Social Return on Investment and Community Needs What’s SROI Got To Do With It?
Session agenda Background • REDF • What is SROI? • SROI history • How does SROI support community goals? SROI: Building Blocks • Overview of early SROI methodology • Different goals, different analyses • Views of Value • Costs & investment / Benefits & Impact
Session Goals •
How is SROI relevant to community needs?
SROI analysis to help organizations manage their work • Identifying the best questions • Identifying reporting that fits the need • SROI in a context of multiple tools for analysis & reporting
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How has REDF approached SROI ?
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What have we learned, and how are we changing our approach?
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How can SROI other community organizations?
SROI: What REDF Learned / Changes to our approach • Challenges and unanswered questions led to new system development >> underway – Systems & automation – Analyze to answer specific questions – Include both monetary & non-monetary analysis
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What can we expect in the coming years?
SROI: Discussion – What’s Next? • … • …
What is REDF?
REDF is an intermediary that helps nonprofit jobsfocused social enterprises employ people with multiple barriers REDF contributes to the fields of philanthropy and social enterprise by communicating the lessons we learn through publishing, speaking, and sharing information on our website (www.redf.org) In all areas of our work, REDF is deeply committed to measuring the results of our efforts
REDF Theory of Change
Work brings dignity and independence to people living with severe barriers to employment People with severe barriers to employment can be most effectively trained and employed by non profitrun businesses REDF dramatically boosts nonprofit-run businesses ability to succeed
What is REDF’s theory of change REDF
• REDF provides the capital, know-how and networks to start and grow job creating social enterprises • REDF shares lessons to build the field nationally
Help people move into employment and out of poverty
Social enterprise
Employment
• Social enterprise jobs are a first step and pathway into the regular work-force for those who can’t get jobs otherwise
• A social enterprise job leads to a rise in hours worked, health status and income; and reduces homelessness and incarceration
• The enterprises and their employees earn income – Offsetting taxpayer costs
• Social enterprise is an innovation that would benefit every community
Social Return on Investment (SROI)
What is it?
What can it do?
• SROI analysis assess the financial and non-financial value created by an organization relative to the financial investment it requires • The value that SROI assesses can be value to individuals, to organizations, or to communities • Assess different types of value created • Inform decision-making • Align investment with value
Evolution of SROI* 1800s 1970s 1993 2000 2006 2008 2009 2010-11
Cost-benefit analysis first developed Cost-benefit analysis required for US federal gov’t spending First known SROI by social enterprise fund: Coastal Enterprises First SROI Methodology documented by REDF SROI Framework published by group of practitioners SROI Network forms to promote consistency and ongoing development of methodology Scottish and UK Governments pilot adoption of SROI for government grants; SPM Network emerges in microfinance Mushrooming applications and versions
• REDF – SROI Act II development and piloting underway • Company & Nonprofit Managers: NGOs (advocacy, politics, human services, green building, education, health and prevention, etc.), private corporations (family-owned, venture, emerging markets), publicly-listed corps (Nike, Philips), McKinsey, KPMG, etc Investors – Large institutional investors (CalPERS, AIG, UBS), venture capitalists (community development, cleantech), philanthropists and foundations (diverse fields)
* Appreciation to SVT for this chronology
A few beginning questions
Why are we here?
Why am I here?
I want to help fill -----community needs
What does measuring impact have to do with helping people or improving communities?
Increasing community needs Urgency stretched resources
I want to put time and money where they will really make difference!
So I want to know Is what we are doing working?
How can we know which aspects of our work need improvement ?
How can I show others that this works?
…and I want to know Where will my money do the most good?
Should I put resources into Project A or Project B?
Which projects should our organization invest in?
Measuring the impact of our work gives us answers SROI allows us to compare results
Is what we are doing working?
How can we know which aspects of our work we need to improve ?
How can I show others that this works?
Where will my money do the most good?
Which projects should our organization invest in?
Should I spend my time on Project A or Project B?
REDF’s approach to SROI
Impact comes in many forms and all forms of impact require investment Financial Impact
Social Impact What is this activity’s impact on individuals?
What financial impact does this activity generate?
Community / Societal Impact What benefits to society does this activity generate?
• Different program goals require different assessments of results and their costs • Social sector work requires assessment of both monetary and non-monetary results
SROI is just one of REDF’s tools for measuring performance
Individual (Enterprise employees)
Measurement • methods •
Desired outcomes
Enterprise (program)
Demographics
•
Demographics
Social outcomes
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Social outcomes
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Stories
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Financial results
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Individual improved lives
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Group of improved lives
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Healthy, growing / sustainable
Society & Community
Organization
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Social outcomes tracking system
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SROI
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Cost / Benefit analysis
Healthier, more effective organizations
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Improved society
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Dollar impact on community
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Cost effective strategies
REDF Approaches to Measuring Impact Methodology Individual (Enterprise employees)
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– Face-to-face interviews with employees at time of hire and at 6 month intervals, up to 24 months •
Assessment methods
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Demographics
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Social outcomes
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Stories
Interviews, interviews, interviews!
What do we ask? – Employment – Wages – Barriers to employment – Housing situation – Usage of social services
Desired outcomes
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– Self-esteem
Individual improved lives
– Social support •
Collect, compile, quantify
REDF Approaches to Measuring Impact Methodology Individual (Enterprise employees)
Assessment methods
Desired outcomes
Enterprise
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Social outcomes
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Financial data, reports
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Stories
•
•
Demographics
Customer, staff, employee feedback
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Individual improved lives
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Jobs that help individuals improve their lives
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Healthy, viable businesses
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Monthly review of business operations
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Monthly and annual enterprise financial statements
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Collect, compile, quantify
REDF Approaches to Measuring Impact Methodology
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Assessment methods
Desired outcomes
Organization
Assess organization’s existing monitoring and reporting needs
• •
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Bring together specialists in client data evaluation and information technology to design customized system
Test, use, refine
Track all programs’ participants
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Customized database
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Improved internal practices
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Better help for people in need
Society & Community
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SROI
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Cost / Benefit analysis
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Improved society
•
Dollar impact on community
•
Cost effective strategies
REDF Approaches to SROI Methodology Individual (Enterprise employees)
Assessment methods
Desired outcomes
•
Demographics
•
Social outcomes
•
Stories
•
Individual improved lives
•
Use Individuals’ Social Outcome information and Enterprise Financial information to
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Calculate investment used to create & support individual’s employement
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Collect, aggregate, and analyze data showing individuals’ employment and life changes over time
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Calculate monetary and non-monetary impact of individuals’ changes
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Compare changes’ impact to investment they took
Society & Community
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SROI
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Cost / Benefit analysis
•
Improved society
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Dollar impact on community
•
Cost effective strategies
How Does REDF’s SROI Measure Impact on SOCIETY ? Social Mission Impact
Enterprise
Business Enterprise Impact
Enterprise
• Investment in social services
• Investment in business
• Usage of social services data
• Business valuation
• New taxes generated
• Business sustainability
SROI FRAMEWORK / ANALYSIS Impact of social enterprise on society / community
What questions are we trying to answer?
Social Impact
Financial Impact
Community / Societal Impact
• How many individuals has the social enterprise employed?
• How is the social enterprise performing financially?
• What are the benefits to society resulting from the social enterprise’s work?
• Is the social enterprise meeting the social mission goals and requirements set out for it?
• Is the social enterprise meeting the business / financial goals and requirements set out for it?
• For each dollar invested in the social enterprise, what are the resulting cost savings to society?
• With an investment of $___, what impact can we have on #___ people?
• To what degree is the enterprise able to sustain itself financially, versus require subsidization?
Some questions require SROI analysis others don’t
SROI Reporting Can Tell One Part of a Complete Story REDF Social Impact Preport: Social Mission Performance
REDF Board Dashboard: Financial Performance
REDF SROI Report: Community / Societal Impact
SROI: What REDF learned >>> changes to our SROI approach
Measurement of impact and SROI analysis can give clarity to social mission work In social mission work, value and return take numerous forms. Because of this, meaningful SROI analysis goes beyond one metric or one formula; SROI approaches must include the capacity to assess both monetary and non-monetary forms of value SROI analysis must be easier to do and it must be replicable The challenges to determining causality and identifying comparable activities / measures for benchmarking continue to need creative solutions
SROI: What REDF learned and changes to our SROI approach
REDF developed its original SROI model in 2000 In 2010 we launched the design and piloting of an automated SROI system, SROI Act II
REDF’s SROI ACT II Social mission performance data and financial data brought together for targeted, reliable analysis via system links Input
Activities
Grants – start up Grants – ongoing Staff time
Assistance, Link to networks
Nonprofit Organization or Initiative
Grants, Earned Income, Staff time
Program Interventions
Services Seeker
Time, Activity participation
Targeted Activity
Funder
Outputs
>>>
Outputs (e.g., # of ppl employed)
Output Data Services Purchaser
Outcomes
Outcomes (e.g., individuals move out of poverty)
Outcome Data
Payment for services Accounting Software
Performance Mgmt Software
SROI Act II Platform Dashboarding, Analysis Templates & Reports
SROI Act II Example: Monetary Analysis SROI Act
[SROI 2.0 product working title]
EXAMPLE A - ANSWERING A FINANCIAL RETURN QUESTION A hypothetical analysis using CVE as a hypothetical organization using SROI Act (note that all facts and metrics are invented for this example ) Question: What is CVE's annual cost per target employee ("participant") employed at CVE's IME, compared to the annual community savings generated? Who: Stakeholders who might ask this question include S.F. City and County government and foundation funders Analysis components: Cost components= Total IME 20xx cost, # target ("participant") employee FTEs in 20xx
Source of component data
IME 20xx cost (i.e.all IME business and social costs) = # target IME employee FTEs
CVE accounting system ETO
$350,000 35
Benefit components= Est. community cost savings (based on change in target employee's use of community svcs -orig REDF SROI methodology, but with updated $s) Average community cost savings per IME employee in 20xx
ETO outcomes re reduced use of svcs, eg foodstamps, calculated with SROI-SW resident data (e.g. cost of foodstamps)
$15,000
SROI-SW Reports Reporting on above data could take a variety of forms. SROI-SW would have pre-programmed calculations and reporting format to accommodate those desired, for example: Net (estimated - average) cost savings for the program =
$525,000
20xx Community savings above program cost =
$175,000
One donor's view of cost savings generated by their donation (e.g. a $50,000 donation to CVE for IME) "Our Estimated investment / return for funding that builds a program (e.g. $100,000 capital investment toward expansion of IME)
( or "for every dollar paid into IME,
$50,000 donated to IME in 20xx, generated *
1.50 in community cost savings is generated")
$75,000 in community cost savings"
(* roi-type calcs, per original SROI model or simplified formula)
SROI Act II Example: Non-Monetary Analysis SROI Act
[SROI 2.0 product working title]
EXAMPLE B - ANSWERING A NON-FINANCIAL RETURN QUESTION A hypothetical analysis using CVE as a hypothetical organization using SROI 2.0 (note that all facts and metrics are invented for this example ) Question: How long does it take, and what does it cost for CVE participant-employees to overcome barriers x and y?
Who: Stakeholders who might ask this question include government contract / compliance officials, e.g. from Dept. of Rehabilitation Analysis components:
Source of component data
Investment components = Total $$ to get Work Prep prog started (or for expansion) Cost components= Total CVE Work Prep program ongoing costs in 20xx, # FTE participants
CVE Accounting system CVE Accounting system
CVE Work Prep 20xx cost = # 20xx participant FTEs in Work Prep program
CVE accounting system ETO
Barrier progress components=
$150,000 45
baseline and subsequent progress measures on x, y barriers (in the form of % reduction over, e.g. 1 year)
ETO
SROI-SW Reports Reporting on above data could take a variety of forms. SROI-SW would have pre-programmed calculations and reporting format to accommodate those desired, for example: Annual cost per FTE for % reduction of x, y barriers
$3,333
Cost / results for a particular contract (or grant) (e.g. a $60,000 contract for Work Prep participant services) Estimated investment / return for funding that builds a program (e.g. $100,000 start up toward the ongoing Work Prep program)
18
*
(your $60k contract buys services that reduce x,y barriers by --% over 1 year for 18 FTEs)
(* roi-type calcs, side by side with projected #s FTEs / individuals' barriers reduced over timeand, if appropriate, any specific related community savings, eg reduction of recidivism leading to estimate of lowered re-incarceration costs)
SROI – What’s Next? Pressures in two directions
Narrow Questions Regarding Outcomes and Cost
Broad Definition of SROI E.g., “Are the results worth the effort?”
E.g., What is the cost per person?
Outcomes Employment rate
Average wage
Annual earnings
Cost per person per year*
81% employed within prior 6 months
$10.96
Increased $12,800 vs. before hire
~$4,000-8,000
67% employed within prior 3 months
$9.62
Increased $1,270 vs. control group
$32,600
* <_________>
SROI – What’s Next? Questions that further SROI development must address
How do we keep the broad SROI questions in mind (“is it worth the effort?”) while ensuring credible links to the right detailed questions about cost and benefit? Who needs to know and how does the “who” affect what analyses are appropriate? How can we ensure that rigorous investment and cost analyses are paired with equally rigorous analyses of outcomes? How can we ensure that the outcomes we cite are generated by the activity we measure?
Investment in Program X = $___
www.redf.org
Session Evaluation Information
SESSION TITLE: Social ROI SESSION CODE: L-W900