Measuring What Matters Social Return on Investment (SROI)

Katherina Rosqueta, Executive Director Center for High Impact Philanthropy

School of Social Policy & Practice (SP2)March 2009

THE CENTER FOR

High Impact Philanthropy

Purpose of SROI

Measure social impactLearn from past programs

Improve for future programs

Decision making among programmatic options

Communicate to Donors / Stakeholders

ROI = Gain or Loss from InvestmentCost of Investment

Return on Investment (ROI), is the ratio of money gained or lost (realized or unrealized) on an investment, relative to the amount of money invested.

Return on Investment (ROI) Definition & Example

Cost of Project = $500

Ex. 1:

Sales from Project = $750

ROI = 750-500

500

250

500=

.5 or 50%=

Cost of Project = $500

Sales from Project = $1250

Ex. 2:

ROI = 1250-500

500

750

500= 1.5 or 150%=

REDF SROI: Measuring Value & Return

Apply 6 stage process

1. Enterprise Value

2. Social Purpose Value

3. Blended Value

Value

+

=

4. Enterprise Index of Return

5. Social Purpose Index of Return

6. Blended Index of Return

Return

REDF SROI: Measuring Return Example

In 1999-2000, Rubicon Landscape Services achieved gross sales of $3.9 million and employed 52 target employees.

Enterprise sales were expected to increase to $7.8 million by 2004 in order to employ a projected 78 to 140 target employees.

Rubicon Landscape Services is a social purpose enterprise fully owned and operated by Rubicon Programs, Inc. a nonprofit community development corporation based in Richmond, California. The enterprise provides grounds maintenance and landscape installation services to large-scale residential, commercial and institutional properties throughout the San Francisco Bay Area and employs disabled or economically challenged individuals.

“Unfortunately, as many organizations wrestle with how to calculate their social return on investment (SROI), some in the field are starting to question whether the methodology is too costly and complex to be meaningfully used to evaluate nonprofit effectiveness.”*

Beyond SROI

* Mark Kramer, “Measuring Innovation: Evaluation in the Field of Social Entrepreneurship,” Foundation Strategy Group, April 2005. On page 22, an interview with Jed Emerson highlights some of the challenges that organizations have had in calculating SROI.

Multitude of systems Multiple Metrics

(Source: Rockefeller Foundation (2008)

Current Leading Metrics

SROI SROI

BACO Ratio

Benefit-Cost Ratio

Expected Return

Cost per Impact

Portfolio AssessmentsFoundation Investment Bubble Chart

Acumen Robin Hood CHIP

Nature of org

Venture philanthropy fund

Foundation Resource center for

philanthropists

Nature of activity

Invest in both for profit and non-for profits

Give grants to nonprofits in NYC

Develop guidance for philanthropists

Tool BACO (Best Available Charitable Option)

Benefit cost ratio Cost per impact

Metrics Examples

BACO (Acumen Fund)

Cost Analysis Nonprofit For-profit

Total Cost $390,000 $455,000

Expected Financial Return

$0 $422,500

Total Output (Bed Nets)

97,825 2,000,000

Total Social Impact (person years of malaria protection)

464,286 or $0.839/person year

2,000,000 or $0.016/person year

Robin Hood Foundation

Center For High Impact Philanthropy

Strengths and Limitations of SROI

+

• Brings objective, quantitative metric

• Forces focus • Enables comparison of

programs • Fosters investment mentality

–

• Allure of false precision • Resource intensive • Does not fully capture the

complexities on the ground • Not all benefits or costs are

easily monetized, counted