When planning a new project, or evaluating whether an existing service has been successful, financial success is often the only thing that gets counted.  

A broader concept of value is needed, particularly for public service (government or second sector) and third sectors (CVS - Community and Voluntary Sector); value added to and improve well-being by incorporating social, environmental and economic costs and benefits. SROI (Social Return on Investment) measures change in ways that are relevant to people and organisations; how they experience the service, how it has contributed;. SROI is about value, rather than money, though application of the franework often leads to real financial benefits. Money is simply the common unit used to compare projects, but money not needed is money that can be used for something else.

The need for SROI

Investment decisions (do we fund this new project? do we put more money into that existing service? how did that pilot go?) made on the basis of pure cash value will miss the point: concepts such as how much we visibly save versus how much we spend can be meaningless when we are trying to improve quality of life, improve the contribution that people make to their communities.  Very often, the most basic and easy to measure financial indicators are a poor measure of success in projects funded by government.

People do contribute and get engaged in ways that, if measured carefully (and avoiding double-counting), really can be translated into a monetary value – does their newfound confidence mean they can get a job, pay their bills, use hospital or community and mental health services less?  Will children, with the right support, grow up to pay taxes and do community work rather than find themselves pushed from one mental health service to another?  SROI is a standard and acceptable way to put a value on "value".

Benefits Realisation?

As you know, I’ve been working on Benefits Realisation on and off for around 20 years – from the days when we called it “Return on Investment”, only it needed to deliver more than just the cash saving – it had to contribute to the organisation’s strategic objectives and it required the behavioural change to get the benefits[1]; right through to the present day well defined Benefits Management[2-5].

But the methods used for Benefits Management have varied between practitioners and clients, and to an outside observer, some of the reports produced by some practitioners have looked more like PR exercises[6]].

A Standard Methodology – kitemarked

Many organisations, government (of course) as well as independent (some of the major charities), have to make decisions whether to support an organisation or a new initiative on the basis of these very varied “benefits realisation” and “return on investment” reports.  They wanted a standard.

Who’s behind SROI?

SROI boasts an impressive list of sponsors.  The Cabinet Office: Office for the Third Sector, New Economics Foundation, Charities Evaluation Services, NCVO (National Council for Voluntary Organisations), New Philanthropy Capital, Scottish Government, among them.  Organisations such as the SROI Network (www.theSROInetwork.org) provides training and manages accreditations and the list of accredited practitioners – this is a national thing!

How SROI helps organisations

As well as providing information for funding bodies and the board of the organisation to evaluate existing services, an SROI report helps the organisation understand and communicate with stakeholders (especially service users) in a structured way, and identify parts of the service that may need changing.

Types of SROI

SROI can be applied in two different ways:

Evaluative, which is conducted retrospectively and based on actual outcomes that have already taken place

Forecast, which predicts how much social value will be created if the activities meet their intended outcomes

The Seven Principles

SROI is a rigidly applied governance framework: it is flexible and comprehensive enough to meet the needs of any evaluation or proposal (in the commercial world it is not used because they tend to use the simpler cost benefits analysis), but rigorous enough to give consistent results.

The framework rests on seven principles and there are six standard stages to an evaluation

• Involve stakeholders.
• Understand what changes.
• Value the things that matter.
• Only include what is material.
• Do not over claim.
• Be transparent.
• Verify the result.

The seven principles ensure that all SROI studies are built up from the same basic foundation: in essence, that stakeholders provide the evidence (they are the source of the information used to build the report, not just a passive audience) and that the benefits claimed for the service are fair, honest and transparent (ie not double-counted, not inflated, not due to some other cause).  The seven principles ensure that SROI reports can be trusted.

The Six Stages

1.  establishing scope and identifying key stakeholders. It is important to set boundaries about what you're SROI analysis will cover, who will be involved in the process and how.
2. Mapping outcomes. For engaging with your stakeholders you will develop an impact map, or theory of change, which shows the relationship between input output and outcomes.
3. Evidencing outcomes and giving them a value. This stage involves finding data show will outcomes have happened in that value in them.
4. Establishing impact. Having collected evidence outcomes and monetise them, those aspects of change that would have happened anyway or the result of other factors are eliminated from consideration.
5. Calculating the SROI. This stage involves adding up all the benefits, subtracting any negatives and comparing the results of the investment. This is also where the sensitivity of the results could be tested.
6. Reporting, using and embedding. Easily forgotten, this vital last step involves sharing findings with stakeholders and responding to them, embedding good outcomes processes and verification of the report.

Preparing an SROI report

Key considerations for an organisation wanting an SROI report are:

Who is the audience?  Is this for a funding provider because they have asked for it, for funding organisations in general, for your users?  Can you use parts of the report, perhaps a short brochure or flyer conveying the key points, for a different audience?

What does your audience want?  In the course of interviewing stakeholders your consultant will speak with the intended audience (as a stakeholder), so what messages do you want to convey at that stage, and what messages during the preparation and presentation of your report?  How will you build your message?

How much time can you spare, and how much consultant time can you afford?  A typical SROI report may take 18-25 days of consultant time, but since this involves a lot of meetings with stakeholders, this may be between 4 and 6 months’ elapsed time (from start to finish).  But they will need your input – which part of the organisation, identifying all the stakeholders, narrowing it down to the stakeholders who need to be included, arranging meetings with those stakeholders both for their input, and for their verification of the consultant’s conclusions.  Make sure you allow enough of your time for this.

What will you do for your stakeholders (particularly service users) to encourage them to contribute?

The fact that you have submitted yourself to an SROI report is a tremendous message of your confidence, and you should expect funding organisations falling over themselves to give you money!

Documents referred to

1.            Thorp, J. and DMR Consulting, The information paradox : realizing the business benefits of information technology. 1998, London: McGraw-Hill. xxvii, 223 p.

2.            Bradley, G., Benefit realisation management : a practical guide to achieving benefits through change. 2006, Aldershot, Hants, England ; Burlington, VT: Ashgate Pub. xv, 287 p.

3.            Ward, J. and E. Daniel, Benefits management : delivering value from IS & IT investments. John Wiley series in information systems. 2006, Hoboken, NJ: Wiley. xvii, 399 p.

4.            APM Benefits Management SIG, Benefits Management 'A strategic business skill for all seasons', APM, Editor. 2009, Association for Project Management.

5.            Jenner, S., Realising Benefits from Government ICT Investment - a fool's errand? 2009, Reading, UK: Academic Publishing International Ltd. 150.

6.            Pylas, P. Vast Majority of EU Banks Pass Stress Tests. Time  2010 23 July 2010 [cited 2010 8 Aug 2010]; Available from: http://www.time.com/time/business/article/0,8599,2006166,00.html.

This page originally written 12 Aug 2010, revised 24 June 2012