Social Return on Investment and Community Needs

What’s SROI Got To Do With It?

Session agendaBackground • REDF • What is SROI?• SROI history• How does SROI support community goals?

SROI: Building Blocks• Overview of early SROI methodology • Different goals, different analyses• Views of Value• Costs & investment / Benefits & Impact

SROI analysis to help organizations manage their work • Identifying the best questions• Identifying reporting that fits the need• SROI in a context of multiple tools for analysis & reporting

SROI: What REDF Learned / Changes to our approach • Challenges and unanswered questions led to new system

development >> underway– Systems & automation– Analyze to answer specific questions– Include both monetary & non-monetary analysis

SROI: Discussion – What’s Next? • …• …

• How is SROI relevant to community needs?

• How has REDF approached SROI ?

• What have we learned, and how are we changing our approach?

• How can SROI other community organizations?

• What can we expect in the coming years?

Session Goals

What is REDF?

REDF is an intermediary that helps nonprofit jobs-focused social enterprises employ people with multiple barriers

REDF contributes to the fields of philanthropy and social enterprise by communicating the lessons we learn through publishing, speaking, and sharing information on our website (www.redf.org)

In all areas of our work, REDF is deeply committed to measuring the results of our efforts

Work brings dignity and independence to people living with severe barriers to employment

People with severe barriers to employment can be most effectively trained and employed by non profit-run businesses

REDF dramatically boosts nonprofit-run businesses ability to succeed

REDF Theory of Change

What is REDF’s theory of change

Employment

Help people move into employment and out of poverty

Social enterprise

• REDF provides the capital, know-how and networks to start and grow job creating social enterprises

• REDF shares lessons to build the field nationally

• Social enterprise jobs are a first step and pathway into the regular work-force for those who can’t get jobs otherwise

• The enterprises and their employees earn income – Offsetting taxpayer costs

• A social enterprise job leads to a rise in hours worked, health status and income; and reduces homelessness and incarceration

• Social enterprise is an innovation that would benefit every community

REDF

• SROI analysis assess the financial and non-financial value created by an organization relative to the financial investment it requires

• The value that SROI assesses can be value to individuals, to organizations, or to communities

What is it?

• Assess different types of value created

• Inform decision-making

• Align investment with value

Social Return on Investment (SROI)

What canit do?

Evolution of SROI*

1800s Cost-benefit analysis first developed

1970s Cost-benefit analysis required for US federal gov’t spending

1993 First known SROI by social enterprise fund: Coastal Enterprises

2000 First SROI Methodology documented by REDF2006 SROI Framework published by group of practitioners

2008 SROI Network forms to promote consistency and ongoing development of methodology

2009Scottish and UK Governments pilot adoption of SROI for government grants; SPM Network emerges in microfinance

2010-11 Mushrooming applications and versions

• REDF – SROI Act II development and piloting underway

• Company & Nonprofit Managers: NGOs (advocacy, politics, human services, green building, education, health and prevention, etc.), private corporations (family-owned, venture, emerging markets), publicly-listed corps (Nike, Philips), McKinsey, KPMG, etc Investors – Large institutional investors (CalPERS, AIG, UBS), venture capitalists (community development, cleantech), philanthropists and foundations (diverse fields)

* Appreciation to SVT for this chronology

A few beginning questions

Why are we here?

Why am I here?

I want to help fill ------community needs

What does measuring impact have to do with helping people or improving communities?

Increasingcommunity needs

Urgency

stretched resources

I want to put time and money where they will really make difference!

So I want to know

Is what we are doing working?

How can I show others that this works?

How can we know which aspects of our work need improvement ?

…and I want to know

Which projects should our organization invest in?

Should I put resources into Project A or Project B?

Where will my money do the most good?

Measuring the impact of our work gives us answers SROI allows us to compare results

Is what we aredoing working?

How can we knowwhich aspectsof our work weneed to improve ?

How can I show others that this works?

Where will mymoney do themost good?

Which projectsshould ourorganizationinvest in?

Should I spend my time on Project A or Project B?

REDF’s approach to SROI

Impact comes in many forms and all forms of impact require investment

What is this activity’s impact on individuals?

Social Impact

What financial impact does this activity generate?

Financial Impact

What benefits to society does this activity generate?

Community /Societal Impact

• Different program goals require different assessments of results and their costs

• Social sector work requires assessment of both monetary and non-monetary results

SROI is just one of REDF’s tools for measuring performance

Individual (Enterprise employees)

Enterprise(program) Organization Society &

Community

• Demographics

• Social outcomes

• Stories

• Demographics

• Social outcomes

• Financial results

• SROI

• Cost / Benefit analysis

Measurement methods

• Individual improvedlives

• Group of improvedlives

• Healthy, growing /sustainable

• Improved society

• Dollar impact on community

• Cost effective strategies

Desired outcomes

• Social outcomes tracking system

• Healthier, moreeffective organizations

REDF Approaches to Measuring Impact

Individual (Enterprise employees)

• Demographics

• Social outcomes

• Stories

Assessment methods

• Individual improvedlives

Desired outcomes

Methodology

• Interviews, interviews, interviews!

– Face-to-face interviews with employees at time of hire and at 6 month intervals, up to 24 months

• What do we ask?

– Employment

– Wages

– Barriers to employment

– Housing situation

– Usage of social services

– Self-esteem

– Social support

• Collect, compile, quantify

REDF Approaches to Measuring Impact

Individual (Enterprise employees)

Enterprise

• Social outcomes

• Stories

• Demographics

• Financial data, reports

• Customer, staff, employee feedback

Assessment methods

• Individual improvedlives

• Jobs that help individuals improvetheir lives

• Healthy, viable businesses

Desired outcomes

Methodology

• Monthly review of business operations

• Monthly and annual enterprise financial statements

• Collect, compile, quantify

REDF Approaches to Measuring Impact

Organiza-tion

Society &Community

• Track all programs’ participants

• Customized database

• SROI

• Cost / Benefit analysis

Assessment methods

• Improved internal practices

• Better help for people in need

• Improved society

• Dollar impact on community

• Cost effective strategies

Desired outcomes

Methodology

• Assess organization’s existing monitoring and reporting needs

• Bring together specialists in client data evaluation and information technology to design customized system

• Test, use, refine

REDF Approaches to SROI

Individual (Enterprise employees)

Society &Community

• Demographics

• Social outcomes

• Stories

• SROI

• Cost / Benefit analysis

Assessment methods

• Individual improvedlives

• Improved society

• Dollar impact on community

• Cost effective strategies

Desired outcomes

Methodology

• Use Individuals’ Social Outcome information and Enterprise Financial information to

• Calculate investment used to create & support individual’s employement

• Collect, aggregate, and analyze data showing individuals’ employment and life changes over time

• Calculate monetary and non-monetary impact of individuals’ changes

• Compare changes’ impact to investment they took

How Does REDF’s SROI Measure Impact on SOCIETY ?

Social Mission Impact Business Enterprise Impact

Enterprise

• Investment in social services

• Usage of social services data

• New taxes generated

• Investment in business

• Business valuation

• Business sustainability

Enterprise

SROI FRAMEWORK / ANALYSISImpact of social enterprise on society / community

What questions are we trying to answer?

• How many individuals has the social enterprise employed?

• Is the social enterprise meeting the social mission goals and requirements set out for it?

• With an investment of $___, what impact can we have on #___ people?

Social Impact Financial Impact Community / Societal Impact

• How is the social enterprise performing financially?

• Is the social enterprise meeting the business / financial goals and requi-rements set out for it?

• To what degree is the enterprise able to sustain itself financially, versus require subsidization?

• What are the benefits to society resulting from the social enterprise’s work?

• For each dollar invested in the social enterprise, what are the resulting cost savings to society?

Some questions require SROI analysis others don’t

SROI Reporting Can Tell One Part of a Complete Story

REDF Social Impact Preport: Social Mission Performance

REDF Board Dashboard: Financial Performance

REDF SROI Report: Community / Societal Impact

In social mission work, value and return take numerous forms. Because of this, meaningful SROI analysis goes beyond one metric or one formula; SROI approaches must include the capacity to assess both monetary and non-monetary forms of value

SROI: What REDF learned >>> changes to our SROI approach

Measurement of impact and SROI analysis can give clarity to social mission work

SROI analysis must be easier to do and it must be replicable

The challenges to determining causality and identifying comparable activities / measures for benchmarking continue to need creative solutions

SROI: What REDF learned and changes to our SROI approach

REDF developed its original SROI modelin 2000

In 2010 we launched the design and piloting of an automated SROI system, SROI Act II

REDF’s SROI ACT II

Outputs >>> Outcomes

Funder

Nonprofit Organizationor Initiative

Services Seeker

Services Purchaser

Outputs(e.g., # of ppl employed)

Outcomes(e.g., individualsmove out of poverty)

OutputData

OutcomeData

Assistance, Link to networks

Program Interventions

Targeted Activity

Activities

Grants – start upGrants – ongoingStaff time

Grants, Earned Income, Staff time

Time, Activity participation

Payment for services

Input

AccountingSoftware

PerformanceMgmt Software

SROI Act II PlatformDashboarding, Analysis Templates & Reports

Social mission performance data and financial data brought together for targeted, reliable analysis via system links

SROI Act IIExample: Monetary Analysis

EXAMPLE A - ANSWERING A FINANCIAL RETURN QUESTIONA hypothetical analysis using CVE as a hypothetical organization using SROI Act (note that all facts and metrics are invented for this example ) Question: What is CVE's annual cost per target employee ("participant") employed at CVE's IME,

compared to the annual community savings generated?

Who: Stakeholders who might ask this question include S.F. City and County government and foundation funders

Analysis components: Source of component dataCost components= Total IME 20xx cost, # target ("participant") employee FTEs in 20xx

IME 20xx cost (i.e.all IME business and social costs) = $350,000 CVE accounting system# target IME employee FTEs 35 ETO

Benefit components= Est. community cost savings (based on change in target employee's use of ETO outcomes re reduced use of svcs, eg foodstamps, community svcs -orig REDF SROI methodology, but with updated $s) calculated with

SROI-SW resident data (e.g. cost of foodstamps)Average community cost savings per IME employee in 20xx $15,000

SROI-SW Reports Reporting on above data could take a variety of forms. SROI-SW would have pre-programmed calculations and reporting format to accommodate those desired, for example:

Net (estimated - average) cost savings for the program = $525,000

20xx Community savings above program cost = $175,000 ( or "for every dollar paid into IME, 1.50 in community cost savings is generated")

One donor's view of cost savings generated by their donation (e.g. a $50,000 donation to CVE for IME) "Our $50,000 donated to IME in 20xx, generated $75,000 in community cost savings"

Estimated investment / return for funding that builds a program * (* roi-type calcs, per original SROI model or simplified formula) (e.g. $100,000 capital investment toward expansion of IME)

SROI Act [SROI 2.0 product working title]

SROI Act IIExample: Non-Monetary Analysis

EXAMPLE B - ANSWERING A NON-FINANCIAL RETURN QUESTIONA hypothetical analysis using CVE as a hypothetical organization using SROI 2.0 (note that all facts and metrics are invented for this example )

Question: How long does it take, and what does it cost for CVE participant-employees to overcome barriers x and y?

Who: Stakeholders who might ask this question include government contract / compliance officials, e.g. from Dept. of Rehabilitation

Analysis components: Source of component data

Investment components = Total $$ to get Work Prep prog started (or for expansion) CVE Accounting systemCost components= Total CVE Work Prep program ongoing costs in 20xx, # FTE participants CVE Accounting system

CVE Work Prep 20xx cost = $150,000 CVE accounting system# 20xx participant FTEs in Work Prep program 45 ETO

Barrier progress components= baseline and subsequent progress measures on x, y barriers ETO (in the form of % reduction over, e.g. 1 year)

SROI-SW Reports Reporting on above data could take a variety of forms. SROI-SW would have pre-programmed calculations and reporting format to accommodate those desired, for example:

Annual cost per FTE for % reduction of x, y barriers $3,333

Cost / results for a particular contract (or grant) 18 (your $60k contract buys services that reduce x,y barriers by --% over 1 year for 18 FTEs) (e.g. a $60,000 contract for Work Prep participant services)

Estimated investment / return for funding that builds a program * (* roi-type calcs, side by side with projected #s FTEs / individuals' barriers reduced over time- (e.g. $100,000 start up toward the ongoing Work Prep program) and, if appropriate, any specific related community savings, eg reduction of recidivism

leading to estimate of lowered re-incarceration costs)

SROI Act [SROI 2.0 product working title]

SROI – What’s Next?Pressures in two directions

OutcomesCost per person per year*

Employment rate Average wage Annual earnings 81% employed within prior 6 months $10.96 Increased $12,800 vs.

before hire ~$4,000-8,000

67% employed within prior 3 months $9.62 Increased $1,270 vs.

control group $32,600

Broad Definition of SROI Narrow Questions Regarding Outcomes and Cost

E.g., “Are the results worth the effort?” E.g., What is the cost per person?

* <_________>

SROI – What’s Next? Questions that further SROI development must address

Investment inProgram X = $___

How do we keep the broad SROI questions in mind (“is it worth the effort?”) while ensuring credible links to the right detailed questions about costand benefit?

Who needs to know and how does the “who” affect what analyses are appropriate?

How can we ensure that rigorous investment and cost analyses are paired with equally rigorous analyses of outcomes?

How can we ensure that the outcomes we cite are generated by the activity we measure?

www.redf.org

Session Evaluation Information

SESSION TITLE: Social ROI

SESSION CODE: L-W900