Adding Social Return on Investment to your Toolbox

April 2, 2015

Measuring what matters to stakeholders

Social Return on Investment (or SROI) is a cost and benefit analysis that calculates the social, economic and environmental value of an organisation’s services or activities. This is a much broader concept of value than other approaches to research and evaluation. In an SROI, a study will measure the important changes that are relevant to service users and stakeholders that experience and contribute to this impact, as opposed to an organisation’s interests.

Since attending an SROI course led by New Economics Foundation, I have been quickly learning about this methodology. Quality Matters has completed four SROI evaluation for Irish organisations and already working on a number of report for later this year. Our clients are interested in SROI as methodology because it speaks to the social impact and value that an organisation’s work can have for its participants and stakeholders, and it has been shown to a effective tool for improving services and developing long-term strategies. This video produced by Dame Kelly Homes Trust provides a useful introduction to the benefits of using SROI.

If you’re interested in learning more about this research methodology, here is seven reasons why social return on investment is a effective tool for non-profit and charitable organisations.

 1. Involves all types of stakeholders

A key principle of SROI is the involvement of all service users, stakeholders and organisations that are involved in the organisation or delivery of a service. Generally speaking, an SROI should involve all individuals that directly benefit from the good work.

The role of an SROI practitioner is to develop a Stakeholder Map that outlines the many types of stakeholders involved in an organisation’s work, and determine if they are within the scope of this study. Typically, this process involves the leadership team of an organisation participating in a facilitated meeting or presentation about the research.

2. Understand why this impact matters for your service users

The most important part of an SROI analysis is to clearly understand the change that occurs for service users. There are a number of ways to determine the impact or change that has occurred for stakeholders, such as outlining the theory of change for your organisation and conducting interview / focus groups with different client groups.

In our experience, many organisations find that outlining the theory of change is a process is educational and interesting exercise for understanding the impact of their work. Theory of Change is a tool to plan or visualise the change that occurs for stakeholders, and it is key to determining the range of outcomes that result from an organisation’s activities or services.

3. Investigates what change has occurred for service users and stakeholders

To effectively measure the impact of this change for service users and stakeholders, you must go straight to the source. Asking people about the impact of these services on their lives is the best way to understand what these changes are, and the importance of these changes. An experienced SROI practitioner will use their best judgement to determine effective ways of engaging stakeholders to ensure that their methods are getting honest results

4. Demonstrating value in financial terms

Social value is best understood in financial terms. For some organisation, measuring the impact of their work in terms of cost can be problematic and not straightforward. Traditional cost and benefit evaluations might ignore costs or resources that are not understood in financial terms.

Simple difference from traditional cost/benefits approaches and Social Return on Investment

An SROI analysis calculates all outcomes in financial terms and includes all calculation in its cost and benefit evaluation. To calculate outcomes in financial terms, this model uses proxies that provide an estimation of the cost or saving. Overall, an SROI analysis is an improved way of determining the actual social value (or return) of your organisation’s work and the value of this change for stakeholders in financial terms.

5. Show the difference that donors have made

It is increasingly important to show our  funders how their investment have made a positive difference for service users. A benefit of this SROI model is showing how investments into an organisation can result in financial savings for the state or service user.

The rigour and transparency of this model means that an SROI provides a standardised approach that appeals to decision  makers. The strength of this approach is that organisation will gain a clearer understanding of the social return of their activities and be able to communicate this is financial language.

6. There are limits to any approach

Understanding change for service users means asking individuals what kind of change has occurred, and this can sometimes be problematic. An SROI will only calculate outcomes that are relevant and significant to most service users.

Like all cost and benefit evaluations, there are limits to this approach. Choosing financial proxies that match particular outcomes require careful judgement, to ensure that outcomes are honestly represented in financial terms. Incorrect proxies can result in reducing the monetary value of an outcome or over-stating its impact for service users.

7. Be committed to measuring your impact

A key issue for many organisations, like social enterprises, charities and non-profits, is measuring the impact of an organisation’s work and how resources are being effectively used. It is important organisations understand if services are working and whether these are working well for service users.

An SROI is a clear and rigorous approach to measuring impact, especially for organisations where measuring social impact is difficult or problematic. This approach can also be time consuming and expensive for some organisations, and it is important to judge if an SROI is the best approach for your work.

Still have questions? Speak with a member of our team involved in our SROI work.

About the author

Philip Isard is a Project Specialist at Quality Matters. Philip’s main interests are research, communications, social media and design.

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