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Transcript of "Measuring social-impact"
1. Measuringsocialimpact:the foundation of socialreturn on investment (SROI)SROI Primer ©2004 nef www.neweconomics.org
Chapter OneIntroductionand PurposeMany organisations have social, environmental and Essentially, to all of your stakeholders… or in othereconomic impacts that have an effect on people, words, the people that matter to your organisation.their communities and the environment for thebetter. They may be a social enterprise, a private This tour will help you explore how to measure socialbusiness, a voluntary organisation or a government outputs, outcomes and impact. It offers you a new,initiative. Some may be large… and others run by a straightforward approach to assessing the monetaryvery small group of people. They may work across the value of some of your social impacts. This is done bysectors… and can have unique objectives or they may calculating the Social Return On Investment …have objectives shared by several other organisations. or SROI.So what links these diverse organisations? Well, theyall face the same challenge… How should they Why measure social outputs,measure their social outputs?… and how should theymeasure the value of achieving their social outcomes and impact? • Improved programme managementobjectives? Now, we can often see, or at least assume More effective planningthe benefits of their work… but in today’s world More effective evaluationit is necessary to communicate specific details about • Increased understanding of the impact of your workthose benefits in order for them to be fully • Stronger communication of the value of your workacknowledged. to ‘the people that matter’ (internal and external stakeholders)My name is Jessica Boyd and I’m going to guide you • Enhanced attention to the social, economicthrough this introduction. We’ll be looking at and environmental value created by your businessmeasuring social outputs and valuing social or organisationoutcomes in monetary terms. If you and yourorganisation fit into any of the categories mentionedhere, then you will have everything to gain fromfollowing this process. There are two main reasonswhy this is important to do… I should also mention that we will use the word ‘social’ here as a short form for ‘social, environmentalFirstly, you can use the information to look forward and economic’ throughout.and plan your business and its objectives… or to lookback and evaluate. Knowing how well you are This web tour has been designed for you to moveachieving your objectives can help you plan your easily from chapter to chapter. You can also jumporganisation more effectively. It may make you more straight to the chapter of your choice. You canattractive to your customers and help you win download the transcript as well as the slides… andcontracts. there are links to useful information on the resources page of our Web site… as well as a glossary of terms.Secondly, measuring and communicating the valueof your social outcomes, helps to demonstrate the So, before we get started, let’s hear some of theimportance of your work to you, your staff, your questions that different organisations are asking.customers, investors or a government agency.SROI Primer ©2004 nef www.neweconomics.org 1.1
Chapter TwoAsk the RightQuestions“We change people’s lives for the better. How do society, in order to expand their programmes andI measure that?” increase their impact further. The reality is there are many reasons to measure your social outputs and“There are many different groups of people involved outcomes… and there is no one way or right answer.in or interested in someway in my organisation.All these stakeholders seem to want different things:How do I prioritise them?” Ask the right questions“I want to bid for work on a new social housing • Who are the people that matter to my business?project. They’ve asked about social benefits that are What are their objectives?part of working with my company. What’s the right • How should I prioritise my stakeholders?answer?” Are their objectives aligned to mine? • What output indicators illustrate how well“They say that what gets measured gets valued, but I achieve my objectives?how do I measure a new skill, access to employment • Can I measure the social return that resultsor crime reduction?” from our impact?If someone asked you about the value of your car,or a pair of jeans… you would be able to tell them.When accountants assess a business’s financialstatements, they calculate its value in terms ofsales or outputs, versus cost of goods and overheads.But if you produce a social output, how do youmeasure that value and calculate its worth? The key is to measure what best reflects the interests of your business and the interests of yourWell, many organisations are asking that same stakeholders. Before we look at how we should goquestion. Some have investors interested in what will about measuring social outputs and outcomes, we’rebe achieved with their financial input. Some have going to look at the basic four elements needed forcustomers choosing to buy products because of their this process.social impact… like fair trade coffee. Some just wantto be bolder about the positive role they are playing inSROI Primer ©2004 nef www.neweconomics.org 2.1
Chapter ThreeTermsand DefinitionsThere are 4 main elements needed to measure the impacts. So perhaps 2 of 20 programmerssocial value creation: inputs, outputs, outcomes would have found jobs on their own. That meansand impacts. that the impact of the training programme should be calculated based on the other 18 (people)Now, these terms mean different things to that started work.different people, so let me clarify how they arebeing used here.Inputs are the resources you need in order to make Key Termssomething happen. They’re measured as a cost. Inputs Outputs Outcomes ImpactsFor example, the cost of equipment for runninga computer training programme. • Inputs - resources invested in your activity • Outputs - the direct and tangible products fromOutputs are the direct result of your business the activity, i.e., people trained, trees planted,objective or programme goal. So for example, products sold25 people learned new computer skills as a result • Outcomes - changes to people resulting from theof your training programme. activity, i.e., a new job, increased income, improved stability in lifeAn outcome is a change that has occurred over the • Impact = Outcomes less an estimate of what wouldlonger term. So for example, the number of people have happened anywaythat started work and improved their personalcircumstances as a result of the training programme.This outcome can be measured in their own terms,for example, the value of their increased income.It could be measured from the perspective As the following real-life case studies will illustrate,of a different stakeholder… like the government. all of these terms will become meaningful to youIn this case, the value of the outcome would also only in relation to your business objectives andinclude increased taxes paid or reduced support to the objectives of your different stakeholders.payments by the state.Now, if you adjust the outcome to take into accountwhat would have happened anyway… you identifySROI Primer ©2004 nef www.neweconomics.org 3.1
Chapter FourWhat GetsMeasured,Gets ValuedThe first thing that needs to be decided in any commercial music events… or the numberorganisation is… What outputs do we measure? of local artists performing at Ocean… or theWell, I’m joined by Gabin Sinclair from Ocean, an number of students participating on the Risingindependent music venue in Hackney, East London. Tide programmes.He’s going to tell us about their experience. JB: That seems clear… and what does the Rising TideJessica Boyd: Hi Gabin, could you start by telling programme actually entail?us a bit about Ocean? GS: Rising Tide provides all kinds of workshops fromGabin Sinclair: Well Ocean is a state of the art music music performance to technical and business skills…venue, with the vision of contributing to Hackney’s those for working within the music industry.regeneration through music. For example, we deliver DJ courses, vocal and instrumental training and studio or sound productionJB: So you could say that you’re helping to improveHackney as a place to live and work. That’s a prettybig goal. What Gets Measured,GS: That’s right, but we believe that creatinga vibrant music scene, one that the local Gets Valuedcommunity can participate in, will help regenerate An objective is a ‘theory of change’that community. Getting young people involvedis particularly important. Outputs measure progress towards achieving that change through an organisation’s workJB: So, how do you go about doing this?GS: Ocean brings in musicians who otherwisewouldn’t be seen or heard live. Giving them theopportunity to perform, helps them to be noticed.We also work with other community groups who wantmusic to be a part of their programmes. Ocean alsoruns Rising Tide which is our education programmewith a more focused target group… most of the courses. In the short term, people gain these specificstudents on Rising Tide programmes are aged skills, but in the longer term, they become morebetween 16 and 22. educated and ultimately more employable… and some actually get new jobs because of this process.JB: I see, so what outputs do you actually measure?GS: Well, our outputs are the participation rates …or you could say, the number of people attending ... ContinuedSROI Primer ©2004 nef www.neweconomics.org 4.1
JB: That sounds great!… and have you always JB: Thank you very much Gabin.measured the direct outputs of Ocean’s work? So, in Ocean’s example, we’ve learned that theirGS: Two thirds of our operating revenue is from ticket outputs are the numbers of participants involvedsales. The remainder comes from funders who in the different programmes. They’ve started tobelieve that music can help regenerate Hackney. measure outcomes, such as long term education andSome of our funders are interested in our artistic reduced crime in the area and we’ll be looking at howprogramme. Others are interested in our education we can value these social outcomes a little bit later.or in future skills for employment. But first, we’re going to explore the importanceJB: So, how do you prove to them that you’re of deciding which outputs and outcomes to measureachieving your objectives? from the viewpoint of your different stakeholders.GS: We track outputs such as participation orqualifications obtained on our courses. We trackRising Tide students who are on accredited courses What Gets Measured,more closely because this helps us to assesswhether or not our courses are meeting their needs. Gets Valued Ocean’s theory of change: music-related activities can contributeJB: So, we can understand your outputs as the to the regeneration of a communityparticipation rates across the different aspects ofOcean’s work… but what about outcomes, how would Outputs measured are the number (#) of:you define those for us? - musicians performing to local tastes - local musicians performingGS: We’re just starting to measure our outcomes - people coming to music eventssuch as the value of Rising Tide to our students’ long - people enrolled in programmesterm education… and the value to society in relation - students graduating with LOCN creditsto the reduction in crime. Many of our students arereferred to us by the local youth offending teams…usually in relation to anti-social behaviour. Ourstudents get really engaged on our courses, so we What Gets Measured,can usually tell who’s behaviour changes andimproves throughout the process. The police will tell Gets Valuedyou that criminal activity reduces when young people Output Indicator Stakeholders (external)are involved in activities such as Rising Tide. # of musicians performing to local Hackney Council, arts-oriented tastes, # of local musicians investors # of people at community Community leaders, local arts andJB: So we can see it makes a real impact on the local and music events community groups, Hackney Councilcommunity. Now, how far, would you say, that # of people enrolled Hackney Council, arts-orientedmeasuring your outputs and outcomes, helps you in programmes investors, community leadersto prove that you are achieving your objectives? # of students graduating with Hackney Council, local business LOCN credits Crime reduction rates Local police, community leaders,GS: We’ve realised that the stories we tell are local residentsmore clearly understood when they’re supportedby figures. We can’t count everything, but countingwhat we can, makes the information more tangibleto our stakeholders.SROI Primer ©2004 nef www.neweconomics.org 4.2
Chapter FiveValue is inthe Eye of theStakeholderAs Gabin explained to us, looking at your outputs JB: That’s interesting, could you tell me a bitcan help demonstrate how well you’re meeting more about your stakeholders and how you prioritiseyour objectives. their needs?We’re now going to look at another real-life case KL: Yes, one of the main stakeholder groups we havestudy in order to demonstrate how important it is to are the local communities that surround ourknow the objectives of your different stakeholders woodland. They were very wary of our motives at first.as this will lead to new sources of value creation. It was important for us to get them on board rightKaren Lowthrop is here from Hill Holt Wood, a socialenterprise in Lincolnshire. Value is in theJessica Boyd: Hi Karen. Eye of the StakeholderKaren Lowthrop: Hi Jessica. • Identify and prioritise all your stakeholders • Consult with them (where possible) to identifyJB: Could you give us some background on your common prioritiesorganisation and your overall objectives? • Measure progress towards achieving your objective • Understand how their objectives match or conflict with your objectivesKL: Sure, Hill Holt Wood is a 14 hectare woodland • Tell your stakeholders what you are doing well,which we run as a social enterprise. One of the key where you could improve and your future goalsobjectives is for us to provide training, vocationaltraining, for 15 to 18 year olds who are at risk ofsocial exclusion. Also, another key objective is toencourage free public access to the woodland andto give information to our local community.JB: So you run a training programme for young from the beginning… and they have formed part ofpeople at risk of social exclusion. the team that has developed this social enterprise. This has helped us both with our business objectivesKL: Yes, that’s part of it, but we founded the and also in restoring the woodland. It is important forwoodland because woodlands play a vital part in the individuals and groups to take advantage of this veryhealth and overall wellbeing of communities. unique environment.Woodlands are part of the sustainable developmentagenda and they do play a role in job creation andeconomic output. In fact we employ 14 people nowand that is a significant employer in our area. ... ContinuedSROI Primer ©2004 nef www.neweconomics.org 5.1
JB: But how do you know that you have achieved JB: Would you say that your objectives have ever beenthat objective? out of step with a key stakeholder?KL: We track users to the woodland, and this helps KL: Well the young people we have on our vocationalus to explain the value of what we do to other courses come with many barriers to learning.stakeholders… like government departments who are Barriers that have prevented them from going intoinvolved in social development, health and the education… or indeed, have led them into crime.environment. It has been proved, I think, that Their objective for coming on the course is to getwoodlands are a very good environment for people a job, to look for long term employment. Fundingto be in. They can dilute all sorts of stress areas and dictates to us that we track just the trainees, thethey can be very calm. Exercise and physical work learners that we train successfully. But the keyalso can have very good measurable benefits for objective is for learners and we don’t feel that wehealth. have reached that objective unless our learners have got sustainable jobs that they will stay in forJB: What other issues are important some time.to your stakeholders? JB: So we can see, therefore, how knowingKL: I think the presence of 40 people on site at Hill stakeholder objectives is important, particularlyHolt Wood… It’s a ’lived in’ woodland… accessibility for programme delivery.of paths… encourages a lot of… a wide varietyof visitors. They feel secure in a well managed, lived Thank you very much Karen for sharing yourin woodland. So, more people benefit from social and experience with us.environmental value we are creating. KL: Thanks Jessica.JB: And could you explain to us how all this may linkto vocational training? So, with Karen’s case study in mind, we’re now going to look at how social value can be monetised…KL: That’s a good question. Our resources come from and we will introduce the Social Return Onthe natural woodland. We offer courses in ‘green Investment analysis.woodworking’, construction, woodland skills andwoodland management… and that’s just an exampleof some. Programme funding comes from governmentsources for ‘youth at risk’ and our classes are verysmall. We have four students to one instructor… andthis allows us to give the kind of attention they need.SROI Primer ©2004 nef www.neweconomics.org 5.2
Chapter SixSocial Return onInvestmentWe’ve looked at measuring outputs and identifying this by using a case study of an organisation byoutcomes in relation to the objectives of different the name of Tomorrow’s People. We’ll look at theirstakeholders. We’re now going to look at monetising Get Out to Work programme in Merseyside.the value of social impacts. Merseyside is actually in an area in Britain whichI’m going to hand over now to Jeremy Nicholls from has a very high rate of unemployment. That meansthe New Economics Foundation and to Stephanie that young people, particularly those withRobertson... and they will introduce Social Return criminal records, have a difficult time finding jobs.On Investment.Jessica Boyd: Hi Social Return onJeremy Nicholls: Hi. InvestmentStephanie Robertson: Hello. • Social investors seek evidence of social impact (social return) that results from theirJB: So, Stephanie, what does SROI mean? financial investmentSR: Many people will be familiar with the return • They have many different profiles (i.e. philanthropist,on investment, ROI, as a way of estimating financial venture capitalist, foundation or government)value creation. Generally speaking, if you investa pound in a project, and more than a pound • SROI indicates the value of the social impact inis returned within a reasonable time frame, that financial termsproject is probably worth further consideration.Investors in organisations that create social valueare thinking the same way. They might be aphilanthropist , a venture capitalist… they could Get Out to Work was actually created to addressrepresent a foundation or perhaps a government that problem… and Tomorrow’s People works withdepartment. There’s many, many different a number of organisations in the Merseyside area.profiles. Social Return On Investment, SROI,is a way to monetise the value of the social impact Now, Jeremy actually worked with Tomorrow’s Peoplein financial terms. and he did the SROI analysis… so he’s going to talk us through.Basically what we’re trying to do is monetise thevalue of the social impact of an organisation’s work.Then we’re going to compare that social value to thecost of making that project happen. We can illustrate ... ContinuedSROI Primer ©2004 nef www.neweconomics.org 6.1
JN: Thanks Stephanie. Well, I’d like to start by activity, were used to project over the next 5 years…describing the organisation’s inputs and outputs. and each future year was discounted to allow for theGet Out to Work costs £51,000 a year… and it change in the value of money over time*. This wasmeasures its success against three targets: Helping all added up, and resulted in a present day value163 of its offenders over the first 2 years… ensuring of Get Out to Work of £543,000.that at least 12 people get a job at the end of that…and reducing the reoffending rate for its client group. Building Get out to Work’s SROIAt the end of the first year, Get Out to Work had Inputs Outputs Outcomes Impactshelped 110 people… and 19 of them had found workand were still employed at the end of 10 months.Now the reoffending rate was 15% lower than the £51,000 110 clients Direct – 19 Direct – 17 involved in clients gain clients into longnational average for that target group… and it was programme long term term employment employmentby measuring their success against these targets, (increased (deadweightthat Get Out to Work was able to calculate the SROI. wages, reduced accounted for) state benefitsThis is how they did it… paid) Indirect – 15% reduction Indirect – in re-offendingThe input was the £51,000 invested. The outputs 15% reduction in re-offendingwere the 110 people that they helped over the firstyear. The direct outcome was that 19 people founda job and reduced the amounts of money they neededfrom the government. The indirect outcome was thelower rate of reoffending. GOTW’s SROI Calculation Impact 17 clients Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Tomorrow’s People were able to use government Per client benefitstatistics and the results of their own surveys to Employment: to client £3,670 £3,830 £3,990 £4,150 £4,320estimate the value of the increase in income (to each Employment: to state £8,940 £9,050 £9,150 £9,270 £9,380job holder), the reduced payments from government Reduced re-offending £12,400 £12,400 £12,400 £12,400 £12,400and the lower crime related costs. They were also Total social benefit £419,740 £390,990 £356,820 £334,580 £311,840able to use Labour Force Survey information to GOTW share (33% of total) £138,510 £129,030 £117,750 £110,410 £102,910estimate that, on average, 2 of the 19 people would Present Value (PV) ofhave found work without their help… and so the GOTW’s share £133,826 £120,451 £106,204 £96,216 £86,647value of the social impact of Get Out to Work was (discounted @ 3.5%)calculated on the basis of the outcomes for 17 Total PV of GOTW’s share = £543,000people and not 19.SR: That’s a really important point. You needto distinguish between outcomes and impacts (*A 5-year timeframe is a standard time horizon toin order to make sure you don’t overstate your value. project return on investment.)This way, your information will be more credibleto your stakeholders.JN: That’s right,… and the results of the first year’s ... ContinuedSROI Primer ©2004 nef www.neweconomics.org 6.2
So the SROI ratio shows the value of the socialimpact in relation to the investment requiredto achieve it. The value of the social impact, in this GOTW’s SROIcase £543,000,… divided by the investment, in this Monetary value of impactcase £51,000. Using this standard calculation, theSROI ratio for Get Out to Work was 10.5 to 1. That is, Total PV of GOTW share of discounted social benefits £ 543,000for every £1 invested, £10.50 is created for society. over 5 yearsSR: Just for emphasis, the SROI ratio is calculated Investment £ 51,000by dividing the value of your social impact by the SROI Ratio 10.5 : 1investment required to achieve that impact.What the ratio tells you… it gives you an indication For every £1 invested, £10.50 is created inof the value for society that’s created for every £1 benefit for societyinvested. However, just remember that SROI is a way SROI = monetary value of impact / value of inputsof thinking, and you may not be able to monetiseeverything… so it’s probably more importantto monetise the things that are important to yourorganisation and also important to your stakeholders. SROI Review • The SROI ratio helps to tell your story,So I guess there’s 2 things to remember. SROI does it is not the whole story!not have to be complicated… and also, the SROI • Set objectives and identify output indicatorsis just a number that is one part of the story. When • Think through outcomes. Decide which can beyou give that number to your stakeholders, it’s measured and monetised. Find dataimportant to put it into context with the other details • Calculate outcome. Subtract deadweightof your programme. to illustrate impact. Check your assumptions • The SROI ratio is the total monetary valueJB: Thanks Stephanie. Thanks Jeremy. of impact, divided by the investmentWell that was a clear introduction to how we can usea straightforward calculation to help us evaluate oursocial impact. Also that SROI could be regarded asa framework for reporting on our wider impact. TheSROI ratio simply indicates value created for societybased on the initial investment.SROI Primer ©2004 nef www.neweconomics.org 6.3
Chapter SevenThe Essentialsand FurtherResources“It certainly makes sense to me. I need to decide on your objectives and the interests of your keyhow to measure outputs against my objectives so that stakeholders will help you to get the results thatI can monitor how well I am achieving these.” you need.“Ah, I see. By understanding my stakeholder’s We hope that you will have found this useful inneeds, I can try and meet them through my developing your own measurement systems andorganisation’s objectives.” planning how to communicate the results.“By putting myself in my stakeholder’s shoes, I can Go to the ‘Resources’ section of this Web site andfind new sources of value creation.” you’ll find links to additional information on social impact measurement, valuing social outcome…“This is really interesting! I’m going to include it in and SROI. And remember that you can downloadmy next tender as it may help me win the contract.” the slides as a useful reference document.Many organisations, from social enterprises and Thank you very much for watching and good luck!charities, to government departments and investors,are looking at ways to measure social outputs,outcomes and impacts. We hope that more and moreof you will see the benefits of using the SROI ratio The Essentialsto demonstrate social value creation. • Understand stakeholder needs and match them to your organisation’s objectivesNow, not everything can be monetised, but the things • Decide how to measure outputs againstthat can, really help to illustrate the importance your objectivesof the work being done… and the value flowing from • Putting yourself in your stakeholders’ shoes can leadachieving social objectives. to new ways of understanding value creation • Report on the whole process, not just the numbersWe’ve gone through the basic steps in this • Government statistics and other data can be used tointroduction… Firstly, set your objectives and identify calculate how you create social impact*. Don’t over-what outputs you want to measure. Then think about state what was actually achievedyour outcomes and decide which of these can bemonetised. Then find the data necessary to do this.Calculate the value of your outcomes and subtractwhat would have happened anyway… this identifiesthe impacts. Finally, you can calculate your SROI *Government data can help both to estimate the monetarybased on your impact, divided by the investment. value associated with certain impacts, and to compare the outcomes for people or groups involved with your organisation to others like them or the general population.Although this process does take some thought,it doesn’t have to be complicated. Keeping focusedSROI Primer ©2004 nef www.neweconomics.org 7.1