Measuring and estimating social value creation

measuring social return on investmentThe Bill & Melinda Gates Foundation have released their report on Measuring and/or Estimating Social Value Creation.

The report profiles eight cost approaches to measuring and estimating social value creation, which are:

1. Cost-Effectiveness Analysis, which is a form of economic analysis that compares the expenses and outcomes of two or more courses of action.

2. Cost-Benefit Analysis, which is often used to help assess the case for a project proposal

3. REDF Social Return on Investment (SROI), provides an alternative to purely economic measurement of return of investment.

4. Robin Hood Foundation Benefit-Cost Ratio, profits a method for assessing and tracking value creation amongst non-profits

5. Acumen Fund BACO Ratio, provides an alternative to measuring social returns

6. William and Flora Hewlett Foundation Expected Return, the concept of providing a consistent, quantitative process for evaluating potential investments

7. Center for High Impact Philanthropy Cost per Impact, introduces a "cost per impact" approach where the social impact and costs are measured and compared

8. Foundation Investment Bubble Chart, illustrates a set of reporting metrics at the organizational or program level that are common across the programs of a non-profit or a segment of a foundation portfolio.

This report makes for solid academic reading, which is what you would expect from the Gates'. But it does also emphasise that there is not a one size fits all approach to measuring social return on investment with the remark that "there is no perfect methodology".

The best recent advice I have heard on social return on investment (SROI), as outlined in an interview on the Social Innovations Conversations, is to identify the one most appropriate key performance indicator (KPI) and use it to focus everything you do, rather than multiple metrics that can become confusing and difficult to track.

For example, if your organisation treats Tuberculosis sufferers, your KPI could be "Number of TB patients who have completely recovered from the disease."

Of course you need to ensure this metric is the most approiate one to track...

Click here to read the Gates report in full.

Read more on SROI here.


Mike.

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