Social value measurement tools in action
The Alliance of Sector Skills Councils and Baker Tilly have published a report, Evaluating economic impact, on 2 February 2010
This develops the application of Social Return on Investment (SROI) to the sector skills councils which operate under licence from the UK government.
The review is based on sample studies of four sector skills councils (Cogent, Energy and Utility Skills, People 1st and Skills for Health). It also draws upon earlier work with a fifth (Skillset). The 80-page document provides some quantification of the impact attributed to the sample group and the methods and sample calculations used are helpful tools for any kind of impact measurement.
As reported two months ago in Caritas, the Office of the Third Sector commissioned its Measuring Social Value project in 2008. The tool helps charities demonstrate public benefit, improves the case for funding in tough times, gives a clearer view of value and enables charities to identify what parts of the organisation merit investment. The report uses three models to understand the ways in which SSCs create economic benefits:
- Economic benefit created. Where there is an impact on earning capacity or productivity or an increase in tax revenues. The term gross value added (GVA) is used as a measure of productivity, because it is stated after deducting costs such as employment costs, and, according to the authors, is a truer reflection of added value than GDP.
- Costs saved or not wasted. Where the intervention results in a saving, either in the cost of another intervention or in a consequential cost (e.g. introducing prevention to save on the cost of a cure).
- Alternative or cheaper sourcing. Where one intervention directly replaces another more expensive one. While the report acknowledges SROI is a valuable tool, it raises a number of issues to consider when analysing the results:
- SROI is typically presented as a ratio of the value of the benefits achieved per pound spent to achieve them. This may be useful internally to each individual organisation as a measure of performance relative to prior periods. However, this ratio should not be used to compare different organisations, as this would create a flawed analysis that ignores specific issues that make individual organisations, and therefore their SROI, unique. In any event, SROI should not be used as a means of ranking or prioritising funding.
- Any study that considers future benefits must account for the risks associated with the achievability of those benefits. The report took the project-specific risks into account by encouraging the SSCs to be prudent in their assumptions, and focus on the value of the benefits that would actually flow from their work;
- A robust SROI analysis must consider the proximity of the benefits created to the actions of the organisation that is seeking to claim ownership of that benefit – in other words, how accessible are they?
- SROI calculations should seek accurately to represent the manner in which benefits are created, but should avoid overly complex calculations at risk of accusations of ‘spurious accuracy’.
- SROI does not account for the interrelationship of social impact and brand value. By creating greater social impact, the recognition and perceived quality of an organisation’s brand is likely to improve, thus increasing the value of that brand.
Jim Clifford, head of charity and education advisory services at Baker Tilly, told Caritas: ‘this is a tremendously important piece of work for the whole of the charity sector. In it the Alliance is leading the way in showing how government promoted methodology can be adopted and adapted by the sector to be used properly for everyone’s benefit.’
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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