Strategy begins with having a clear goal or outcome in mind. Ideally, once deciding on a goal, a donor tries to determine what approach offers the most promise for success. For example, will students do better in school with a longer school day or a smaller class size, or some combination of the two? By setting a clear goal (for example, kids doing better in school) we can then determine how to achieve that goal.
As much as possible, our programs attempt to determine the "expected return" of a set of potential grants (or groups of grants) and then choose the options with the highest expected return. Simply put, expected return is a cost benefit analysis. It takes the value of achieving a goal, discounted by the likelihood of success, divided by the cost.
Written as an equation, it would look like this:
For an in-depth look at expected return, Redstone Strategy prepared a report, Making Every Dollar Count, for the Hewlett Foundation.
Stanford Social Innovation Review also featured an article by Paul Brest, Hal Harvey, and Kelvin Low, Calculated Impact, in their Winter 2009 issue.