Measuring What Matters Social Return on Investment (SROI) Katherina Rosqueta, Executive Director Center for High Impact Philanthropy School of Social Policy & Practice (SP 2 ) March 2009 THE CENTER FOR High Impact Philanthropy
Purpose of SROI Measure social impact Learn from past programs Improve for future programs Decision making among programmatic options Communicate to Donors / Stakeholders
ROI = Gain or Loss from Investment Cost of Investment Return on Investment (ROI) , is the ratio of money gained or lost (realized or unrealized) on an investment, relative to the amount of money invested. Return on Investment (ROI) Definition & Example Cost of Project = $500 Ex. 1: Sales from Project = $750 ROI = 750-500 500 250 500 = .5 or 50% = Cost of Project = $500 Sales from Project = $1250 Ex. 2: ROI = 1250-500 500 750 500 = 1.5 or 150% =
REDF SROI: Measuring Value & Return Apply 6 stage process <ul><li>Enterprise Value </li></ul><ul><li>Social Purpose Value </li></ul><ul><li>Blended Value </li></ul>Value + = <ul><li>Enterprise Index of Return </li></ul><ul><li>Social Purpose Index of Return </li></ul><ul><li>Blended Index of Return </li></ul>Return
REDF SROI: Measuring Return Example In 1999-2000, Rubicon Landscape Services achieved gross sales of $3.9 million and employed 52 target employees. Enterprise sales were expected to increase to $7.8 million by 2004 in order to employ a projected 78 to 140 target employees. Rubicon Landscape Services is a social purpose enterprise fully owned and operated by Rubicon Programs, Inc. a nonprofit community development corporation based in Richmond, California. The enterprise provides grounds maintenance and landscape installation services to large-scale residential, commercial and institutional properties throughout the San Francisco Bay Area and employs disabled or economically challenged individuals.
“ Unfortunately, as many organizations wrestle with how to calculate their social return on investment (SROI), some in the field are starting to question whether the methodology is too costly and complex to be meaningfully used to evaluate nonprofit effectiveness.”* Beyond SROI * Mark Kramer, “Measuring Innovation: Evaluation in the Field of Social Entrepreneurship,” Foundation Strategy Group, April 2005. On page 22, an interview with Jed Emerson highlights some of the challenges that organizations have had in calculating SROI.
Multitude of systems Multiple Metrics (Source: Rockefeller Foundation (2008)
Current Leading Metrics SROI SROI BACO Ratio Benefit-Cost Ratio Expected Return Cost per Impact Portfolio Assessments Foundation Investment Bubble Chart
Metrics Examples Acumen Robin Hood CHIP Nature of org Venture philanthropy fund Foundation Resource center for philanthropists Nature of activity Invest in both for profit and non-for profits Give grants to nonprofits in NYC Develop guidance for philanthropists Tool BACO (Best Available Charitable Option) Benefit cost ratio Cost per impact
BACO (Acumen Fund) Cost Analysis Nonprofit For-profit Total Cost $390,000 $455,000 Expected Financial Return $0 $422,500 Total Output (Bed Nets) 97,825 2,000,000 Total Social Impact (person years of malaria protection) 464,286 or $0.839/person year 2,000,000 or $0.016/person year
Strengths and Limitations of SROI <ul><li>+ </li></ul><ul><li>Brings objective, quantitative metric </li></ul><ul><li>Forces focus </li></ul><ul><li>Enables comparison of programs </li></ul><ul><li>Fosters investment mentality </li></ul><ul><li>– </li></ul><ul><li>Allure of false precision </li></ul><ul><li>Resource intensive </li></ul><ul><li>Does not fully capture the complexities on the ground </li></ul><ul><li>Not all benefits or costs are easily monetized, counted </li></ul>