Social Return on Investment (SROI) is an emerging methodology that seeks to measure the value of social impact. SROI presents the social impact of different initiatives into financial value terms, and presents this value in relation to the investments that lead to the social impact result.
Some individuals equate SROI to Cost Benefit Analysis (CBA), where the inputs into a program are considered in relation to the perceived value of the outcomes of a program. One significant way in which SROI differs from CBA, however, is that it explicitly focuses on the experience of stakeholders and represents value from the stakeholders’ perspective in the final analysis. The SROI methodology, like accounting, is a principles-based approach. The first principle, as set out by the SROI Network’s Guide to Social Return on Investment, is “involve stakeholders.”The notion of involving stakeholders happens at every stage of the SROI process. When establishing the scope of the SROI and identifying possible stakeholders, identified stakeholders are to be consulted. When mapping the outcomes of the program at the core of the analysis, stakeholders are asked about their experience and the outcomes that have been the most important to them. As financial proxies are assigned, value from the stakeholder’s perspective is considered, and stakeholders are involved in identifying this value.
In determining the impact of the program (how much of the change from the program is due specifically to the program and not due to other factors) stakeholders are asked about the elements that contributed to the change that they experienced. Finally, the results of the analysis are shared with stakeholders to confirm the validity of the results and to ensure accountability.
The stakeholder’s connection to return on investment
Why has the Social Return on Investment methodology placed such a strong emphasis on involving stakeholders? What benefit does this provide when measuring and illustrating the social value of different interventions?
There are many reasons why involving the stakeholders in analyzing social value creation is beneficial, not only to the analysis, but also to the program’s operation and the stakeholders themselves. From an analysis perspective, involving stakeholders increases the validity of the assumptions that underpin the analysis and decreases the risk that estimations are not in line with reality. Involving stakeholders assists the individuals conducting the SROI to determine the actual impact of the program that they are analysing, while avoiding over-claiming.
For the organization, understanding value from the stakeholder’s perspective can help the organization to maximize the social value that they are creating and to direct the program toward the best approach for effective service delivery. According to the SROI Network’s Guide to Social Return on Investment, “involving [stakeholders] can help you to understand more about strengths and weaknesses of the activities you are analyzing and may provide useful information that can help your organization improve.” In this way, involving stakeholders can help identify a common ground between what stakeholders value most and want to achieve, and what the organization wants to achieve, thereby creating a method through which to increase effectiveness and maximize social value creation.
Accountability to stakeholders
For the stakeholder, including their perspective in the analysis ensures that the analysis is reflective of their lived experience, which leads to a more meaningful connection to the program and its planning. According to the SROI Network, involvement of the stakeholders in the SROI process “enables them to hold the service to account and involves them meaningfully in service design.” This is an important point, whereby the stakeholders can feel that the services they receive are accountable to them, giving them ownership over the programming and encouraging them to press for more effective program design and service delivery.Of importance in the entire process of involving stakeholders is that value from their perspective can be included in the analysis. While many intangible values related to social programs may still be missed in the financial number crunching of SROI, including value from the stakeholder’s perspective begins to ensure that the full spectrum of social value created can be captured and demonstrated through the analysis. In this way, involving stakeholders can help to ensure a more “full cost accounting” approach to understanding social value creation.
Overall, then, the SROI approach of involving stakeholders not only sets it apart from CBA but also opens the potential for grassroots program design and increased effectiveness, greater accountability and reliability in analysis, and a more in-depth understanding of social impact and the value of that impact.
Anne Miller is Team Lead of the Social Return On Investment (SROI) Initiative at the SiMPACT Strategy Group, a specialist agency in social impact management, measurement and valuation.