Social Return on Investment

In my last blog post I talked about how non-profits can uncover their most powerful stories by analysing their Social Return on Investment, or SROI. The first step towards understanding your SROI is to create a business plan that’s focused on your long-term goals.

Like your creed or mission statement, your goals should, as much as possible, guide everything that you do. Every project you take on, event you create, or communications plan you draft, should have clear outcomes that align with your mission statement and business goals.

It seems simple enough, but for values-driven non-profits, having a business plan with associated metrics can seem better suited to the for-profit realm. After all, they’re not in it for the money.

But I’m going to argue here that they should be, at least partially, about the money. Or more accurately, the savings. Non-profits can deliver services in a highly cost-efficient way; in doing so, they can create long-term social value that saves governments millions of dollars (note that the word “social” also refers to economic and environmental). In a sense, the term “non-profit” is bit of a misnomer.

Capturing the social value your organization creates will allow you to demonstrate the impact of donor dollars. There are many other reasons why you should measure this, including:

Improved programme management, including more effective planning and evaluation
Increased understanding of the impact of your work
Stronger communication of the value of your work to ‘the people that matter’ (internal and external stakeholders)
Enhanced attention to the social, economic and environmental value created by your business or organisation*

In a future blog post, I’ll outline a step-by-step process that can help non-profits measure what gets done.

*Source: London Business School and the New Economics Foundation. (2004) Measuring social impact: the foundation of social return on investment (SROI).

The non-profit sector employs 1.2 million Canadians and raises $24 million for projects in Canada and around the world. In 2012, over 13.3 million Canadians age 15 and over volunteered with a non-profit, and almost 84 percent of Canadians donated to one.

Non-profits are an important pillar in our society. They play a significant role in the economy, in the lives of those they help or enrich, and in our national psyche, as they allow us to give back to a cause that’s bigger than ourselves.

Why then is it so hard for non-profits to measure the impact they have? By measurement, I’m not talking about how many homework clubs run, endangered species saved, or schools built. These are fairly easy results to track – and they are important. But they only tell one side of the story.

The other side is the long-term value, or social return on investment (SROI) that non-profits create for society. It’s unfortunate that this story rarely gets told, as it’s the most compelling one for donors to hear.

Measuring the SROI can be complicated and require resources, but the results will help non-profits make a stronger case for giving and ensure that they are spending their donor dollars wisely. In my next blog post I’ll look at how non-profits can measure SROI and uncover their most powerful stories.