Decisions based on instinct don't hold up to scrutiny
4 min read

Decisions based on instinct don’t hold up to scrutiny

At Culture Counts we interact daily with funders of community and cultural programs who face the challenge of assessing the impact of the activities they support. This includes Federal, State and Local Governments and philanthropic funders, who all balance the need to understand their return on investment against the demands of systematic evaluation.

When asked for our advice on how to strike this balance we say it’s really a question of risk tolerance. If you are currently making funding decisions without evidence to justify the impact achieved, understand that it’s a question of when, not if, the risks come to the surface. 

In 2017, economist Richard Thaler was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioural economics and his pioneering work in establishing that people are predictably irrational in ways that defy economic theory. In his research, Thaler found that humans make 95% of their decisions using mental shortcuts or rules of thumb based on anecdotes and stereotypes. Facts and evidence seldom find their way into the decision frame. This presents two problems.

First, decisions based on these subjective influences are seldom consistent, so it’s difficult to make sense of them across a portfolio of activities over time.

Second, the decisions don’t stand up well to external scrutiny, which is an essential characteristic of an open, democratic society.

At best, these problems open funding organisations up to external criticism and divert resources away from their mission of increasing cultural activity and delivering social, economic, civic, environmental and cultural impact. At worst, they lead to the withdrawal of funding and the erosion of the resource base available to support cultural activity. 

The solution: building a culture of continuous measurement  
In our experience, funding organisations that measure the outcomes achieved by their investments gain substantial returns. For an investment of less than one percent of invested funds, decision-makers have the evidence they need to improve the value generated by their portfolio of activities and more importantly to prove that value to outside investors and contributors.

Many successful Culture Counts subscribers use the evidence from their evaluations to improve funding applications and acquittals and then apply their value claims to build relationships with philanthropic funders, corporate sponsors and private donors. This not only builds the financial sustainability of individual organisations but also increases the pool of supporters across the cultural sector. Providing valid value propositions effectively grows the size of the resources pie.

As a funder, think about the risks to your budget for supporting community and cultural programs. Do you have a system of evaluation that collects, analyses and reports insights against a list of agreed objectives? Do the organisations and events that you support provide you with evidence of the outcomes they achieve? Do you have hard evidence to show external parties that the work you support is urgent, important and needs to continue?

The long-term solution is to build a culture of measurement. This will ensure you have the required data to draw upon when making decisions of where best to focus limited budgets to achieve maximum results. It will also provide evidence to show the work you support has a profound impact on those who engage with it, which in turn helps cultural organisations and the sector build stronger cases for support and investment. 

About the author
Michael Chappell is a CEO at Culture Counts.