Measuring and estimating social value creation

The 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.

Measure your performance

You've defined your vision and set your objectives, but how do you know if you are meeting your objectives?

You measure and track your performance.

Commercial businesses measure their performance in terms of revenue and profitability. Social businesses can also do this, but more importantly they need to track their performance against their social objectives.

The social objectives may be the number of homes provided for the homeless, or the number of HIV/AIDs orphans who are being cared for.

Each of your objectives should have a set of tactics that determine how you are going to meet your objectives.

Looking at the example on homes for the homeless, and assuming you are currently an Estate Agency, the tactics could include:

1. Use existing contacts in the construction trade to build or provide the low cost housing
2. Finance the homes through the sale of commercial or residential buildings
3. Engage with organisations that can identify those most in need of homes
4. Etc, etc.

You then need to measure your performance (progress) against these tactics.

This can be done in a variety of ways, but the simplest way is to track your progress is to keep a log (written or electronic) based on set periods (weekly, monthly, annually) with the number of times your are and are not delivering on these tactics, and hence meeting your objectives.

Your tactics should be reviewed regularly, to ensure they are still appropriate.

For example, you may find that your contacts in the construction trade cannot provide the houses you are looking for, and you need to focus on low cost governmental housing, perhaps looking at a Private-Public Partnership.

I've used the example of an Estate Agency here to highlight that you don't have to be a typical non-profit, NGO or charity to be a social business. Although you do need to be careful that your financial objectives do not clash with your social objectives, and may consider having your social business as a separate legal entity.


Mike.

A clear vision and objectives are a must for social businesses

Arguably all organisations need a clear vision of what they are trying to achieve and objectives to determine how to get there.

This is especially important to social business, and is the ninth key principle.

A vision provides the over riding direction for the business and should drive everything you do.

It could be something like providing all HIV/AIDs sufferers in the Kwa-Zulu Natal with the healthcare they need; or to supply employment for unemployed women in the Khayelitsha township.

Your vision is the reason why your organisation exists and provides the guiding light for everything you do. It provides the focus and direction required to ensure that you do not deviate from the path you have set.

Once you have a clear vision, you should set objectives. Objectives provide the stepping stones to realising your vision. Examples of this could be that you will get 100 of the HIV/AIDs sufferers in Kwa-Zulu Natal on the right medication in 2009; or that you will gain employment for 2 unemplyed and unskilled women in Khatelitsha in January 2009.

Objectives should be captured in a way that is easy to understand, communicate, and most importantly, measure. If you can't measure your progress against your objectives then it is very difficult to know when you have achieved them. Having numbers, like the financial value or number of items, as well as dates in your objectives help provide the measurement.

No matter what the size of your organisation, all staff need to know what your vision and objectives are. Create posters and display them round the office, post them on your website and keep repeating them at every opportunity.

In this way your vision and objectives can become second nature to all, and ensure that your whole organisation adheres to this key principle of social business.


Mike.