To assess their own performance, defend their funding and/or pass the Public Benefit test, charities and many public and private organisations have to understand their social return on investment. RSM’s experienced social impact team can help you do this.
Social impact looks into the effect that the work of public/third sector or commercial businesses have on their beneficiary groups or wider society.
It is most commonly measured by considering the social return on investment (SROI), using reasonable measures of the values of outcomes to calculate an economic value for the effect, or how effective your organisation is at generating measurable social benefits. Engaging with key stakeholders during this process will help you to develop your understanding of which outcomes are most valued by your beneficiaries and funders.
SROI can help your public, private and charitable organisation:
- demonstrate the value that it adds to funders in order to defend against cuts or argue for increased funding;
- forecast expected outcomes from both existing and new activities and develop measures to assess your performance;
- show that you have considered and can meet the Public Benefit test (which is now mandatory for all charities); and
- design projects, programmes and services to maximise SROI.
How we measure social impact
The basic models that we consider to measure SROI are threefold. These include: the economic benefit created, the costs saved and not wasted, and alternative or cheaper sourcing. In more detail, these mean:
Economic benefit created: where, either at a micro or macro level, there is an impact on earning capacity, consumption of benefits, reliance on welfare systems, on productivity, on tax revenues, on trade, or indeed the wider social or environmental benefits. For example, intervening to help a homeless person in training and finding employment creates additional tax revenues.
Costs saved or not wasted: where the intervention results in a saving in the cost of other interventions, consequential costs, or increases the effectiveness of another intervention. For example, an intervention to rehabilitate a drug user is likely to reduce the need for interventions by the health service and police, allowing these resources to be redirected.
Alternative or cheaper sourcing: the savings made where the intervention directly replaces another more expensive one. Take, for example, a charity that provides information and research to government at a lower cost than a commercial research agency would charge.