much of an insight. What I want to look at though, is how funders’ responses to measurement challenges can cause more harm than good.

When I say impact is hard to measure, I mean, more precisely, total impact per dollar is hard to measure. Total impact includes every direct and indirect impact; every intended or unintended, positive or negative impact; impact across multiple outcomes and across decades. Total impact (per $) is what actually matters and yet, we never measure it. Why? Because we can’t.

The challenge of measuring total impact per $ has at least twelve different causes - see table below. To tackle each, funders have developed self-defeating biases which distort their approach to evaluating and supporting doers. Those biases are the second reason[1] impact markets are so dysfunctional.

Why is bang per buck hard to ascertain? I know tables can make hard reading (and even harder one sub-stack - I’ll avoid them in future!) but most of my argument is embedded in this one, so please do zoom in and whip through it, to see just how much the impact measurement challenge undermines the impact market.

There is a lot in that table but hopefully, many of these biases feel familiar. The wide variety of reasons ‘total impact’ is so hard to figure out, makes it very hard for funders to know who creates the greatest bang per buck. The biases are natural responses to these challenges. They represent funders seeking certainty. Problems arise when the cost of the search for certainty, rises above its benefits.

Effective philanthropy analysts try to solve the problem in another way. Their bang per buck calculations are based on quantitative evaluation data from which they make assumptions about future impact. They are usually careful to discount predicted impact, to avoid overstating their case. This is fine as far as it goes but it leaves them with blind spots like biases towards approaches which lend themselves to quantitative evaluation. Because the tangibility of bang per buck evaluations is at the core of effective philanthropy, longer-term and second-order effects are often under-weighted. Institution building work is under-funded as the EA process encourages the funder to free-ride on the developmental funding provided by others in the past. That’s not a problem if enough funders were backing doers with core-cost or unrestricted funding, but as any doer knows, they are not.

While it’s possible to mitigate some of the challenges and biases through tactics like those in the right-hand column, when I shifted from running a charity to leading a foundation, I found that the only real way out of the search for certainty in an uncertain world, is to side-step the problem by taking a fundamentally different evaluative approach.

A different approach to evaluating charities

What if, instead of over-indexing on narrow, short-term estimates of likely bang per buck, funders adopted a more nuanced approach - balanced score cards, in which a potential grantee was evaluated based on a range of criteria.

When I was running grants for the Peter Cundill Foundation (PCF), we developed a scorecard that placed a reasonable amount of weight on independent, quantitative evidence of outcomes (Randomised Control Trials etc.) but it also placed weight on the organisation having a culture for understanding its impact, as well as on the strengths of leadership, governance, strategy and growth, how coherent its range of activities were and critically, on indirect and sector impact.

By reducing the relative weight placed on RCTs or other quantitative evidence, we were able to find a greater range of quality partners. PCF’s long-term grantee portfolio showed compound income growth of 28% a year, over the six years I was there. Of course, income growth is at best a limited proxy for impact and selection and survivorship bias will have played a role in the portfolio’s success. Having said that, that growth rate across 40+ partners does indicate we were good at picking winners. If only I’d been a fund manager in the commercial world, I would be rich!

Top tips

Funders:

1) Watch out for and avoid these biases!

2) Consider using a balanced score card to evaluate partners and then back them with unrestricted funding so they can focus on total impact.

3) Consider hiring former doer executives who are often in the best position to make subjective judgements required by balanced score card type evaluations while also being comfortable with quantitative research methods

Doers

1) Focus on total impact; build a culture for doing the right thing even when no one is looking. Your reputation as a strong and trusted institution depends on it over the long-term even if that means slower initial growth

2) Try to avoid funders whose funding approach drives your strategy away from maximising total impact

3) Be brave about feeding back to funders whose funding process reduces your impact. Funders can’t read minds and if your work is good enough, they need you, as much as you need them.

By encouraging funders to shift to balanced scorecard-based partnership evaluation, I’m not suggesting quantitative research and data don’t have a role to play. After all, the process of attempting to calculate bang per buck will generate insight even if the results should be taken with a pinch of salt. It’s just that when we index too heavily on RCT results or widgets of impact produced over 3-year programmes, we risk missing the wood for the trees. Next time, as thrilling as it may sound, I’ll be using some of my undergraduate micro-economics to show how various structural issues cause even more impact market dysfunction. I’ll wrap up the series with a vision for a market that truly maximises total impact.

[1] See ‘Why are Impact Markets so Dysfunctional - Part 1’ for the first.

[2] The Illusion of Comparability Among Standardised Effect Sizes: Why Education Evaluations Should Report Raw Effects | Center For Global Development

I can be judgemental. My wife has told me so and she’s a psychotherapist, so I tend to accept her feedback – at least after I’ve dwelt on it for a few weeks!

I’m particularly judgemental when it comes to people with prestige, money, or power. I tend to assume their agendas are selfish. How else might they have obtained and retained their position?

As the founder of a young, struggling charity, blaming the selfishness of potential funders was a useful psychological defence. I wasn’t failing - it was just that rich people were immoral.

And by comparison, in my own, unexamined inner world, my agenda was pure. I was dedicated to the selfless pursuit of impact maximisation built on compassion. At least, that’s what I told myself.

Luckily, we all grow up in the end. For me, that has meant a growing understanding that each of us contains multitudes. Our agendas are mixed and complex. As a 21-year-old, privileged, white, British man launching a school in an informal settlement in Kampala, my own drivers included deep compassion and curiosity but also status, adventure and maybe, just maybe, the chance to be a boss; to exert control.

Only by being honest about the complex agendas that drive us, can we understand why, as civil servants, NGO workers, philanthropists and researchers, our actions don’t always align with the goals of the organisation or system we operate in. Only by digging into the complex agendas of colleagues and counterparts, can we create environments that incentivise them to focus on achieving shared goals.

The ‘Market for Impact’

Funders make grants to doers (NGOs, social entrepreneurs, ‘for-purpose’ companies etc.) in a ‘market for impact.’ Funders demand impact and doers supply it. Twelve years as a fundraising CEO and six as a funder have given me a sense of what makes both sides tick. It turns out that neither doers, nor funders are wholly focused on generating maximum impact. Why? Because they are human. They have mixed agendas. They are subject to multiple drivers. And yes … that includes effective altruists!

The point is this: Our sector is full of brilliant people, deeply committed to doing the right thing. The problems we face are nearly always structural, not moral. If you’ve worked in the impact sector for a while, none of this will feel revelatory. We see it everywhere. A funder refuses to cover overhead costs because consciously or not, part of their agenda is not just creating impact but being able to clearly attribute that impact to their funding. And why not? No one operates from purely selfless motives.

To make progress, we first need to be clear-headed about our mixed agendas. Only by satisfying those agendas (or by encouraging people out of the impact arena) can we refocus on changing lives. This may sound like cynicism but I like to see it as practical, optimistic realism.

In a healthy impact market, capital would flow in a way that maximised total impact. Impact-maximising funders would calculate a programme or charity’s impact per pound, dollar, kwacha, or rupee before ‘buying’ as much of that product as they could afford to give, or the charity could supply.

Impact markets fail, because impact is hard to measure, incentives are distorted by secondary agendas, and neither funders nor doers are impact-maximising machines.

Secondary Agendas

What are those agendas? Let’s start with doers.

Doers’ primary agenda is the sense of purpose that comes from working to improve the world at whatever scale. Beyond that, the mix varies - creativity, financial security, ego, fear of failure or the simple pleasure of being in charge. The doer themselves couldn’t tell you the precise proportions.

Enlightened grant makers build their understanding of how this mixture of drivers affects doers. By treating doers as people with complex agendas rather than robotic impact-maximising agents, funders have a better chance of getting the ‘how’ of giving right.

What Drives Funders?

Funders each have their own agendas and reasons to act. Just like doers, the primary driver for many funders is impact. Most funders or staff in funding bodies, also face onward accountability - to taxpayers or principal philanthropists. How often do doers produce detailed, multi-year plans for risk-averse grant officers, when what they need is flexible funding to adjust strategy in real-time?

Then, there are the subconscious drivers like distrust. Stories of corruption or misconceptions around amateurism in the charity sector generate distrust, and when impact is so hard to measure, that encourages control tendencies. Likewise, drivers such as kudos and prestige can lead funders to value attribution for impact over total impact.

These drivers are human and understandable. My point is not to judge. In fact, it’s the reverse, it’s to encourage us all to recognise these drivers in ourselves and others, without judgement. Rather than ignoring or burying our wider agendas, let’s recognise them and work with them. It’s time to give the people you work with, what they need to maximise their impact.

And to get yourself what you need, so you can do so too.

Rendel’s Top Tips

It’s one thing to recognise how important it is to think about people’s agendas and another to know what to do about it. In coming posts, I’ll be sharing lots of practical tips for funders and doers to help you on that path.

When I was CEO at PEAS and came up with a new idea, Laura Brown, my ever-patient number two, would often reply ‘Well, that is an idea John,’ before moving the conversation on. Very occasionally, she would say, ‘Well actually, this one is a good idea.’

The nice thing about a blog, is that I can share ideas in the hope that at least some of them go beyond being just ‘an idea.’ If you spot any ‘good ideas,’ do please share the post, subscribe or comment at the bottom. Equally, if you disagree with something or want to add to it, I love thinking in dialogue, so please feel free to share challenges too.

In each post, I’ll try to share practical tips for the impact sector. Here are the first:

Funder Tip 1 - A simple exercise for funders, is to consider how your grant-making approach promotes the autonomy and security (alongside other secondary drivers) of the doers in your portfolio. How would you redesign your process with those things in mind?

Funder Tip 2 - Are any of your grantees so motivated by a secondary agenda, like fear or excessive ego, that they are unlikely to maximise impact in those moments when no one is looking? If a doer talks more about severity of need, than the efficacy of their solution, that’s a red flag. If their impact data is big on reach and less strong on depth or sustainability, it is time to move on.

A reflection for doers – How can we avoid blaming colleagues, when mixed agendas get in the way, and instead, work out how to satisfy those agendas, in ways that are consistent with our mission?

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John Maynard Keynes once said, ‘In the long run, we’re all dead’

In a world in which extreme need and unnecessary suffering are ever-present, a sense of urgency is what gets us out of bed in the morning. And yet, in international development, that urgency often excuses myopia. Too many programmes are designed to deliver ‘widgets of impact’ today, over compounding, long-term transformation. And so, tomorrow never comes.

It is precisely because every child deserves the best possible education, that we should focus on maximising impact over the long-term. This is as true for an international funder, as it is for a government or NGO.

And yet, everywhere, we see narrow plans and strategies filled with heroic, unrealistic assumptions, which fail to take the bigger picture into account. We see too much funding flowing into downstream efforts, where problems have become apparent and too little, tackling those problems at source.

What causes the gap between what is done and what needs to be done? And - more importantly - what can we do about it? ‘The Long Game’ tackles these questions and throws in some fun tales from the frontline along the way.

About me: After starting out as a maths teacher in London through the Teach First programme, I went on to found and grow the charity PEAS. When I stepped down after 12 years as CEO, PEAS had become Africa’s leading secondary education specialist. At the time, PEAS employed over a thousand staff running schools in rural areas across Uganda and Zambia. Since then, PEAS has really flown. Under the dedicated leadership of Laura Brown and Jenny Groot, the charity is now a trusted partner of the governments of Uganda, Zambia and Ghana. Its work supporting those governments to improve education outcomes for hundreds of thousands of children, shows what’s possible when an organisation is as dedicated to sustainability, as it is to immediate impact.

After PEAS, I spent six years as a funder, leading the Peter Cundill Foundation’s grants programmes across Canada, the UK and East Africa. In July 2025, I got the chance of a lifetime - to undertake a research fellowship that gave me the time to read, think and write.

I’m indebted to the vision, challenge and collaboration of Simon Coyle (XTX Markets) and Matt Lerner (Founders Pledge) who have given me this extraordinary opportunity. And to the many colleagues who have been so generous in feeding back on my writing. For their investment in these ideas to be repaid, I’m relying on you. Please do subscribe (it’s free!), feedback, share and let’s play the long game together.