The document presents a model called the "two squares and two circles model" for understanding and calculating social value. It uses the example of social housing to explain the model. The model represents (1) the social value created, (2) the costs of creating that value, (3) the number of beneficiaries, and (4) the number of intended beneficiaries. It shows that organizations can continuously improve and increase their social value by increasing the value created, reducing costs, increasing the number of beneficiaries, or reducing the number of unintended beneficiaries. The model provides a framework for understanding how activities can be modified or optimized to maximize social value.

1. Social Value as a driver of
Continuous Improvement
The two squares and two circles model.
Simple but powerful.
Dr Julian Westwood

2. Understanding Social Value
I once had the opportunity to explain to
a wide range of people across a diverse
organisation what social value is and how
it would transform their work.
They were sceptical.
I was fortunate enough to stumble upon
this way of explaining it which worked
better than I could have hoped.
One colleague, a very practical guy,
leaped across the table when I asked the
question, “How could you create more
social value?” He gave the answer which
is the second part of tis presentation.
If you are in a charity, government, third
sector or some commercial
organisations, then creating social value
is your primary objective.
Understanding this simple calculation
makes clear the four options everyone
has to increase that overall value. That is
the drive for continuous improvement.
That colleague caught up with and
showed me how he was creating more
social value by modifying an existing
programme of window replacements.
I’d never have thought of it. He did.

3. This square represents the value of the “good” that you have created. This could be
the benefit of addressing mental health needs, providing housing or education.
Maybe its reducing re-offending, increasing employability, reducing drug
dependency. The way that you create it doesn’t matter in this model. It also doesn’t
matter which method you used to calculate the value.
Taking social housing as an example this is the value created by providing X thousand
houses at below market rate to those who would not be able to function in the
housing market.

4. From that amount you need to subtract the cost of creating that social value. This is
the running cost of your operation. Hopefully, but not always, this will be less than
the value you created. I have seen projects which have cost more to run than the
benefit they deliver.
In social housing this would include; salaries for staff, materials for repairs, IT systems,
office buildings, vans etc.
This would give you a “net- impact” value.

5. Once you have your net impact you multiply that by the number of people who
benefit from what you do.
For social housing this is the number of people who live in the good quality
houses provided below market rate and who could not themselves function in the
housing market.
X

6. From that number it is necessary to subtract anyone who is benefitting from what
you do who is not one of the intended beneficiaries. This is the “net-beneficiaries”.
In social housing these are people who do not, or perhaps no longer, require the
reduced cost of housing. Perhaps over time their situation has improved to the
point where they could now function independently in the housing market.
X

7. The “net impact” (squares) is then multiplied by the “net beneficiaries” (circles) to
give the overall Social Value. (I use the symbol $V as short-hand)
The actual calculation is, in practice, slightly different to this but this has the
benefit of making the following points clear.
X Social
Value
($V)
=

8. To continuously improve your organisation and increase social value four options
should be immediately obvious.
X Social
Value
=

9. Increase the amount good that you create – do more of it, do it better.
X Social
Value
=

10. Reduce the cost of what you do. This could be through the removal of waste and
finding ways of being more efficient in delivery. If this isn’t a constant area of focus
for you then it should be.
Every resource wasted has an opportunity cost which is also subject to these
multipliers so a pound wasted in procurement, for example, is many pounds of
Social Value lost.
X Social
Value
=

11. Increase the number of beneficiaries.
This could be through better use of resources, improving recycle times for use of
resources etc.
In social housing this would include reducing the period for which houses are
“void” between lets. This often runs at about 4% - so that’s almost 1 in 20 homes
not creating benefit.
Consider the opportunity cost in financial and Social Value terms.
X Social
Value
=

12. Reduce the number of false beneficiaries.
Better target your services to where it creates the greatest social impact – this is,
by definition, the right thing to do.
In social housing it has become received wisdom to keep tenants who are good
payers. It is among this group that you will find those who no longer require the
reduced level of rent. Their positive financial value carries an unrecognised and
much larger social value opportunity cost. In blunt terms there is a family trapped
in inadequate housing with detrimental impact on their health, wellbeing, and life
prospects so that others can unfairly receive below market cost housing.
X Social
Value
=

13. X
Greater
Social
Value
=
Delivering one, more, or all of these can significantly increase the Social Value
that you create.
Understanding how to calculate social value and how it relates directly to your
activity can be a driver for continuous improvement.

14. I hope that has been helpful and
prompted thoughts about how to
increase the Social Value that you
create.
Dr Julian Westwood
julianwwd@gmail.com