S-ROI measuring the immeasurable?

I truly believe that valuing the socio economic impact of non-profits is key in order to ensure future creation of a truly sustainable and impact oriented citizen sector. S-ROI is therefore crucial in the future of the non-profit sector.

Social Value is created when resources, inputs, processes or policies are combined to generate improvements in the lives of individuals or society as a whole. It is in this arena that most nonprofits justify their existence, and unfortunately it is at this level that one has the most difficulty measuring the true value created. Public sector "pay for performance" and other trends are a move in this direction, but need to be taken one step further, with social impacts being tied back to the "investment" required to achieve such impacts. Therefore and despite all the difficulties of valuing the direct benefits of social action in $ terms it is to develop such measurements.

Regarding potential negative impacts of using S-ROI type of measures I would like to counter argue Jessica’s identified threats.

Firstly, I think that it will not result in a bias of investment towards less risky projects because often these less risky investments and actions are also the ones with the less impact on the future and so the different discount rates that dictate the riskiness of investments allows us to compare two different riskiness investments that also with different returns. This will result in much more rationale decisions on where to apply a very limited pool of resources.

Secondly and regarding the short term bias it is again not a credible reason since also short term projects (e.g., food aid) have less impact than building a democracy or structural projects and will therefore not be under valued even using a discount rate.

Regarding intangible outcomes one may argue about their value if they don’t have any impact on society as a value producing community. Certainly that intangible changes impact is valuable but given the difficulty in measuring it aren’t we better off applying $ elsewhere. I am sure that if well structured projects exist in terms of intangibles they have very rationale reasons that can and will certainly be translated in $ terms (e.g., openness of cultures to equality regarding voting rights will translate into a more efficient democracy and hence economic impact will be generated that can be measured by looking into other countries that have gone through the same process).

Finally one must not forget the objective of measurement. It exists not to compare projects with the for profit sector or even between radically different projects among different organizations, but yes to compare potential projects in similar areas by one organization or comparable ones. Therefore I truly believe that by using objective measurements we are giving a great step towards a more sustainable and economically efficient social sector that will in turn translate into bigger impacts.

Finally and regarding balance scorecards I would like to reinforce Quin’s argument about the top-down approach. One can only apply an effective scorecard if its objectives and structure is fit with the desires and needs of those that will use it. It can be applied at different levels in the organizations if each one has its own centre of responsibility.

S-ROI and balance scorecards are nevertheless not comparable since they serve different purposes. A scorecard is in my view more oriented to the day-by-management, more directed to inside management while S-ROI has a more general usefulness in such that it can be used by external investors in the making of their money allocation decisions.