The Theory of Change and Strategic Planning

The Theory of Change (ToC) is a simple and logical representation of the estimated or realized impact of an organization. It is also “a set of beliefs and assumptions about what changes need to happen and how to bring them about to reach a stated goal”. Theories of Change (ToCs) “establish a context for considering the connection between a system’s mission, strategies and actual outcomes, while creating links between who is being served, the strategies or activities that are being implemented, and the desired outcomes. ” In other words, ToC is a backward-mapping tool that links long-term goals to changes that need to happen for the organization to reach these same goals. For this to happen, members at an organization must first define a vision of success followed by an understanding of how to make this vision a reality, while involving all of its stakeholders. The output of this reasoning will consist of a “road map”, or “causal chain”, that identifies the ecosystem and the involved actors and how they affect (positively and negatively) the organization. Even though the methodology was designed for performance evaluation and monitoring, ToCs can be of great use for strategic planning. As a matter of fact, defining a pathway of change towards long-term goals provides prediction tools and works as a linkage between the activities that need to be performed.

Strategic planning through ToC considers the Social Value Chain and works it backwards, i. e. starting from the impact an organization aims to achieve and concluding with the required outputs to make that impact possible. Required resources for the normal course of activity, from financial to human resources and logistics Working methods, projects and goods and services provided Direct results measured by the amount of goods and services provided Indirect results measured by the social changes resulting from the provided goods and services

A common strategic plan through ToC starts by defining the scope and the assumptions of the project/initiative/organization, i. e. the problem and what requires change. This step is followed by a mapping of ToC, where the organization’s mission is formulated, or reformulated, in accordance to the problem it wants to solve and the impact it aims to achieve. To do so, the organization must have in mind its main activities and the proposed solution for this same problem. The underlying assumptions design the conditions to which the Social Value Chain will evolve. Mapping ToC will allow to formulate, or reformulate, the organization’s mission and vision as 1) ToC specifies what the organization aims to achieve in the long-term (vision); and 2) it defines how the organization will do so (mission). The organization’s values determine the course of action.

The Social Value Chain is shaped by previously conceived assumptions, or, in other words, the outcomes’ preconditions (and risks) that support the initiative’s prospect success. Assumptions may be based on empirical knowledge or developed through research evidence and must comprise both the organization’s internal and external conditions. Nonetheless, these must be implicit in the pathway and thus sustain the causal connections. The Social Value Chain helps defining the long-term strategic objectives (long-term outcomes) and the short-term goals (short-term outcomes) that will lead to those objectives. Short-term goals will only be achievable through concrete activities with expected results (outcomes). Social impact can then be measured by a set of reliable indicators. This process bridges the gap between ToC and the strategic planning process, as it gives an understanding of the organization’s strengths and weaknesses as well as its key differentiation factors and internal stakeholders (members/employees, founders and managers). Additionally, organizations must understand their environment, mainly their external context and respective opportunities and threats, competition and external stakeholders (community, society, government, suppliers, funders, partners). ToC “should be a living rather than a static document – it should be tested, challenged and refined regularly”.

Valters (2015) presents as ToC’s key principles: 1) focus on the process and its outcomes rather than assuming it as a static and formal document, 2) prioritize learning instead of theory-based approaches, 3) be locally led, meaning, it involves all stakeholders including the direct beneficiaries, and 4) think it like a compass, not a map, in the sense that it helps finding the “way through the fog of complex systems, discovering a path”.