Why Calculate Social Value Return On Investment?
Measuring the impact of your social value is important. It allows you to compare all of your social value initiatives to see if they are achieving what you set out to achieve and allows comparison across and between initiatives to inform budgetary allocation, prioritisation and even methodological application. If you are tendering for contracts, SROI values can be used to evidence previous activities or to inform forecasts for the contract for which you are bidding and can provide public sector buyers with evidence and confidence of your effectiveness and commitment when compared to others.
How do we measure social value?
When it comes to social return on investment, there is no universally agreed way of measurement, but currently, the most dominant and widely accepted approach when calculating and reporting social value is to provide a financial value. It is important to realise that this financial value is a proxy and is not “real money” or a financial return on investment. The proxy is used simply as a comparator and as a way of quantifying the outcomes in a way that most people can understand and relate to. But it can lead to a one-dimensional perspective and give the illusion that one social value initiative is “better” than another. This would clearly not be the case. Even if we could accurately and consistently measure and quantify social value for one group of stakeholders, considering that social value is intrinsic and subjective, another group of stakeholders could place a different value on the same experience. The result is that great care must be taken whenever there is a claim or comparison. This is especially true when considering things like the Arts, one person’s pottery exhibition is another person’s junk.
Other issues around accurately calculating social value include being sure that the benefit you are reporting is directly attributable to your initiative. Was there something else going on at the same time that you were unaware of? You should only claim and report the impact that you can prove is a result of your project. You also need to ask; What would have happened anyway? This is known as deadweight and most social value calculators ask you to include this as part of your calculations.
The subjectivity and lack of consistency around measuring social value return on investment has led to attempts to try to standardise measurement in a consistent and coherent way and a number of approaches are currently available. Generally, the input or cost element of calculating social value is relatively straightforward. Various organisations can usually provide accurate figures or proxies on the cost of things like people’s time, materials and other resources, a meeting room for example. Issues then arise around figuring out the benefit to the recipient, especially as social value measures outcomes as well as outputs. It may be easy to say that an organisation has provided employability training to 12 people (the output) but what are the resultant outcomes for those 12 people? This is where a social value investment calculator or a structured approach can help.
What approaches to measuring social value are available?
There are a plethora of approaches to measuring return on social value investment available and some organisations, like social enterprises use different ones depending on circumstances. It is beyond the scope of this brief guide of to provide detailed explanations or indeed to provide other alternatives, but we have given an overview of each approach and links to the originating web sites should you require further information. The one you select will depend on a variety of things, including time available, resources, availability of data, access to stakeholders, nature of your social value, when you need the report by and so on. One important point to note is that regardless of which approach you to decide upon, most are designed for larger organisations and may either be unsuitable or need to be adapted for SME’s.
If you would like advice on which one to use and support with the process then simply, get in touch!
The most prominent tool for wellbeing valuation in public sector procurement has been developed by HACT (Housing Associations’ Charitable Trust) in partnership with the research consultancy Simetrica. HACT website is a particularly useful resource for those wishing to learn more about wellbeing valuation.
“Wellbeing valuation allows you to measure the success of a social intervention by how much it increases people’s wellbeing. To do this, the results of large national surveys are analysed to isolate the effect of a particular factor on a person’s wellbeing. Analysis then reveals the equivalent amount of money needed to increase someone’s wellbeing by the same amount.”
They go on to say:
“Wellbeing valuation does not seek to value each individual’s experience of your intervention (e.g. employment training, keep fit) but instead represents the experience of the average person.”
The most obvious limitations are that the calculator is specifically designed for social housing providers and so if the calculator does not contain a value for your intervention then you will have a gap in your report or need to obtain data from elsewhere. As social value impact measurement is flexible you could use some elements of the HACT dataset and combine them with data from elsewhere or alternatively undertake your own research. Great care would need to be taken when using a “mixed methods” approach as taking data from multiple unconnected sources has all kinds of data contamination issues. You would need to justify the rationale, source of data and data application in your social value impact valuation report for it to be acceptable.
Social Return on Investment (SROI)
Social return on investment or SROI uses financial proxies to value outcomes that are drawn from different places or through different methodologies. Our partners at Social Value UK do provide training and if you are going to regularly use SROI their website is a great starting point.
Arguably, using an SROI approach could provide a more accurate or appropriate measurement for specific projects, or a series of projects especially if there are not existing datasets to turn to. As the HACT tool uses reported values for the average person, SROI could give different results and be more specific to your intervention This is not guaranteed, however, and care must be taken when selecting data, during data analysis and when reporting. Any data manipulation, weighting or transposing must be clearly justified and where possible results triangulated. The fact that SROI has been chosen will probably mean that triangulation is very difficult if not impossible.
Expertise is perhaps the biggest limitation. Whereas the HACT calculator has already created the values for you (within the limitations described above) SROI can require more time and effort as well as making more judgements about values and appropriate data sources. However, it should not be discounted on those grounds. Unlike some other approaches, it can be applied to any organisation, has built-in flexibility, is specific, not general, but most importantly it involves the stakeholders and recipients of the social value.
The National Themes, Outcomes and Measures (TOMs) Framework
The Framework has been designed around 5 principle issues, 18 outcomes and 35 measures and are updated annually (including proxy values) and the broad governance structure includes; The National Social Value Taskforce, The Research Advisory Board, and The Social Value Portal.
Whilst the framework has identified the most common social value measures that apply to the whole of the UK it openly recognises that it
“is designed primarily to reflects the needs of local authorities”.
The overall aim of the framework is to provide a national minimum social value reporting standard. Unlike the HACT framework, it can be applied to any project and so allows organisations to compare their own performance to others and benchmark their performance. As with HACT and SROI, the Framework uses a set of proxy values many of which have their source in the Unit Cost Database. The TOM’s guidance document, available here, states that where no UCD value exists government guidance has informed the development of the proxy and that deadweight is included where relevant.
The advantage of the TOM’s framework is that as it is a minimum social value reporting set it has some flexibility built-in. Outcomes can be rephrased, and measures moved from one Outcome to another, the framework also allows additional measures to be added. However, the Framework is designed primarily for local authorities and that can clearly be seen in the list of measures which exclude a good many things which would be classed as social value.
This is predominantly a welfare economics tool, that some argue is too simplistic to use, for deciding if a social value project should proceed. (It can be used retrospectively too). Traditionally, it focusses on economic benefits and so does draw some criticism that this focus is too much on financial return on investment and that social value is often given less consideration and weighting, even if this is not the intention. Therefore, an adjustment has to be made to account for social and environmental impact which in turn leads to a more SROI approach (see above).