By Helen Fitzhugh - Researcher at The Guild

The Measuring social value conference was an opportunity for people interested in measuring and maximising social benefit to gather together and debate Social Return on Investment (commonly known as SROI). It was a valuable opportunity. I came away from the day convinced that all interested parties have a collective responsibility to make sure the process of developing and using SROI is steered in the right direction.

SROI is a way of measuring social impact and then describing it in terms of value. It has a focus on involving service users and other stakeholders. It also makes sure you consider outcomes, not just outputs. At the final stage the value is reported as a ratio. For instance, you can say that an organisation produces £3.50 social return for every £1 invested. This will not always represent a monetary saving to the investor, or even to anyone else, but it is a way of expressing value that people will already understand – in terms of money. 

SROI at its best could be transformative – helping to promote a pan-sector focus on long-term, real and substantial change for people who need it most, as well as promoting better management, clarity and service-user involvement in organisations with that aim. SROI at its very worst could be a well-meaning but unfortunate promotion of the idea that rich social change can be reduced to a ratio. There is some concern that a poor understanding of what SROI can and cannot do means that investors may compare vastly different organisations based on the SROI calculations to decide who is and is not worthy. The voluntary, community and social enterprise sectors have a vested interest in making sure that SROI follows the first path.

What can be done? In my opinion, the following five elements are key:

• Engagement with the debate

• Recognition that social value metrics are still in their infancy

• Sensible and nuanced awareness-raising of the benefits and limitations of SROI to the public sector and other potential investors

• Sensible and nuanced use of the ratio by organisations

• A collective focus on how SROI could promote structural change in commissioning social benefit.

Firstly, we all need to actively engage in the debate. Ignoring or boycotting the subject will not make SROI or any of the other moves towards evidence-based practice go away. The impetus is already behind measuring social impact and we need to make sure we are lobbying, challenging and supporting to direct the momentum, curb what is counter-productive and promote what is good. I know from my own experience that even at a conference dedicated to SROI, this ‘critical friend’ approach can be hard. At some of the roundtable discussions I found myself presenting some of the concerns that small VCS organisations and social enterprises commonly express about SROI. When doing so, I was occasionally made to feel that I was being unnecessarily negative, when what I felt I was doing was recognising that the concerns persist and trying to find ways of addressing them. Personally, having completed practitioner training, debated on the assurance sub-committee and started to undertake my own pilot SROI, I knew that people had already put a lot of time into responding to these concerns, but that the message was not always getting through to a wider audience. Later on, in other roundtable discussions and private conversations, the overwhelming majority of conference attendants were pleased to discuss openly the benefits and the limitations of SROI, without a hint of ‘selling’. This is where the real value of debate lies.  

One of the important reasons there is still patchy understanding of SROI is simply because it is still in its infancy. We were reminded of this by a contribution from the floor to the effect that purely financial accounting had taken 100 years to develop and that SROI had not been around for nearly as long. Others reminded us that SROI reports published at the start of this decade would not pass the current SROI network assurance processes. A Cabinet Office logo on the front of the latest guide does not mean the end of SROI history. As more and more organisations of different sizes, structures and approaches test SROI, there are bound to be new discoveries, changes and developments. This is another reason why debate is still important – use of SROI is far from a foregone conclusion.

In order to make sure that SROI follows the right path, we need to raise awareness of how SROI can be used sensibly at the purchasing and grant-making end of the funding relationship. Some people feel that SROI should be claimed solely as a quality and management process by organisations and that its use in procurement is incidental. I see this as odd. It is a great idea for all organisations to embed the first part of the process. It involves clarifying objectives, looking at a theory of change, concentrating on outcomes, consulting and involving stakeholders. However, this in itself is not SROI. It is a thorough and responsible approach to planning, it is using an outcomes focus and it is consultative. But the SROI process encompasses all of this, followed by the conversion of information gathered into measurable value – a move into the quantitative. The SROI guide itself says that it moves into the language of finance because it is what people, including investors, will understand. To ignore this fact is to ignore one of the driving purposes of SROI.

Awareness-raising is key, but as with any cause, its important not to over claim or over-sell. SROI may not be of use to every organisation (those social enterprises who are sustainable through direct sales to the public may not feel the need to do the financial proxy element of the process, for instance, but instead invest in a different type of marketing). SROI ratios can not be compared between organisations because they are a product of an approach that follows a framework and is based on judgement. A well-conducted, assured individual SROI process report can tell you a lot about an organisation. But the ratio alone is not an easy fix for investors. It’s a cliché, but those who know about SROI like to say that nobody would invest in a business just on the basis of the turnover figure, but would look deeper. SROI should be used in just the same way. It can add to the picture. It can bring social value to the fore where it might not have been before. But the ratio alone does not provide a benchmark for anything other than the same organisation in years to come.

It is very easy to sell SROI for the way it takes the complex and presents it as simple. It is harder to make the sensible and nuanced argument that SROI provides a tool for demonstrating value, but that the process is the really valuable part. The ratio is a fantastic hook for use in marketing and for letting people know the benefit of what you do. Organisations will have a responsibility going forward to promote their ratio as a culmination of a whole process that should be taken into consideration. The assurance process set up by the SROI network will make sure that these principles are adhered to in officially assured SROI reports. It’s important to make sure that they are taken beyond that into a wider sensible and nuanced discussion of SROI. We need to make sure that SROI does not over claim.

It is also important to make sure that organisations within the third sector, whether they want to use SROI or not, see the value in collective action to lobby for contracting on the basis of social value outcomes, not just numerical targets and outputs. But also, we need to be lobbying for something more radical: well supported co-planning and partnership approaches to commissioning. One of the speakers at the conference, Miia Chambers (who has been pursuing an outcomes-based approach to commissioning within Camden Council) suggested that the value of SROI would be lost if commissioners don’t use it to foster a partnership approach, but instead set targets according to this new metric, thus cycling the whole issue of contract requirements back to a new set of numerical targets.

All in all, SROI is a process that, if taken up and shaped with sense and moderation, could promote the further creation of social value at the individual and the structural level. If you want to make sure the development of SROI has a positive outcome for our sector, it’s time to join the debate.

Posted on : 21/01/2010

Click here to Register and post a comment on this article