Theory of Change for Charities: A Complete Guide
What a Theory of Change is, how to create one step by step, common mistakes to avoid, and how it connects to outcome measurement and funder reporting for UK charities.
A Theory of Change (ToC) is a structured explanation of how and why your charity's work leads to the changes you want to see. It maps the causal pathway from what you invest and do, through the results you produce, to the long-term difference you make in people's lives or communities.
TL;DR: A Theory of Change maps the logical steps between your charity's activities and the impact you intend to create. Most major UK funders — including the National Lottery Community Fund, which distributes over £600 million annually — now expect to see one in grant applications. Building a ToC improves programme design, focuses your outcome measurement, and strengthens funder reporting. Tools like Plinth help you collect the outcome data your ToC identifies.
What Is a Theory of Change?
A Theory of Change is a comprehensive description and illustration of how and why a desired change is expected to happen in a particular context. It is both a planning tool and a communication tool — it forces you to articulate your assumptions about how your work creates impact, and it gives funders, trustees, and partners a clear picture of your programme logic.
Definition: A Theory of Change (ToC) is a methodological framework that describes the causal pathway from a charity's inputs and activities through to its intended short-term, medium-term, and long-term outcomes. It makes explicit the assumptions underlying each step, allowing the organisation to test whether its programmes are working as intended and to communicate its logic to stakeholders.
Unlike a simple mission statement, a ToC is specific enough to be tested. It does not just say "we help young people into employment" — it explains how your particular combination of activities leads to that result, and what conditions need to be in place for it to work.
NPC (New Philanthropy Capital) has published extensively on Theories of Change, including their practical guide 'Theory of Change in Ten Steps' which remains one of the most widely used resources in the UK charity sector. NPC has consistently advocated for charities to use Theories of Change, arguing that the framework gives organisations a structured way to identify what is and is not working — and to adapt their services based on evidence rather than assumption.
How Is a Theory of Change Different from a Logic Model?
These two frameworks are closely related and often confused. Both map the pathway from inputs to outcomes, but they differ in scope, depth, and purpose.
| Feature | Theory of Change | Logic Model |
|---|---|---|
| Scope | Broad — covers the entire organisation or a complex programme | Narrow — typically focuses on a single programme or project |
| Assumptions | Makes underlying assumptions explicit and testable | Usually does not address assumptions |
| Causality | Explains why each step leads to the next | Shows what follows what, but not always why |
| Format | Often non-linear, with multiple pathways and feedback loops | Typically linear, reading left to right |
| Detail level | Rich narrative and contextual explanation | Concise, visual summary |
| Primary use | Strategic planning, evaluation design, stakeholder engagement | Programme planning, funder reporting |
In practice, many charities use both. A Theory of Change provides the strategic narrative; a logic model provides the operational summary. The National Lottery Community Fund, which distributes over £600 million annually, asks applicants to describe their Theory of Change, while many trusts and foundations accept a logic model as a simpler alternative.
Why Do Charities Need a Theory of Change?
A Theory of Change is needed because it solves three persistent problems in the charity sector: unfocused programme design, weak outcome measurement, and unconvincing funder applications.
It sharpens programme design
Without a ToC, charities often deliver activities because they always have, rather than because there is a clear rationale for why those activities produce the desired results. A ToC forces you to ask: "Why do we believe that running a six-week mentoring programme will improve young people's employability?" If you cannot answer that question with a logical chain of reasoning, you need to redesign the programme or review the evidence.
Many charities that go through the process of developing a ToC find themselves redesigning aspects of their services, because the process reveals gaps in programme logic they had not previously recognised.
It focuses your outcome measurement
A Theory of Change tells you exactly what to measure. Each step in the causal pathway has associated indicators — if your ToC states that mentoring leads to improved confidence, which leads to increased job applications, which leads to employment, then you know you need to measure confidence, job applications, and employment outcomes. Without a ToC, charities often measure what is easy rather than what is meaningful.
Plinth's survey tools allow you to design pre-and-post outcome surveys that map directly to the indicators in your Theory of Change, so you are collecting exactly the evidence you need.
It strengthens funder applications
Funders want to know that you have thought carefully about how your work creates change. A clear ToC demonstrates intellectual rigour and self-awareness. The Esmée Fairbairn Foundation, one of the UK's largest independent funders, explicitly asks applicants to describe their Theory of Change. The National Lottery Community Fund, Comic Relief, and most major trusts expect the same.
How to Create a Theory of Change: Step by Step
Step 1: Start with your long-term goal
Define the ultimate change you want to see. Be specific about who benefits, what changes, and the timeframe. "Reduced youth unemployment in Greater Manchester" is better than "helping young people."
Step 2: Map backwards from impact to activities
Working backwards is the distinguishing feature of Theory of Change methodology. Start with your long-term goal and ask: "What needs to be true for this to happen?" Each answer becomes a precondition. Continue until you reach the activities your charity directly delivers.
Example pathway for a youth employment charity:
- Long-term impact: Sustained employment for disadvantaged young people aged 16-25
- Medium-term outcome: Young people secure and retain jobs for 6+ months
- Short-term outcome: Young people apply for suitable jobs with confidence
- Intermediate change: Young people develop interview skills, CV writing ability, and workplace awareness
- Direct output: Young people complete a 12-week employability programme
- Activities: Weekly group workshops, one-to-one mentoring, employer site visits, mock interviews
- Inputs: Trained mentors, programme materials, venue, employer partnerships, funding
Step 3: Identify your assumptions
At each step, ask: "What are we assuming here?" For example, you might be assuming that young people will attend regularly, that mentors have the right skills, that employers are willing to recruit from your programme, or that transport is not a barrier to attendance. Making assumptions explicit means you can monitor them and act when they prove wrong.
The Centre for Youth Impact encourages charities to document and test their assumptions, noting that many organisations discover untested or incorrect assumptions through this process — leading to meaningful programme improvements.
Step 4: Add your evidence base
Where possible, reference evidence that supports each link in your chain. This might be academic research, sector evidence reviews, your own historical data, or published evaluations. Funders give significantly more weight to Theories of Change that are grounded in evidence rather than aspiration alone.
Step 5: Define indicators for each outcome
For every outcome in your ToC, specify how you will know it has been achieved. These become your outcome measurement indicators — the questions in your outcome surveys, the data points in your monitoring system, and the evidence in your funder reports.
Step 6: Review and iterate
A Theory of Change is a living document. Review it annually, or whenever you have significant new evidence about what is working. If your outcome data shows that a particular step in your pathway is not happening as expected, that is a signal to investigate and adapt.
Common Mistakes When Creating a Theory of Change
Mistake 1: Making it too complicated
A ToC that tries to capture every nuance of your work becomes unusable. Focus on the main causal pathway. If your ToC diagram needs A3 paper and a magnifying glass, it is too complex. Aim for a one-page visual with a supporting narrative document.
Mistake 2: Confusing outputs with outcomes
This is the most common error. "200 young people completed the programme" is an output. "75% of completers reported improved confidence in job searching" is an outcome. Your ToC must clearly distinguish between the two. NPC has noted that confusing outputs with outcomes is one of the most common weaknesses they see in charity Theories of Change.
Mistake 3: Ignoring external factors
Your charity does not operate in a vacuum. Economic conditions, government policy, local infrastructure, and participants' wider circumstances all affect whether your work achieves its intended outcomes. A good ToC acknowledges these external factors and explains how your programme accounts for them.
Mistake 4: Creating it once and filing it away
A ToC that sits in a drawer is worthless. It should be a working tool that informs programme design, staff induction, outcome measurement, and funder reporting. Revisit it regularly with your team and update it as you learn more about what works.
Mistake 5: Building it in isolation
The most effective Theories of Change are co-created with staff, beneficiaries, and stakeholders. Frontline workers understand the nuances of delivery. Beneficiaries can tell you whether your assumptions about their needs are correct. A ToC developed by a consultant in isolation often misses these critical perspectives.
How Does a Theory of Change Connect to Funder Reporting?
A well-constructed Theory of Change provides the framework for everything funders want to see in your grant reports. Your ToC defines the outcomes you should be reporting on. Your indicators become the metrics in your monitoring returns. Your assumptions become the qualitative commentary that explains why results did or did not meet expectations.
Plinth's impact reporting features allow you to generate funder reports directly from the outcome data you collect through your programme delivery — data that is structured around the indicators your Theory of Change identifies. This means your ToC, your data collection, and your reporting are all connected in a single system rather than existing as separate, disconnected exercises.
The Charity Commission's 2024-25 report emphasised that the sector now has 170,862 registered charities (Charity Commission Annual Report 2024-25), and funders are increasingly looking for clear evidence of effectiveness. A Theory of Change provides the narrative structure that turns raw data into a compelling account of your impact.
Frequently Asked Questions
Do small charities need a Theory of Change?
Yes, though it can be simpler. A small charity delivering a single programme might have a one-page ToC. The process of articulating how your work creates change is valuable regardless of your organisation's size. According to NCVO, charities with income under £100,000 are the least likely to have a documented ToC, yet they often benefit the most from the clarity it provides.
How long should a Theory of Change be?
The visual diagram should fit on one page. The supporting narrative — explaining assumptions, evidence, and indicators — is typically 3-10 pages depending on the complexity of your programmes. Avoid the temptation to make it an exhaustive academic document.
Can we use the same Theory of Change for all our programmes?
If your programmes serve different populations or address different problems, they need separate Theories of Change. However, you can have an overarching organisational ToC that shows how your programmes collectively contribute to your mission, with programme-level ToCs sitting beneath it.
What tools can help us create a Theory of Change?
Specialist tools include TOC Online (free) and TOCO from the Aspen Institute. However, many charities successfully use simple tools — a whiteboard session with sticky notes, followed by a clean version in PowerPoint or a drawing tool. The process matters more than the software.
How often should we update our Theory of Change?
Review it annually as part of your strategic planning cycle. Update it whenever you have significant new evidence — for example, if your outcome data shows that a particular step in your pathway is not working as expected, or if external circumstances change significantly.
Recommended Next Pages
The Complete Guide to Outcome Measurement — How to measure the outcomes your Theory of Change identifies.
Logic Models for Charities Explained — The simpler alternative to a Theory of Change, and how the two frameworks relate.
Measuring Grant Impact — How to track and report the impact of funded programmes.
How to Design Effective Outcome Surveys — Practical guidance on creating surveys that capture meaningful outcome data.
What is Impact Reporting? — How to communicate your results to funders, trustees, and the public.
Last updated: February 2026