CONDUCTING AN SROI ANALYSIS: THE SOCIAL

ENTERPRISE PERSPECTIVE

Laurie Mook, School of Community Resources and Development Arizona State University

Unpacking Impact Forum Toronto, June 21, 2016

OVERVIEW ■  Brief introduction to Social Return on Investment (SROI)

■  Social enterprise perspectives on the benefits and challenges of undertaking an SROI analysis

Publication: Nonprofit Management & Leadership Volume 26, Issue 2, 2015.

How prevalent is SROI?

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Google Scholar frequency: "social return on investment"

How prevalent is SROI?

(Krlev et al, 2013, 33)

Published SROI Analyses 2000-2011 Heavily promoted by British and Scottish governments

Brief intro to the SROI process ■  Mix of social accounting and cost/benefit analysis

■  Can be retrospective or prospective, or a hybrid

■  Defining features (Nicholls et al. 2012, 9-10): 1.  Takes a stakeholder approach to understand what changes 2.  Uses an evidence-based approach 3.  Monitizes inputs and outcomes using market proxies 4.  Adjusts for deadweight, attribution, and drop-off 5.  Applies a discount rate for outcomes anticipated in future years 6.  Calculates a ratio of social outcomes to inputs

The SROI ratio

■  SROI calculates the value of social outcomes and divides that figure by the value of inputs to come up with a ratio of social outcomes to inputs.

–  For example, $10,000 of resources is invested in an organization that produces $20,000 worth of social outcomes à social return $2:$1

OUR RESEARCH

■  Teams of community and university researchers

■  Started with UK Guide to SROI

■  Series of workshops

Funded by the Canada Social Sciences and Humanities Research Council

SIX stages

1.  Establish scope and identify key stakeholders

2.  Map outcomes and develop a theory of change

3.  Gather evidence of outcomes and give them a value

4.  Establish impact

5.  Calculate SROI

6.  Report, use and embed

(Nicholls et al 2012, 9-10)

CONDUCTING AN SROI: SOCIAL ENTERPRISE PERSPECTIVE

■  What advances did the organizations make in terms of understanding their social impact?

■  What limitations arose in the reporting of their social impact through the SROI process?

ADVANCES in understanding social impact 1.  Understanding of stakeholder perspectives

2.  Ability to make outcomes visible

3.  Empowerment of employees and volunteer

1. UNDERSTANDING of STAKEHOLDER PERSPECTIVES ■  Stakeholder engagement was the most frequently identified benefit

■  Often the organization was knowledgeable about its clients, but much less so about its other stakeholders

■  Able to get nuanced insights into the impact of services from different perspectives

■  Highlighted the diverse expectations of stakeholders and the many ways effectiveness was defined

■  Identified some tensions –  For example, some providers of furniture saw themselves as customers

of a pickup service, while others saw themselves as donors à definition of ‘success’ different: customers concerned with price; donors concerned with social impact

2. OUTCOMES MADE VISIBLE

■  Confirmed achievement of mission goals

■  Gave a much broader picture of the social impact of services

■  Provided insights that managers could share with funding bodies to help funders better understand the social and environmental impacts of the social enterprise

3. EMPOWERMENT of employees and volunteers ■  Employees and volunteers empowered by the ability to

express the impact of their work and see the impact of their organization

–  Important factor in degree of employee/volunteer engagement

LIMITATIONS in reporting social impact ■  Issues related to:

1.  Data collection 2.  Calculations 3.  SROI methodology

1. Issues related to DATA COLLECTION ■  Limited access to some client groups/data

–  In one case, contact information was not available and the

organization had to rely on second-hand information. –  In another case, it was difficult to ask confidential health

questions with participants.

■  Resource-intensive to collect data, which also limited the extent to which stakeholder data could be collected

1. Issues related to DATA COLLECTION ■  There is often a lag time for social impact to occur.

Conducting a rigorous measurement of outcomes over a number of years is challenging and costly, and beyond the realm of most social enterprises.

■  Data systems not in place to capture and integrate social and financial information.

2. Issues related to CALCULATIONS ■  Process very subjective at multiple times, which affects

calculations. Decision points include: –  Which stakeholders to include –  Selection of proxies –  Rates for deadweight, attribution, drop-off, discounting

■  Illustrated nicely in a study by Cooney and Lynch-Cerullo (2014): –  Individuals working off the same data produced very different

final SROI ratios, ranging from $1.16 per dollar invested to more than $6.00 per dollar invested

3. Issues related to SROI METHODOLOGY ■  Tendency to make judgements based on comparing ratios

without considering the context

–  For one organization, the SROI ratio was higher in one year than the next. However was also a significant financial deficit in the first year. The next year the organization turned around, however the SROI ratio was lower.

■  SROI supplemental to financial performance

■  The final ratio in itself does not offer insights into social value creation or the context of programs

QUOTES

■  “In conclusion, we have a paradoxical result: we have engaged in a formal SROI evaluation that has produced a measurement of $3.06 of social value for each dollar of investment. However, in reflecting upon this finding, we believe that it is of much lesser importance that the process the research team engaged in to produce the measurement.” (Vieta et al l, 2015, 166)

QUOTES

■  “Although the SROI model provides important and valuable guidelines, it is challenging to conduct because no one template fits all scenarios, especially for programs … that do not fit a traditional model. Determining the reliability and validity of proxies is open to interpretation and can lead to over- or under-claiming of social value. This is where transparency is very important in terms of explaining how the proxies were determined and the values used in the calculations” (Owen et al, 2015, 225).

OVERCOMING CHALLENGES

Part of the problem of the SROI methodology is the ‘lens’ used to guide and evaluate the process, and the emphasis on calculating the SROI ratio: –  “It is assumed that if we could come up with a way of

objectively determining the degree of change, monetary value, deadweight, attribution, duration of social impact, and discount rate, we could arrive at a rigorously-derived ratio that is meaningful and representative of the social impact returned to an investor (or funder in the case of many nonprofits) for every dollar of investment” (Mook et al, 2015a, 236)

OVERCOMING CHALLENGES

■  If instead we view SROI through an ‘interpretivist’ lens where the key goals are interpreting and communicating stakeholder change through their stories using quantitative and qualitative data, the challenges of the SROI process an be reframed:

–  “Although accuracy and rigor are important, the key to success [of the process] is not going to be in the ability to calculate an all-encompassing ratio, but in understanding stakeholder impact [through their eyes] and modifying organizational behavior to maximize impact as a result” (Mook et al, 2015a, 243).

OVERCOMING CHALLENGES

Regarding longitudinal data collection:

■  This is problematic for most social enterprises, but may be within the realm of a funder to arrange. For example, the Toronto Enterprise Fund conducts independent evaluations of the impacts of the social enterprises it funds, and these data could be incorporated into an organization’s SROI process (Speer 2014)

OVERCOMING CHALLENGES

■  The separation of social and financial performance:

■  - Integrate economic, socio-economic and social impact by stakeholder group à The Stakeholder Impact Statement

Some conclusions

■  Stakeholder and outcome mapping, discussions around proxies was very useful – a tremendous amount of organizational learning occurred here.

■  Process was resource-intensive and time-consuming –  Current information systems do not facilitate social data

gathering and integration with financial data

Some conclusions

■  Final ratio was a conversation starter, but significant caveats around interpreting this number

–  Many assumptions have to be made along the way, reducing the usefulness of the final SROI ratio

–  Important to consider context and integrate with financial performance

■  Qualitative evidence also important

■  Transparency and education about how the process was conducted is key

References

■  Nonprofit Management & Leadership 26 (2), 2015 – entire issue on social enterprise SROI project. http://onlinelibrary.wiley.com/doi/10.1002/nml.2015.26.issue-2/issuetoc

■  Nicholls, J., E. Lawlor, E. Neitzert & T. Goodspeed (2012). A Guide to Social Return on Investment, 2nd ed. http://socialvalueuk.org/what-is-sroi/the-sroi-guide

■  Social Value UK (2014). Starting Out on Social Return on Investment. http://socialvalueuk.org/publications/publications/doc_download/508-guidance-on-starting-out-on-sroi-2014

Thank you! Merci!

Contact information:

■  Laurie Mook, Arizona State University

■  Lmook@asu.edu

Funded by the Canada Social Sciences and Humanities Research Council