SROI Discussion

profileshoomoosh
TheSROINetwork-TheGuidetoSocialReturnonInvestment2015.pdf

A guide to

Social Return on Investment

January 2012

in association with

“For FRC Group using SROI has been a fascinating

process which has fine tuned our understanding of

the impacts that are achieved as we improve our

performance, and exposed areas in which we can

do more.”

Verity Timmins, Impact Manager, FRC Group

“At Impact Arts we have embraced SROI as one of our

central evaluation tools, which complements our existing

evaluation practice very well. SROI has clear benefits

for our organisation in terms of our future funding and

business development activities, as well as focusing our

day to day practice on where and how we add value.”

Susan Akternel, Innovation and Development Director, Impact Arts

“SROI has helped us develop an ongoing relationship

with our stakeholders which shows that we are listening

to their needs and we can now report how our work

impacts on their lives and the lives of others.”

Maeve Monaghan, Director, NOW Project

A guide to Social Return on Investment 3

Update to the 2009 Guide

This Guide is an update to the 2009 Guide to Social Return on Investment that was

published by the Cabinet Office. There are no changes to the principles or to the

methodology used to apply those principles within the framework. The purpose of

the update is to amend the language used so that it is more relevant for international

audiences and for different sectors and types of organisations.

A small number of typographical errors have also been corrected.

The worked example was included as an example of how those principles are applied

in practice. A supplement will be available for the worked example ‘Wheels to Meals:

one year on’ which sets out how the organisation has developed its approach to SROI

after completing an evaluation against the initial forecast.

Supplements to the Guide will be prepared from time to time and form part of the

guidance available. At the date of this update a supplement on Materiality has been

released and is available from the SROI Network website.

January 2012

Acknowledgements

The 2009 guide was written by Jeremy Nicholls, Eilis Lawlor, Eva Neitzert and Tim

Goodspeed, and edited by Sally Cupitt, with additional contributions from Sheila Durie, Jenni

Inglis, Karl Leathem, Tris Lumley and Richard Piper.

Comments, guidance and advice were also received from the advisory group and from members of

the SROI Network. Thanks to the following members of the SROI Network: Helen Fitzhugh, Adrian

Henriques, Martin Kinsella, David Marshall, Kathleen Quinn, Kevin Robbie, Stephanie Robertson,

Peter Scholten and Sara Williams.

Thanks to the following members of the advisory group: Saeeda Ahmed, Gustavo

Bagattini, Simon Berry, Amitti CanagaRetna, Andrea Chauhan, Ken Cooper, Theresa

Crawley, Elly de Decker, David Emerson, Tracy Houston, Pradeep Jethi, John Kingston,

Martin Kinsella, Alan Knight, George Leahy, Liz Liston-Jones, Joseph Lowe, Fergus Lyon,

Claire Michelet, Ralph Mitchell,

Penny Newman, Gerald Oppenheim, Akhil Patel, John Pearce, Tess Pendle, Matthew Pike, Martin

Scott, Oliver Sian Davies, Richard Spencer, John Stewart, Chris Walker, Peter Wells and Jo Wheeler.

Particular thanks also to Gustavo Bagattini and John Pearce.

A number of people and organisations have contributed to the development of SROI, started by Jed

Emerson and the Roberts Enterprise Development Fund, including nef (the new economics

foundation), Sara Olsen, Stephanie Robertson and other members of the SROI Network. The

development of SROI has been supported by, amongst others, Hewlett Foundation, the Hadley Trust,

the Adventure Capital Fund and the Equal Social Economy Scotland Development Partnership.

This update has been written by the original authors.

4 A guide to Social Return on Investment

Contents

Introduction 07

1 What is Social Return on Investment (SROI)? 08

The principles of SROI

The stages in SROI

2 How Can SROI Help You? 10

3 Who Can Use SROI? 11

Types of organisation

Skills required to analyse the SROI report

Time requirement

4 Using This Guide 13

Symbols

Language used

The worked example

Resources available

5 Future Updates 15

The Guide to SROI Analysis

Stage 1: Establishing scope and identifying stakeholders 16

1.1 Establishing scope 18

1.2 Identifying stakeholders 20

1.3 Deciding how to involve stakeholders 24

Stage 2: Mapping outcomes 28

2.1 Starting on the Impact Map 30

2.2 Identifying inputs 31

2.3 Valuing inputs 31

2.4 Clarifying outputs 32

2.5 Describing outcomes 33

Stage 3: Evidencing outcomes and giving them a value 36

3.1 Developing outcome indicators 38

3.2 Collecting outcomes data 40

3.3 Establishing how long outcomes last 43

3.4 Putting a value on the outcome 45

A guide to Social Return on Investment 5

Stage 4: Establishing impact 54

4.1 Deadweight and displacement 56

4.2 Attribution 59

4.3 Drop-off 61

4.4 Calculating your impact 62

Stage 5: Calculating the SROI 64

5.1 Projecting into the future 66

5.2 Calculating the net present value 67

5.3 Calculating the ratio 68

5.4 Sensitivity analysis 69

5.5 Payback period 71

Stage 6: Reporting, using and embedding 72

6.1 Reporting to stakeholders 74

6.2 Using the results 76

6.3 Assurance 78

Resources 80

1 Format for an SROI report 82

2 Glossary 84

3 Note on cost allocation 86

4 Note on capital or loan-financed projects 91

5 Sources of support and further information 92

6 Downloads 95

7 A summary of the relationship between SROI and other approaches 95

8 The seven principles of SROI 96

9 Checklist for SROI analysis 98

10 The worked example 102

11 A blank Impact Map (provided as a loose insert

in the printed version of this guide, and also

available as a download)

6 A guide to Social Return on Investment

Introduction

There is increasing recognition that we need better ways to

account for the social, economic and environmental value that

results from our activities. The language varies – ‘impact’,

‘returns’, ‘benefit’, ‘value’ – but the questions around what

sort of difference and how much of a difference we are

making are the same. Understanding and managing this

broader value is becoming increasingly important for the

public and private sectors alike. This is true whether it is civil

society organisations working to create value, Governments

commissioning and investing in activities to create social value,

investors seeking to ensure that their investments will make

a difference, or private businesses recognising both risk and

opportunity in the wider effects of operations.

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A guide to Social Return on Investment 7

All this means that it is also more important that we have some

consistency and a shared language when we talk about value.

SROI is the application of a set of principles within a framework

that is designed to help bring about that consistency, whilst

at the same time recognising that what is of value will be very

different for different people in different situations and cultures.

The first edition of this guide, which itself built on the work

of three earlier SROI guides1, was prepared as part of a three

year programme on measuring social value funded in 2008 by

the then ‘Office of the Third Sector’ based in the Cabinet Office

of the UK Government. This was delivered by a consortium

of organisations: the SROI Network, nef (the new economics

foundation), Charities Evaluation Services, the National Council

for Voluntary Organsations and New Philanthropy Capital.

In addition to this programme, the Scottish Government also

supported the development of SROI, including a database of

indicators to support SROI analysis.

The work of the SROI Network now stretches across many

different countries and continents, and this second edition of

the guide reflects that interest. We have though decided to use

only one currency symbol, for reasons of clarity and consistency,

and so have continued to use £. However, readers will be

able to find examples in various currencies and translations

of the Guide on our website. For more information on the

developments of SROI, please refer to the SROI Network

website: www.thesroinetwork.org

1 The SROI Framework, drafted by Sara Olsen and Jeremy Nicholls; A Guide to SROI Analysis by Peter Scholten, Jeremy

Nicholls, Sara Olsen and Brett Galimidi; and Measuring Social Value, by Eva Neitzert, Eilis Lawlor and Jeremy Nicholls (new economics foundation).

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8 A guide to Social Return on Investment

1 What is Social Return on Investment (SROI)?

Every day our actions and activities create and destroy value; they change the world

around us. Although the value we create goes far beyond what can be captured in

financial terms, this is, for the most part, the only type of value that is measured and

accounted for. As a result, things that can be bought and sold take on a greater

significance and many important things get left out. Decisions made like this may

not be as good as they could be as they are based on incomplete information about full

impacts.

Social Return on Investment (SROI) is a framework for measuring and accounting for

this much broader concept of value; it seeks to reduce inequality and environmental

degradation and improve wellbeing by incorporating social, environmental and

economic costs and benefits.

SROI measures change in ways that are relevant to the people or organisations that

experience or contribute to it. It tells the story of how change is being created by

measuring social, environmental and economic outcomes and uses monetary values to

represent them. This enables a ratio of benefits to costs to be calculated. For example,

a ratio of 3:1 indicates that an investment of £1 delivers £3 of social value.

SROI is about value, rather than money. Money is simply a common unit and as such is

a useful and widely accepted way of conveying value.

In the same way that a business plan contains much more information than the

financial projections, SROI is much more than just a number. It is a story about change,

on which to base decisions, that includes case studies and qualitative, quantitative and

financial information.

An SROI analysis can take many different forms. It can encompass the social value

generated by an entire organisation, or focus on just one specific aspect of the

organisation’s work. There are also a number of ways to organise the ‘doing’ of an

SROI. It can be carried out largely as an in-house exercise or, alternatively, can be led

by an external researcher.

There are two types of SROI:

• Evaluative, which is conducted retrospectively and based on actual outcomes that have already taken place.

• Forecast, which predicts how much social value will be created if the activities meet their intended outcomes.

Forecast SROIs are especially useful in the planning stages of an activity. They can help

show how investment can maximise impact and are also useful for identifying what

should be measured once the project is up and running.

A lack of good outcomes data is one of the main challenges when doing an SROI

for the first time. To enable an evaluative SROI to be carried out, you will need data

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A guide to Social Return on Investment 9

on outcomes, and a forecast SROI will provide the basis for a framework to capture

outcomes. It is often preferable to start using SROI by forecasting what the social value

may be, rather than evaluating what it was, as this ensures that you have the right data

collection systems in place to perform a full analysis in the future.

The level of detail required will depend on the purpose of your SROI; a short analysis

for internal purposes will be less time-consuming than a full report for an external

audience that meets the requirements for verification.

The principles of SROI

SROI was developed from social accounting and cost-benefit analysis and is based on

seven principles. These principles underpin how SROI should be applied and are set

out in full in the Resources Section (see page 96-98). The principles are:

• Involve stakeholders.

• Understand what changes.

• Value the things that matter.

• Only include what is material.

• Do not over-claim.

• Be transparent.

• Verify the result.

Like any research methodology, SROI requires judgement to be used throughout the

analysis and there is no substitute for the practitioner’s judgement. This guide flags

up points in the process where judgements are required, and where decisions about

materiality need to be taken. For example, materiality is a concept that is borrowed

from accounting. In accounting terms, information is material if it has the potential to

affect the readers’ or stakeholders’ decision. A piece of information is material if missing

it out of the SROI would misrepresent the organisation’s activities. For transparency,

judgements about what is material should be documented to show why information has

been included or excluded. We encourage you to become familiar with the concept as it

will inform your decisions throughout the process.2

The stages in SROI

Carrying out an SROI analysis involves six stages:

1 Establishing scope and identifying key stakeholders. It is important to have clear

boundaries about what your SROI analysis will cover, who will be involved in the

process and how.

2 Mapping outcomes. Through engaging with your stakeholders you will develop an

impact map, or theory of change, which shows the relationship between inputs, outputs

and outcomes.

2 Guidance from AccountAbility recommends that you consider the views of your stakeholders, societal norms, what your peers

are doing, financial considerations, and organisational policies and objectives as criteria for judging materiality.

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10 A guide to Social Return on Investment

3 Evidencing outcomes and giving them a value. This stage involves finding data to

show whether outcomes have happened and then valuing them.

4 Establishing impact. Having collected evidence on outcomes and monetised them,

those aspects of change that would have happened anyway or are a result of other

factors are eliminated from consideration.3

5 Calculating the SROI. This stage involves adding up all the benefits, subtracting any

negatives and comparing the result to the investment. This is also where the sensitivity

of the results can be tested.

6 Reporting, using and embedding. Easily forgotten, this vital last step involves

sharing findings with stakeholders and responding to them, embedding good

outcomes processes and verification of the report.

SROI has many similarities with other approaches and these are set out in the

Resources section (page 80).

2 How SROI Can Help You

An SROI analysis can fulfil a range of purposes. It can be used as a tool for strategic

planning and improving, for communicating impact and attracting investment, or

for making investment decisions. It can help guide choices that managers face when

deciding where they should spend time and money.

SROI can help you improve services by:

• facilitating strategic discussions and helping you understand and maximise the social value an activity creates;

• helping you target appropriate resources at managing unexpected outcomes, both positive and negative;

• demonstrating the importance of working with other organisations and people that have a contribution to make in creating change;

• identifying common ground between what an organisation wants to achieve and what its stakeholders want to achieve, helping to maximise social value;

• creating a formal dialogue with stakeholders that enables them to hold the service to account and involves them meaningfully in service design.

SROI can help make your organisation more sustainable by:

• raising your profile;

• improving your case for further funding;

• making your tenders more persuasive.

3 Evidencing outcomes and giving them a value. This stage involves finding data to show whether outcomes have happened and then valuing them.

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A guide to Social Return on Investment 11

SROI is less useful when:

• a strategic planning process has already been undertaken and is already being implemented;

• stakeholders are not interested in the results;

• it is being undertaken only to prove the value of a service and there is no opportunity for changing the way things are done as a result of the analysis.

Comparing social return between different organisations

Organisations work with different stakeholders and will have made different

judgements when analysing their social return. Consequently, it is not appropriate

to compare the social return ratios alone. In the same way that investors need more

than financial return information to make investment decisions, social investors will

need to read all of the information produced as part of an SROI analysis. However, an

organisation should compare changes in its own social return over time and examine

the reasons for changes. Organisations should also endeavour to educate funders and

investors on the importance of putting the ratio in the context of the overall analysis.

Certain situations require a different approach

This guide covers most situations. However, for situations where there is investment in

assets, or the use of debt finance, there is a note in the Resources section (page 91).

3 Who Can Use SROI?

Types of organisation

SROI has been used by a range of organisations across the not for profit (or voluntary),

public and private sectors, including those that are small, large, new and established.

Not for profit organisations and social enterprises

Not for profit organisations and social enterprises can use SROI as a management tool

to improve performance, inform expenditure and highlight added value. These may be

start-up organisations developing business plans or established organisations. It can

be used for analysing the value arising from trading activities whether the organisation

is selling to the general public, to the public sector or to other businesses.

Private businesses

Both large and small businesses can use SROI to assess risks and opportunities arising

from the impact of their products and services on their stakeholders e.g. employees,

suppliers, customers, the environment and their local communities.

Small businesses can also use SROI to assess risks arising from the impact of the

business on stakeholders and to identify ways to align their business objectives with

wider societal objectives, which may result in opportunities for new, or improved

products or services.

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12 A guide to Social Return on Investment

Funders

Funders that invest to create social value can use SROI initially as a way to help them

decide where to invest, and later to assess performance and measure progress over

time. The approach allows an investor to assess the applicant’s understanding of, and

commitment to, creating social environmental or economic value.

Funders that are operating under responsible investment criteria can use SROI to

ensure that the businesses in which they invest are managing the most material social,

environmental and economic risks.

Other funders can use SROI to assess social, environmental and economic risks that

will, or may occur, as a result of an investment and which could affect the returns.

Commissioners

Public service commissioners are in the business of securing social value that is

delivered by third parties. The mechanisms by which that value is secured may differ

but, by measuring that value, better decisions can be made. SROI can be used at three

points in the commissioning process:

• Programme/pre-procurement – forecast SROI analyses can be used at the strategic planning stage to decide how to set up a programme, for market testing and to

determine scope and specification of contracts.

• Application/bidding – forecast SROI analyses can be used to assess which applicant or bidder is likely to create the most value. (Where applicants or bidders are already

delivering the intervention that is being commissioned, evaluative SROI can be used

at the application/bidding stage).

• Monitoring and evaluation/contract management – evaluative SROI analyses can be used to monitor the performance of a successful contractor.

Using SROI to inform public sector commissioning decisions is in line with value for

money appraisals.2 Value for money assessments are generally based on the ‘optimum

combination of whole-of-life costs and quality (or fitness for purpose) of the goods or

service to meet the user’s requirement’. These costs and benefits must include ‘wider

social and environmental costs and benefits for which there is no market price’.3

For developing policy

SROI can be used by organisations that develop public policy, for which recognition

of social value is important. For example, it has been used to compare the value of

investing in support-focused community penalties for women offenders as opposed to

sending them to prison4 and to assess the value (or costs) of an additional runway at

Heathrow airport.5

2 www.hm-treasury.gov.uk/data_greenbook_money_sustainability.htm 3 Further guidance on the use of SROI in public sector commissioning

is available on the SROI Network website, www.thesroinetwork.org 4 Unlocking value, nef 5 Grounded: a new approach to valuing Runway 3, nef

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A guide to Social Return on Investment 13

Skills required to analyse the SROI report

Carrying out an SROI analysis requires a mixed set of skills. It will be helpful if

you have prior experience of engaging stakeholders, outcomes measurement or

evaluation, using Microsoft’s Excel software and basic accounting skills. Even if you

have experience in these areas, it may still be helpful to attend a training course. You

can also bring in help from within your organisation, although, in the absence of this,

you may need to arrange some external support.

Time requirement

Giving exact guidance on timescales is difficult because it is contingent on many

factors, including scope, skills level and data availability, and whether you will be using

the report for internal management or external reporting purposes.

All new measurement systems take some resources to implement. However, there are

ways to keep the resources you require to a minimum. You could start with a project

or contract rather than the whole organisation, or you could start with a forecast SROI

analysis, especially when looking at a new business or a new activity. A forecast

SROI analysis for internal management purposes, for example to help design

information systems, would not need to be as detailed as a report you were planning

on making public.

An evaluative SROI analysis will be more time-consuming and could take several

months, but the time required is much reduced if the organisation already produces

good outcomes data or has a system of social accounting in place. However, it can take

time to introduce systems to assess outcomes. Doing a forecast SROI analysis first can

help one plan and prioritise the introduction of new information and outcome

assessment systems.

4 Using this Guide

This guide goes through the SROI process in stages. The completion of a table which

maps out the analysis is central to the process. This table is called an Impact Map.

There is a loose insert of the Impact Map included in the printed version of the guide,

and copies are also available for download from the SROI Network website,

www.thesroinetwork.org.

If you are new to SROI, it is a good idea to read the whole Guide before starting. This is

important because although it works through the process step by step, some of these

steps can be completed at the same time, so reading the whole guide first may save

you time later. Then return to the beginning and start working your way through. Bear

in mind that not everything in the Guide will be relevant to your analysis.

If you have some experience in SROI you may wish to use the Guide as a reference

tool. Social investors and commissioners interested in using SROI could focus on the

introduction, the principles and specific guidance for investors and commissioners

from the SROI Network website, www.thesroinetwork.org.

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14 A guide to Social Return on Investment

Symbols

You will see these symbols throughout the guide:

Time for you to put what you have learned into

practice. Over to you!

The caution symbol warns you about

common mistakes.

The return symbol highlights key points where

you may decide you need to go back to an

earlier step in the process.

It is important to remember that SROI is a

framework based on principles. Often there

are no right and wrong answers and you will

need to use your judgement to respond to the

question appropriately. The main points

at which this is required are highlighted with

this symbol.

‘Involve’. This symbol highlights points where

you should involve your stakeholders to refine

and confirm your decisions.

Language used

For simplicity we have used the following language throughout this guide:

• ‘Social value’ is used to describe social, economic and environmental value.

• ‘The social return of your activity’ is used rather than ‘the social return of your organisation’. If you are analysing the social return of all your activities then this

would be the same as the social return of your organisation.

• Where ‘impact’ is used we mean your outcomes after taking into account what would have happened anyway, the contribution of others and the length of time the

outcomes last.

• The guide is written for ‘you’ although ‘you’ may be a single person or a team.

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A guide to Social Return on Investment 15

Wheels-to-Meals – The worked example

Throughout the guide we will use the fictional example of Wheels-to-Meals, which

is presented in this format.

This is a hypothetical example. It is used to explore the principles and processes of

SROI. Some elements of the Impact Map have been included to support learning and

provide an appropriate example.

Wheels-to-Meals is a business that developed from a meals on wheels service

provided by volunteers. Increasingly, it realised that its clients not only needed the

good hot meals it provided but, equally important, the contact and socialising with

the volunteers who brought them. Wheels-to-Meals provides a luncheon club to

eligible older and disabled local residents and the majority of the volunteers are

also elderly. The luncheon club is delivered with the same resources as a meals on

wheels service, except that residents are transported to meals, rather than the other

way round. The service includes provision of hot, nutritious lunches, transport,

opportunities to socialise, and mild exercise. The service is available for up to 30

residents, 5 days a week and 50 weeks a year.

Resources available

There is a loose Impact Map enclosed in the printed version of this guide, which is

also available for download from the SROI Network website, www.thesroinetwork.org.

The Resources section on page 80 also includes:

• The format for an SROI report.

• A glossary.

• A note on cost allocation.

• A note on capital or loan-financed projects.

• Sources of support and further information.

• Downloads.

• A summary of the relationship between SROI and other approaches.

• The seven principles of SROI.

• A checklist for SROI analysis – you can use this to tick off each step as you work through.

• An impact map for the worked example.

5 Future Updates

Like financial accounting and other ways of measuring, SROI is subject to further

refinement and development. Users of this guide should check the website

www.thesroinetwork.org for updates to the methodology. Suggestions for changes can

be made through the SROI Network website.

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16 A guide to Social Return on Investment

Stage 1:

Establishing scope

and identifying

stakeholders

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A guide to Social Return on Investment 17

Before you start your SROI analysis, you need to clarify what

you are going to measure and how, and why you are embarking

on a measurement process.

If you are carrying out an evaluative SROI analysis it may be

useful to set up an SROI planning team. Winning management

support at this early stage can help to make resources available

for the SROI analysis, which in turn might allow you to extend

its scope.

There are three steps in this stage:

1.1 Establishing scope

1.2 Identifying stakeholders

1.3 Deciding how to involve stakeholders

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18 A guide to Social Return on Investment

1.1 Establishing scope

The scope of an SROI analysis is an explicit statement about the boundary of what is

being considered. It is often the result of negotiations about what is feasible for you

to measure and what you would like to be able to improve or communicate. You will

need to be clear about why you are conducting the analysis and what resources are

available, and define the priorities for measurement. This stage will help ensure that

what is being proposed is feasible.

The example below illustrates how a housing foundation made decisions about the

scope of its SROI analysis.

Example: Establishing scope for a housing foundation

A large housing foundation was interested in calculating its social return to

communicate its impact to its primary funder. The foundation has 35 employees and is

involved in many activities, ranging from youth clubs to physical estate improvement

projects. As there was no budget for the SROI analysis, it was decided that it would be

conducted in-house and responsibility would rest with the quality manager at

the foundation.

It was decided to publish the results of the SROI analysis alongside the end-of-year

financial accounts in four months’ time. The short timeframe, limited resources and

the fact that the SROI analysis had to be completed in-house meant that the focus

was to be on one project, with a plan to consider other projects in subsequent years.

The decision was made to focus on a project which gave debt advice to tenants.

This project has direct relevance for the foundation’s primary funder, as one of the

outcomes of the project is an increase in the number of tenants able to pay their rent.

What to consider in order to set scope

The issues you will need to consider include:

1 Purpose

What is the purpose of this SROI analysis? Why do you want to begin this process

now? Are there specific motivations driving the work, such as strategic planning or

funding requirements?

2 Audience

Who is this analysis for? This should cover an initial assessment of how you will

communicate with your audiences.

3 Background

Consider the aims and objectives of your organisation and how it is trying to make a

difference (or its theory of change). If you are focusing on specific activities you will

need to understand the objectives of those activities. It is important that you have

a clear understanding of what your organisation does, what it hopes to achieve by

its activities and the scale of the issue it is seeking to address. For sources of further

support and information on this see the Resources section.

4 Resources

What resources, such as staff time or money, will be required? Are these available?

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A guide to Social Return on Investment 19

5 Who will carry out the work?

Can you undertake the SROI analysis internally, or will you need to bring in external

help? Make sure you have the right mix of skills and support from the start.

Generally, you will need skills or experience in finance, accounting, evaluation and

involving stakeholders.

6 The range of activities on which you will focus

Will you be analysing all the activities of your organisation, or just specific ones?

You might want to separate the activities related to a particular source of funding,or

those that are a priority for you. Keep your scope small if it is the first time you are

doing an SROI analysis.

Clearly describe what you intend to measure. For example, if the activity was

‘our work with young people’, this may cover several departments within your

organisation and you may actually mean something more specific, like ‘mentoring

support provided to young people’.

7 The period of time over which the intervention will be or has been delivered

SROI analysis is often annual, corresponding with annual financial accounting

timescales. This can vary. For instance, a commissioner may want an evaluation of a

specified timescale.

8 Whether the analysis is a forecast or an evaluation

If this is your first SROI report it will be much less time-consuming to prepare a

forecast than to conduct an evaluative SROI analysis, unless you have the right

outcomes data available. Otherwise, a forecast SROI analysis will help you to put in

place a measurement framework so that you can come back to do evaluative SROI in

the future.

Top Tip: Keep good records

Good record keeping is essential to successfully completing an SROI analysis.

When you get to Stage 6, you will see that the SROI report needs to contain a

lot more than just the calculation of the social return. It needs to document the

decisions and assumptions you made along the way. Keeping a dedicated record of

your planning and progress from the start will make writing the report a lot easier.

Adjusting the scope

Adjusting your scope in response to new information is good practice and not unusual.

In particular, you may wish to review your scope after considering the numbers and

types of stakeholders you need to involve. This will determine the resources required

and it may mean you need to start with fewer activities.

The worked example – scope Wheels-to-Meals is a business that works with older people. Wheels-to-Meals

provides transport for its members to come to a centre, where they are provided

with hot, nutritious lunches. While at the centre, members have the opportunity to

socialise, attend workshops on health and related issues, and take mild exercise.

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20 A guide to Social Return on Investment

The local government contract for this business is to become the subject of a joint

commissioning approach. Wheels-to-Meals wants to contribute to the joint

commissioning process with a credible demonstration of the social value it is

creating. Wheels-to-Meals’ staff and trustees worked together to define the scope of

their upcoming SROI analysis and decided that it would:

• contribute to the joint commissioning process;

• cover all the activities of the organisation over one calendar year;

• be a forecast SROI analysis through using information on past experience where relevant and available; and

• be undertaken by internal staff.

Remember that this is an example and is not intended to be a full analysis of scope.

Over to you: Establishing scope and constructing a plan

Consider these questions in relation to the SROI analysis you are undertaking.

1 What is the purpose of the SROI?

2 Who is it for?

3 What is the background?

4 What resources do you have available?

5 Who will undertake the SROI?

6 What activities will you focus on?

7 What period of delivery will your analysis cover?

8 Is the analysis a forecast, a comparison against a forecast or an evaluation?

Record your answers, as you will need to refer to them during the analysis and when

you come to write your report.

1.2 Identifying stakeholders

Listing stakeholders

Now that you are clear about the scope of the analysis, the next step is to identify

and involve your stakeholders. Stakeholders are defined as people or organisations

that experience change or affect the activity, whether positive or negative, as a result

of the activity being analysed. In SROI analysis we are concerned primarily with finding

out how much value has been created or destroyed and for whom.

To identify the stakeholders, list all those who might affect or be affected by the

activities within your scope, whether the change or the outcome is positive or negative,

intentional or unintentional.

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A guide to Social Return on Investment 21

The example below relates to Wheels-to-Meals

• Older and disabled residents

• Family members

• Local government

• Volunteers

• Neighbours

Public health service

Over to you: Draw up a list of your stakeholders

Deciding which stakeholders should be included

You can see from the example above that the SROI process could become

unwieldy if you had to involve all possible stakeholders.

When deciding whether a stakeholder is to be included you need to think

about which stakeholders have experienced material change as a result of your

activities? In the next step you will be asking stakeholders about this from their

perspective and this may mean you have to change your initial decision about

what their outcomes are. If, for example, for resourse reasons, you set the

scope narrowly on a small number of stakeholder, you may miss out on some

important sources of value. For a report to meet the assurance standard of

‘Understanding Change’ you will need to include all the stakeholders that you

consider may experience material changes as a result of the activity, i.e. relevant

and significant outcomes.

Without consultation we cannot know if we have identified all stakeholders that

have experienced material outcomes, but we have to start somewhere. The

process will confirm and refine this decision, and so we should be prepared

to change our mind as we go through the different stages about which

stakeholders to include and exclude.

During stakeholder consultation ask ‘have you noticed changes that have

occurred for other people?’ as it may still be possible to include those groups in

the first consultation.

There is a tendency to focus on the positive outcomes that were intended (or expected)

by your stakeholders, particularly if you focus only on your organisational aims or

objectives, which do not usually identify unexpected or negative changes. However,

intended and unintended outcomes and positive and negative outcomes are all

relevant to SROI.

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22 A guide to Social Return on Investment

Some unintended outcomes can be positive. For example, a local economic

development initiative undertook an evaluative SROI analysis and found that there had

been a number of positive outcomes beyond getting a job. Those with children said

they were now able to be better parents because getting a job had improved their

general mental health and wellbeing. In some cases, unintended benefits can be more

important to stakeholders than those that were intended.

However, some unintended outcomes can be negative. For example, a charity that flies

young people from disadvantaged homes in their country to another country during

the summer holidays, to give them an educational experience and a holiday. Alongside

the many positive outcomes for the young people, there is also an unintended negative

consequence of carbon emissions from the flights. Including the carbon emissions

simply makes the trade-off visible and might encourage ideas on how they achieve

their objectives in a less carbon-intensive way.

One type of unintended change happens when your activity displaces someone else’s

activity. For example, reducing crime in one area may displace criminal activity to

another area. In this case, the residents of the neighbouring area should be included as

stakeholders. This may mean you need to reconsider your scope.

The example continues with Wheels-to-Meals to show which stakeholders were

included in the analysis and which were excluded. You will see that a reason is given

for each decision, often based on a broad understanding of the outcomes for

that stakeholder.

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Example: Selecting stakeholders at Wheels-to-Meals

Key stakeholders Reason for inclusion

Older and disabled residents Group that is expected to gain the most

benefits

Local government Provide finance and so affects the activity

Volunteers Provide time necessary to make the

activity under analysis possible and gain

benefits from being involved

Neighbours Currently provide support to residents

Excluded stakeholders Reason for exclusion

Public health service (NHS) The public health service was not

included because there were insufficient

resources to analyse more stakeholders

for a relatively small activity

Families of elderly and disabled residents Families not included because there were

insufficient resources to analyse more

stakeholders for a relatively small activity

The exclusion of these stakeholders is an example of a situation where the scope has

been reduced and explained. This meets the principle of transparency. However if the

analysis was intended for public use, it would not meet the principle of understanding

change since there would be a risk that the material changes experienced by these

stakeholders would not be included. However, it may be on closer investigation that

the outcomes for this stakeholder are not material, which would merit their exclusion

anyway. At this stage the outcomes would be assessed for relevance (the initial screen

for materiality). The point is that the changes for a stakeholder must be considered and

then all outcomes assessed for materiality consistently. Excluding a stakeholder group

at this stage on grounds of resources is excluding them for the wrong reasons.

Make sure stakeholder outcomes link to your activities

Be careful that the stakeholders you have included experience change that

is related to the activity in your scope. A common mistake is to include

stakeholders that are relevant to the organisation but not to the activities set out

in the scope. For example, if you are doing an SROI analysis of one project, be

careful not to include stakeholders whose outcomes are achieved as a result of

another project.

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24 A guide to Social Return on Investment

Make sure your choice of groups of stakeholders doesn’t hide

significant differences

When stakeholder groups are identified it is often assumed that they share

enough common characteristics to form one group, for example ‘local residents’

or ‘participants’ or ‘young people’. Yet members of these groups may

experience and want different outcomes depending on their age, income or

some other factor. If you think these differences are likely to be significant, split

your stakeholders into subgroups.

Occasionally, you may find that past experiences have a major effect on whether

participants achieve a particular outcome. For example, for an organisation

working with young people, those who have previously had support from

another organisation may do better when they work with you. Splitting them

into subgroups now may help you sort out how much of the outcome was due

to your intervention.

Over to you: Determining which stakeholders to include

Set up a table like the one below. Put all the stakeholders from your initial list

in the first column, together with your initial assessment of how they affect or

are affected by the activity, including positive and negative effects. As you work

through the remainder of this Guide you will be making a judgement which

may result in stakeholders no longer being involved. Next decide which of

the stakeholders will be included. Give your decision and a reason in the third

column. Leave the remaining three columns blank until the next step. Including

a stakeholder that does not have material outcome is as much of an issue as

omitting a stakeholder with material outcomes. Make sure that you can defend

the inclusion of all of the stakeholders you take forward to the next change.

Stakeholder

and how

they affect

or

are affected

by the

activity

What

we think

happens

to them,

positive and

negative

Included/

excluded?

Method of

involvement

How many? When?

1.3 Deciding how to involve stakeholders

This section introduces you to methods of involving stakeholders. So far you have

based your assessment of stakeholders and change on your own knowledge and

experience.

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A guide to Social Return on Investment 25

As well as helping you find out what really matters to your stakeholders, involving

them can help you to understand more about strengths and weaknesses of the

activities you are analysing and may provide useful information that can help your

organisation improve.

Methods for involving stakeholders

Collecting information from stakeholders can be as simple as phoning someone or as

complex as holding a facilitated focus group session. When gathering information from

participants, ask staff that work with them about the best way of engaging them.

Here is a list of possible methods for involving stakeholders:

• Get stakeholders together in one place and ask them directly;

• Try a workshop format, with informal discussions and a flipchart to record responses;

• Have stakeholders complete a form during a regularly scheduled meeting – for example, an annual general meeting of an organisation, or other set gathering;

• Ring representatives from key stakeholder groups and ask them;

• Email a short form to representatives from key stakeholder groups;

• Have a social event and ask staff members to walk around and speak to stakeholders;

• One-to-one interviews.

Ideally, you should collect information directly from stakeholders. However, lack of

time or resources may mean that some information has to come from existing research

with your stakeholders. Where possible these existing sources should themselves

be based on asking your stakeholders. Also, there may be stakeholders you cannot

involve – future generations, for example. In this case you need to identify people to

speak on their behalf.

Top Tip: Be practical about involving stakeholders

It is particularly important to be sensitive to the amount of time and resources

stakeholders can give to this process, whether they are staff, funders, or participants.

Think about each stakeholder’s inputs, outputs and outcomes before meetings to

ensure that time is used as efficiently as possible. If it is likely that you will have to

speak to them again to collect more data for your analysis, make sure that you tell

them this so they know what to expect.

Think about ways in which people already gather, for example public meetings or

training sessions, and see if you can make use of any of these. Also, where you are

asking people to give a significant amount of time to the process with no obvious

benefit to them, consider providing incentives such as lunch, travel expenses or

vouchers to encourage attendance.

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26 A guide to Social Return on Investment

How much involvement?

At this initial stage you do not have to worry about getting a large sample that is

statistically representative. You can stop doing new research when you no longer ‘hear’

new things and so can reasonably expect to have heard the main points. This approach

is commonly used in social research and is called ‘saturation’.

Using time effectively

Involving your stakeholders need not be onerous or time-consuming and is often a

way of checking and refining your work.1 However, you can limit time spent on this by

being creative.

By planning ahead you may be able to use your time (and that of your stakeholders)

effectively by collecting data for several stages at once. So don’t feel that you have to

keep going back to your stakeholders.

For forecast SROI analyses you can often collect the information needed for stages 2, 3

and 4 in one session.

For evaluative SROI analyses you can collect information for stages 2 and 3.1 in one

session – although you will need to collect the information in stage 3.2 as a separate

exercise. As a result you may be able to collect the information you need for the

remainder of stages 3 and 4 either in the first session or at the same time as you collect

the information for stage 3.2.

Regardless of the type of SROI analysis, you will also need to engage with your

stakeholders for stage 6.

Over to you: Planning for involving stakeholders

Now that key stakeholders have been identified, fill in the next three columns

of the plan for involving stakeholders that you started in section 1.2. Put in the

details of how you will involve them, how many you will involve and when. This

plan will be summarised and form part of your report.

1 In HM Treasury’s Green Book the principle of proportionality states that the amount of time spent on analysis should be

proportionate to the amount being spent on the activity overall.

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A guide to Social Return on Investment 27

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28 A guide to Social Return on Investment

Stage 2:

Mapping outcomes

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In this section we build an Impact Map informed by our

engagement with stakeholders. This details how the activities

you are analysing use certain resources (inputs) to deliver

activities (measured as outputs) which result in outcomes for

stakeholders. The Impact Map is central to the SROI analysis.

Sometimes this relationship between inputs, outputs and

outcomes is called a ‘theory of change’ or a logic model – or the

story of how your intervention makes a difference in the world.

You will gain the information from your stakeholders using

the plan you established in the previous stage. By involving

stakeholders in constructing the Impact Map you ensure that

the outcomes that matter to those who are directly affected will

get measured and valued.

There are five steps when filling out an Impact Map:

2.1 Starting on the Impact Map

2.2 Identifying inputs

2.3 Valuing inputs

2.4 Clarifying outputs

2.5 Describing outcomes

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30 A guide to Social Return on Investment

2.1 Starting on the Impact Map A loose Impact Map has been included with the printed version of this guide. You can

work with this or you could set up your own using Microsoft’s Excel or Word software.

A pdf of the Impact Map is also available at www.thesroinetwork.org.

The top section of the Impact Map is for information on your organisation and the

scope of the analysis from your project plan. Below this, the first two columns of the

bottom section (‘stakeholders’ and ‘intended or unintended changes’) are based on the

stakeholder analysis completed in step 1.3. The last column on the Impact Map is for

you to record things you need to do at a later point as you go along. Throughout this

stage, the rest of the Impact Map is filled in step by step. We illustrate each step using

the worked example.

Top Tip: Impact Maps

If this is the first time you have done an Impact Map it may be easier to work

through all the exercises for inputs, outputs and outcomes in relation to one

stakeholder and then repeat this for the next stakeholder.

The worked example – starting the Impact Map

Wheels-to-Meals’ first step was to complete the top section of the Impact Map with

scope and other details, as follows (to view in full, see pages 102 and 103):

The second step was to fill out the first two columns. Look at the Impact Map for

Wheels-to-Meals on page 102: the orange section shows you how these columns

have been completed.

Wheels-to-Meals considered the stakeholders that have an effect on its activity and

on whom the activity has an effect. However, it decided not to include them all. For

example, the public health service (NHS) could have been a stakeholder but was not

included because a number of other significant stakeholders had been identified and

there were insufficient resources to analyse more stakeholders for a relatively

small activity.

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Over to you: Starting on the Impact Map

Fill in the top section and first two columns of your Impact Map.

2.2 Identifying inputs

The inputs column is the next one to fill in on your Impact Map. The investment,

in SROI, refers to the financial value of the inputs. You need to identify what

stakeholders are contributing in order to make the activity possible – these are their

inputs. Inputs are used up in the course of the activity – money or time, for example.

The value of the financial inputs, especially for a single grant or a contract, is usually

easy to establish, although it is important that you include the full cost of delivering the

services. In some situations there are other contributions being made, including non-

cash items, which need to be valued. Further information on valuing non-cash inputs is

available in the Resources section (see page 93).

Where you are analysing the social value generated by an activity that is financed from

several sources, some initial analysis of the costs of these activities is required and

there is specific guidance on this in the Resources section (see page 86).

Beware of double counting inputs

Be careful that all the inputs you record are used in delivering the activity. Your

organisation may not use all the funding for an activity; this ‘surplus’ relates to

the amount of the finance that was not necessary for the activity to happen. If

there is a surplus then a different treatment is required: either you should

include the additional social value that would be generated if you spent the

surplus, or you should reduce the value of the input by the amount of the

surplus.

2.3 Valuing inputs

When filling out your Impact Map you may have identified non-monetised inputs;

these are inputs other than the financial investment, like volunteer time. If the activity

would not go ahead to the same extent without these inputs, then you will want to put

a value on them. This will ensure that you are transparent about the full cost of

delivering your service. This section is for those that want to give a value to their non-

monetised inputs.

Two main types of non-monetised inputs are generally relevant in SROI: volunteer

time and contributions of goods and services in kind. Valuing volunteer time can be

more difficult.

The hours given by volunteers are often given a value equivalent to the average hourly

rate for the type of work they are doing. For example, if an administration volunteer

does 5 hours a week in an area where administration work is paid on average £5 per

hour, their weekly input would be £25. This value is given regardless of whether any

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32 A guide to Social Return on Investment

money is paid to the volunteer; it simply gives the input a value that can be added up

with other inputs.

Volunteer inputs can also include an allocation of the overheads that would be

incurred if the person were employed. This would cover National Insurance and

pension contributions and also the costs of desk space, electricity, and so on.

The current convention in SROI is that the time spent by the beneficiaries on a

programme is not given a financial value.2

Forecasting SROI

If you are forecasting your social return, the quantity of inputs that will be required will

be an estimate based on a mix of:

• your experience;

• data from previous years’ activity – if you have it; and/or

• research based on other people’s experience of the levels of inputs you may require.

Evaluating SROI

If you are evaluating your social return, you will want to obtain the information from

your organisation’s management systems, such as records of how many hours or days

your volunteers contributed. If this is not available, then you can use an estimate for

now and this will be an action point for the future.

The worked example – inputs Look at the Impact Map for Wheels-to-Meals on page 102: the pink section shows

you how the column for inputs has been completed.

The material inputs for the scope and stakeholders are primarily time and money.

In this example volunteer time is valued at £6/hr – an estimate of minimum wage

for 2010 (the end of the period of the forecast). There are different ways of valuing

volunteer time depending on the work being done by the volunteers. In this case, the

value used is in line with Volunteering England’s (www.volunteering.org.uk) figure

for a kitchen and catering assistant.

Over to you: Inputs

Once you have asked your stakeholders about inputs, fill in the inputs column

on your Impact Map. Where required, try to attach a value.

2.4 Clarifying outputs

Outputs are a quantitative summary of an activity. For example, the activity is ‘we

provide training’ and the output is ‘we trained 50 people to NVQ level 3’. You can work

through your list of stakeholders, describing the outputs from the activity.

2 This is currently under discussion within the SROI Network.

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A guide to Social Return on Investment 33

Sometimes the same output is repeated for several stakeholders, which are included

in SROI at this stage because they form part of the theory of change. They will not be

counted in the calculation, so there is no risk of double counting. In situations where

stakeholders are contributing their time, the output – a number of hours – may be

described in the same way as the inputs: a number of hours.

The worked example – outputs

Look at the Impact Map for Wheels-to-Meals on page 102: the pink section shows

you how the column for outputs has been completed.

The activity, in this example, is the same for all stakeholders – the luncheon club.

However, it needed to be broken down into outputs. So, ‘luncheon club’ is an

important part of the story and context, but the impact map also quantifies the

outputs: group activities, transport and meals.

Over to you: Outputs

Once you have asked your stakeholders about outputs, fill in the outputs

column on your Impact Map.

2.5 Describing outcomes

Outcomes for stakeholders

SROI is an outcomes-based measurement tool, as measuring outcomes is the

only way you can be sure that changes for stakeholders are taking place. Be

careful not to confuse outputs with outcomes. For example, if a training programme

aims to get people into jobs then completion of the training itself is an output, getting

the job is an outcome. Identifying outcomes is not always immediately intuitive, be

sure to spend sufficient time getting to grips with the theory of change to ensure that

you are measuring the right things.

You have already set out your view of the intended or unintended outcomes that

you expect. Now you need to check with your stakeholders to see if this view

was correct. They may describe the effects differently to you, perhaps even in

surprising ways. You may find that you need to include a new stakeholder. For

this reason, the outcomes description column can only be completed

after talking to your stakeholders. It can help identify outcomes if you ask

stakeholders some questions; for example: ‘How would you describe how your

life has changed?; ‘What do you do differently now?’.

Remember that this symbol appears throughout the Guide but that you may be

able to collect information from stakeholders relating to several stages at the

same time (see page 26).

Relate outcomes to the right stakeholder

Don’t write down outcomes against one stakeholder that relate to changes

that happened to another stakeholder. For example, if in step 1.3 you recorded

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34 A guide to Social Return on Investment

the ‘increased integration of refugees’ as an intended change for your funder,

you need to recognise that this is really an outcome for refugees. If this is

also recorded as an outcome against the funder it would be double counting.

Sometimes, although a stakeholder contributes to the activity, they are not

significantly changed by it.

In cases where the government is the funder there may be changes to society

which you could include. In the above example, integration of refugees may

reduce benefit payments which can then be included as a change for the state.

Making a judgement on outcomes

In deciding on outcomes, you should consider other factors, such as the

organisation’s objectives, as well as the views of your stakeholders.

Stakeholders’ views are critical but they are not the only factors in deciding

which outcomes are significant. SROI is described as stakeholder-informed,

rather than stakeholder-led, to recognise this.

This has some practical implications. For example, a substance user may

express a desire to continue using. In these cases you may decide not to include

the desired outcomes of one of your stakeholders as they conflict with your

organisation’s own intended outcomes and values.

Intermediate outcomes, or distance travelled

Sometimes it takes years for outcomes to take place – for example, slowing the rate of

climate change – but there may be observable changes along the way. You may have

heard this described as distance travelled, intermediate outcomes, or a chain of events.

It is important to establish what this chain of events is, not least because your activity

may only bring about some changes in the chain.

When a new outcome is identified by stakeholders or by your assessment of other

factors, you will need to decide whether it is an entirely new outcome, or in fact part of

an existing chain of events.

The worked example – describing outcomes

Look at the Impact Map for Wheels-to-Meals on page 102, the pink section shows

you how the column for describing outcomes has been completed.

When the initial analysis was undertaken, one of the assumptions was that residents

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would be healthier. However, during initial discussions with stakeholders, it soon

became clear that for many residents this was not where the story ended. As a result

of exercise sessions, residents were fitter. This resulted in a reduction in falls. Several

residents said things like, “Well, I don’t end up in hospital as much for a start!”

when they were asked what they thought happened to them as a result of coming to

the luncheon club. This outcome had not been identified as significant before but it

appeared to be an important part of the story for many of this stakeholder group.

To understand this, Wheels-to-Meals considered the ‘chain of events’ that was

occurring as a result of the outputs. So, for this example of fewer falls, the chain of

events was:

Activity Example output Outcome 1 Outcome 2 Outcome 3

Luncheon club group activities,

including exercise

sessions

as a result

residents were

fitter

as a result

they fell less

as a result

they ended up

in hospital less

These three outcomes are all describing different stages of one change.

The activity and output(s) are summarised together in the outputs column.

The outcomes are summarised together in the outcomes description column.

By involving stakeholders, Wheels-to-Meals also identified an important unintended

negative outcome – by coming to the luncheon club, some residents were no longer

being supported by neighbours who had been popping in and doing shopping for

them. Neighbours were a new stakeholder group, so a new row was included in the

Impact Map and inputs, outputs and outcomes for this group were recorded.

In exploring a chain of events, you may notice that there are different chains for

different groups of people within a single stakeholder group. Where this

happens you may feel that the differences are significant and you may need to

split a stakeholder group into one or more groups, each with a different chain.

Over to you: Finalising what to measure

Once you have asked your stakeholders about outcomes and considered other

factors, fill in the outcomes column on your Impact Map. This chain of events is

often described as a theory of change. You can write up the theory of change for

each stakeholder and the relationship to the activity covered in your scope. This

will form part of your report.

This is also a useful point at which to check your Impact Map to make sure you have

only included material outcomes and make any appropriate revisions. Check that you

aren’t missing anything significant or including something that is not relevant. Take a

moment to look at your Impact Map and decide what you will finally include before

moving on to measurement. If you make a decision to exclude any outcomes, make

sure you document this, and the reasons why, in your SROI report.

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36 A guide to Social Return on Investment

Stage 3:

Evidencing

outcomes and

giving them

a value

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So far you have mapped out and described the outcomes

that are occurring for stakeholders. In this step, we develop

outcome indicators and use these to collect evidence on the

outcome that is occurring.

There are four steps in stage 3:

3.1 Developing outcome indicators

3.2 Collecting outcomes data

3.3 Establishing how long outcomes last

3.4 Putting a value on the outcome

In this step, we develop outcome indicators and use these to

collect evidence on the outcome that is occurring, and assess

their relative importance by valuing them.

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3.1 Developing outcome indicators

Indicators are ways of knowing that change has happened. In SROI they are applied to

outcomes as these are the measures of change that we are interested in. The next

stage in developing the impact map is to clarify one or more indicators for each of the

outcomes on your map. You will need indicators that can tell you both whether the

outcome has occurred, and by how much.

Time to involve your stakeholders

Stakeholders are often the best people to help you identify indicators,

so ask them how they know that change has happened for them.

For example, if the outcome was an increase in self-confidence, ask the people

whose self-confidence is increased what they now do as a result, or ask them to

tell you what they mean by self-confidence. In this way you are more likely to

get to something that you can measure. They might say: “Before [the activity] I

would never go out, but now I get the bus into town to meet my friends.” In this

example the indicator of self-confidence could be whether people go out more or

spend more time with other people.

Balancing subjective and objective indicators

Sometimes you need to use more than one indicator. Try to mix subjective (or

self-reported) and objective indicators that complement each other. There are

risks of relying on self-reporting measures that can be offset by supporting them

with objective indicators. Check your indicators with your stakeholders. For

example, frequency of use of doctor services is commonly used to measure health

outcomes but could be either positive or negative depending on the circumstances

(eg increased use of doctor services is often a positive outcome for homeless

people who are less likely to present with health problems when they arise).

The example below is for a mental health day service.

Example: choosing indicators

Outcome Indicator

Reduced social

isolation

• Whether participants are taking part in new activities (eg taking up new sports or hobbies, visiting new places)

• Whether participants report having more friends • Level of social skills reported by participants • Whether participants are accessing relevant public services that they had not used in the past, like public transport

Decreased

stigmatisation of

people with mental

health problems

• Number of activities participants are involved in outside the mental health services

• Number of incidents of discrimination reported by participants • Involvement of local community in organisation’s activities • Change in attitudes within the local community

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The worked example – indicators

Look at the Impact Map for Wheels-to-Meals on page 106: the blue section shows

you how the columns for indicators have been completed.

The indicators for some outcomes were quite straightforward. For example, the

outcome ‘fewer hospital admissions’ has a simple indicator: number of hospital

admissions.

In other cases – healthier residents, for example – indicators needed to be identified

to measure the outcome described. In this case, Wheels-to-Meals chose an objective

indicator (‘fewer visits to the doctor’) and a subjective indicator (‘number of residents

reporting improved health’). The subjective and objective indicators support each

other.

Checking your indicators

Now that you have indicators that are relevant to the stakeholder and scope, you need

to check that they are not only measurable but that you will be able to measure them

within the scope and the resources you have set.

If you are completing a forecast SROI report you need to check that you could

reasonably measure your indicators in future. If you are doing an evaluative SROI

analysis, you need to check the cost of collecting information about outcomes that

have happened, if the information is not available. This can be expensive as it can

involve surveys of people who are no longer involved with your organisation. If, for

example, a survey is not possible, one of the recommendations is likely to be to change

the way you capture information in future.

Sometimes your stakeholder will only achieve the outcome they seek later on, when

they are no longer working with you. You will need to maintain contact with your

stakeholders to make sure you capture this and that you therefore have indicators

that are relevant to your stakeholders. This can be done through postal and telephone

surveys and can be limited to a representative sample. You may need to provide a

financial incentive for your stakeholders to respond.

Measure what matters

A common mistake here is to misinterpret what we mean by measurable.

A basic principle of SROI is to measure and value the things that matter.

Measurability means expressing the outcome indicator in terms that are

measurable, rather than finding an indicator that is easy to measure.

Avoid the trap of using inappropriate indicators just because they are readily

available. If the outcome is important you will need to find a way to measure it.

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40 A guide to Social Return on Investment

Over to you: Choosing indicators

Return to your Impact Map. For each outcome, choose indicators that will tell

you whether the outcome has occurred, and to what extent. Try to think of more

than one indicator per outcome to strengthen your findings and help you be

sure that the outcome has occurred.

3.2 Collecting outcomes data

You will now need to collect data on your indicators. This may be available from

existing sources (internal or external) or you may need to collect new data.

If you are doing a forecast SROI analysis, use existing data where available. If you

have delivered this activity before, you can base your estimation on your own previous

experience. If this is the first time you have undertaken the activity, then your estimate

will be based on research or other people’s experience in similar activities. Look at

information from:

• Membership organisations, government departments, market research firms, consulting companies, partner organisations; and

• Published research from universities, government departments and research organisations.

As part of your forecast SROI analysis, it is important to change the way you collect

data so that you have the right information in place to carry out an evaluative SROI

study at a later date. Think about ways that you can incorporate this into everyday

activities to make it as cost-effective as possible. For example, a childcare intervention

could engage with parents at regular intervals as they collect their children and record

outcomes that way.

If you are doing an evaluative SROI analysis, use and review the data the organisation

already collects and what is available from other sources. It is more time-consuming

and costly to gather data about impact after the event, and existing data and self-

reported change may have to suffice.

New data will usually come from people directly involved in the creation of social

value – project participants or employees, for example – and will be gathered by your

organisation. You may be able to get the local government organisation or another

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organisation to agree to let you include questions in a standard questionnaire that it

would administer. The most commonly used techniques for primary data collection

include:

• One-to-one interviews

• Record keeping (such as case files)

• Focus groups

• Workshops and seminars

• Questionnaires (face-to-face, over the phone, in the post, on the Internet). A common question is how big the sample of your clients should be. There is no hard

and fast rule here. If you work with twenty young people, you should try and speak

to all of them. If you work with thousands of people, you should use a representative

sample and statistical tests to support your arguments. If this is not feasible it is

recommended that you choose a sample size that you feel is defensible and within

your budget. See the sources of further information in the Resources section (page 80)

for help in calculating sample sizes and for drawing conclusions from samples.

Finding relevant data can be difficult, so use the best available information or make

assumptions or estimates. Do not worry about not being able to collect every piece of

data. You may even conclude that it would be best to go back to Stage 1 and redefine

your scope until more resources are available and organisational priorities permit.

Remember that in order to be transparent you will need to explain what you have used.

The table below gives you some examples of collecting outcomes data for a

community-based employment-mentoring programme.

Stakeholder Outcome Indicator Data collection

Unemployed

person

Gains and

maintains

employment

Whether in work

after 12 months

Annual postal survey

of stakeholders and

telephone follow up

Participant with

physical disability

Reduced social

isolation

Frequency of social

contact with friends

Gathered

systematically at

six month review

between client and

worker

Young person Improved

behaviour

Number and type of

school exclusions

Report by teacher

Local government Increase in

recycling

Amount of waste

going to landfill

Monitoring of

change in amount

of waste

Local community Reduced fear of

crime

Number of local

people who report

feeling safer

Government crime

mapping tool

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42 A guide to Social Return on Investment

Top Tip: Tap into innovation on outcomes measurement

Sometimes you will find that there is an indicator but there is currently no way

of measuring it and new methods need to be developed1. It was once commonly

thought that confidence, self-esteem and other experiential outcomes could not be

measured. However, there are many techniques for measuring a range of wellbeing

outcomes that are now widely accepted by government and charities.

Look into what is already being done in this area that could be used or adapted for

your purposes, or consider how you can work with others to develop new ways of

measuring outcomes.

Local Multiplier (LM3) is an example of a tool that was developed by nef in

order to measure local money flows. See www.procurementcupboard.org for

more information. A tool called the Outcomes Star has been developed to assist

homelessness charities to capture the distance travelled by their clients. This is a

good example of how you can measure progress towards an outcome. You can find

more information about the Outcomes Star at www.outcomesstar.org.uk

Worked example – source and quantity of indicators

Look at the Impact Map for Wheels-to-Meals on page 103: the blue section shows

you the source and quantity of the indicators.

Do not double count outcomes

When you are dealing with a chain of events, be careful not to double count.

For example: ten people want to gain work through training and all ten gain

qualifications. But only five gain work. When you come to value the outcome for

the five that gained work, valuing bo th the qualification and the employment

will double count the value of the training.

Another situation where there is a risk of double counting is when looking at

savings to the state. For example, an SROI study might include the financial

saving to the state of reducing homelessness. However, such calculations can

include savings to the NHS on healthcare. You shouldn’t then separately include

the savings to the NHS as it would be double counting. But remember this is

subtle. For example, if a disabled person gets a job, benefits might accrue to

them (expressed in part through income), to their carer (respite), and to the state

(tax and benefits). Counting all three is not considered double counting in SROI

because the value is experienced separately by all three stakeholders.

To distinguish between the two, ask yourself: am I counting the same value, for

the same stakeholder, twice?

1 Go to www.thesroinetwork.org/vois-database for information on the indicator database.

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Over to you: Outcomes data collection

Complete the column on the Impact Map for sources of information. Once

you’ve collected your data, fill in the ‘quantity’ column.

Don’t forget that you are communicating to different audiences and may need

a number of different types of information. Almost always it will help people

understand what you do and explain how you create change if you can record

short case studies of one or two people or organisations in each stakeholder

group. These would form part of a full SROI report. You should now have

enough information to be able to prepare these.

3.3 Establishing how long outcomes last

The effect of some outcomes will last longer than others. Some outcomes depend on

the activity continuing and some do not. For example, in helping someone to start

a business it is reasonable to expect the business to last for some time after your

intervention. Conversely, providing a service so that people do not visit their doctors so

often may depend on the service being available all the time.

Where you believe that the outcome will last after the activity has stopped, then it

will also continue to generate value. The timescale used is generally the number of

years you expect the benefit to endure after your intervention. This is referred to as the

duration of the outcome or the benefit period.

You will need an estimate of the duration of each of your outcomes. Ideally this would

be determined by asking people how long an intervention lasted for them – this will

give you evidence of the duration. However, if information is not available on the

durability of different outcomes, you can use other research for a similar group to

predict the benefit period, such as the likelihood that ex-offenders will begin offending

again, or that people in employment will lose their jobs. Look for research to support

your decision. It is important to use data that is as close as possible to the intervention

in question so as not to inappropriately generalise. This is an area where there can be a

tendency to overstate your case and lose credibility.

Sometimes the duration of the outcome is just one year and it only lasts while the

intervention is occurring. In other instances it might be 10 or even 15 years. For

example, a parenting intervention with children from deprived areas may potentially

have effects that last into adulthood. You will need to have longitudinal data to support

the duration of the outcome and should consider how you might start to collect this

(if you are not already doing so). If you don’t have this information you will need to

make a case based on other research. The longer the duration, the more likely it is that

the outcome will be affected by other factors, and the less credible your claim that the

outcome is down to you. This is addressed by looking at the rate at which the outcome

drops off and is considered in Step 4.4.

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44 A guide to Social Return on Investment

Beneficiaries Duration Rationale

Participants on a year-long

IT training programme

that go on to get related

employment

4–5 years The move into successful employment

could set participants on a career path.

Although they might stay on this for

some time (eg 15 years), the period is

kept to 4-5 years as increasingly the effect

of the training will wear off and their work

experience will become more important

Carers that get brief respite

(1 week)

Up to 1

year

Respite care needs to be regular in order

to sustain the benefits

Businesses that get support

with cheap workspace

3–4 years The support could set up businesses

that last for much longer than 3-4 years.

However, it is likely that after the initial

set up other factors (eg the general

economic climate) will become

more important

Participants that get better

quality wheelchairs

2 years The benefit of the new wheelchair will

depreciate much like other assets

Duration and life expectancy are different

In the case of capital projects it is important to recognise the difference between

the duration of the benefit and the life expectancy of the asset. For example,

a new building may last 20 years and in each year create benefits which last

several years. There is a note in the Resources section on using SROI with

capital projects.

Keep a record of the rationale you used for determining the benefit period for

each outcome. This will need to go into your SROI report.

To date, the convention in SROI has been to account for outcomes from the time

period after the activity, even if they occur during the activity.2

The worked example – duration Look at the Impact Map for Wheels-to-Meals on page 103: the blue section shows

you how the column for the duration of the outcome has been completed.

For Wheels-to-Meals, most of the benefit occurs during the activity and would not be

sustained if the luncheon club ceased to operate. However, in line with convention,

this is accounted for as if it happened in the period after the activity. We will consider

two examples: fewer falls as a result of the mild exercise and fewer visits to the

doctor as a result of the practice nurse sessions.

2 This is a simplification of the approach used in HM Treasury’s Green Book, where the outcomes are accounted for in the

time period they arise. There is a risk that the simplification used in SROI will distort the calculation of social value in some situations. Although SROI currently commonly uses this simplification, it is perfectly possible to calculate the SROI based on the time periods in which the outcomes occur, in which case it is important to state that this is what has been done.

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• Fewer falls The activities were designed to maintain and improve general wellbeing in older

and less mobile people. We have assumed that residents would not have mild

exercise sessions without coming to the luncheon club and so, for our impact

map, residents will stop having these sessions at the end of the year and the

benefit will not endure. The duration is one year.

• Fewer visits to doctor Here, the change is due to increased awareness of health issues and contributing

factors. Residents are given knowledge. When they stop having the practice nurse

sessions at the luncheon club they do not lose the knowledge. They might use

it less as time goes on (the effect of which on our analysis is picked up later in

“drop-off”), but the change is not reversed. So the benefit endures beyond the

activity. We have estimated the duration to be 5 years.

Over to you: Duration of outcomes

Complete the ‘Duration’ column on your Impact Map.

3.4 Putting a value on the outcome

The introduction on page 8 started with an explanation of the importance of valuation.

The purpose of valuation is to reveal the value of outcomes and show how important

they are relative to the value of other outcomes. As well as revealing missing value it

will help determine how significant an outcome is.

The next step therefore is to identify appropriate financial values – these are a way of

presenting the relative importance to a stakeholder of the changes their experience.

Remember that you are identifying a value for the outcome and not the indicator. You

will then be able to complete the columns on the impact map relating to financial

proxies, their value and their sources.

What is valuation?

This process of valuation is often referred to as monetisation because we assign a

monetary value to things that do not have a market price. All the prices that we use in

our day-to-day lives are approximations – ‘proxies’ – for the value that the buyer and

the seller gain and lose in the transaction. The value that we get will be different for

different people in different situations.

For some things, like a pint of milk, there is considerable agreement on and

consistency in the price. For other things, such as a house, there is likely to be a wider

spread of possible prices. For others – a new product that has never been sold before,

for example – there may be no comparison.

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All value is, in the end, subjective. Markets have developed, in large part, to mediate

between people’s different subjective perceptions of what things are worth. In some

cases this is more obvious than in others. But even where prices are stable and have

the semblance of ‘objective’ or ‘true’ value, this is not really the case.

If we take the house example again, how much it is worth depends who we are

referring to. If you are selling a house, you will have a sense of what you are prepared

to accept for it – how much value it has for you. If I am thinking of buying your house,

I have my own view of what I am prepared to pay – how much value it has for me.

What the market does – in fact, what it is effectively for – is to bring together people

whose valuations happen to coincide. This ‘coincidence’ is called ‘price discovery’ – but

it is not uncovering any ‘true’ or ‘fundamental’ value, rather it is matching people who

(broadly) agree on what something is worth.

Arriving at an estimate of social value is the same as this in almost every way. The

difference is that goods are not traded in the market and so there is no process of ‘price

discovery’. This does not mean, however, that these social ‘goods’ do not have a value

to people. If I want to buy a house but there are no sellers, this does not mean that it

does not have a value to me or that I don’t have an idea of what this is. Similarly, if a

local government organisation creates a park for residents, where I can go, this too has

a value to me. The fact that I have not had to pay for this does not negate this fact.

In SROI we use financial proxies to estimate the social value of non-traded goods to

different stakeholders. Just as two people may disagree on the value of a traded good

(and so decide not to trade), different stakeholders will have different perceptions of

the value they get from different things. By estimating this value through the use of

financial proxies, and combining these valuations, we arrive at an estimate of the total

social value created by an intervention.

This is no different in principle to valuations on a stock market, which are simply a

reflection of the cumulative subjective valuations of buyers and sellers. With SROI,

however, the total valuation arrived at is likely to be more complete. Why? Because

share prices only reflect the valuations of a very limited group of stakeholders

(institutional and retail investors), while an SROI analysis, if done properly, captures

the different types of value relating to an activity, intervention or organisation, as seen

from the perspective of those that are affected – i.e. the stakeholders.

The process of valuation has a long tradition in environmental and health economics;

SROI is building on the methodology and extending it to other fields. While it may

seem initially daunting, it is relatively straightforward and gets easier with practice. As

SROI becomes more widespread, monetisation will improve and there will be scope for

pooling good financial proxies. Now we will take you through some guidance drawn

from different disciplines for identifying proxies for each of these.

Proxies that are easy to source

Sometimes monetisation is a fairly straightforward process – where it relates to a

cost saving, for example. This might be the case where you are interested in the value

of improved health from the government’s perspective; you may decide to use the cost

of attending a doctor’s clinic.

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Sometimes this will not result in an actual cost saving because the scale of the

intervention is too small to affect the cost in a significant way (see section on marginal

costs, below) but it still has a value.

The flipside to cost savings is an increase in income. Rises in income for people

through salary or for the state through tax increases are obvious examples. However,

be careful of double counting here. For example, if an individual gets a job, they

increase their income and the state receives increased taxes. In this case the increase

in income should be recorded after deducting taxes.

The increase in income may also not be additional to either the person or the state.

For the person the increased income may be offset by an increase in taxes or loss

of benefits. For the state the increase in taxes will only result in an increase in

government income if no one else loses work and the total level of employment

increases. However, there may still be a value to the state of that person getting a job

that should be included – perhaps because inequality has been reduced.

Remember we are talking about proxies here, as some of these outcomes will not

result in actual financial savings. However, for some stakeholders, such as the funders,

you may want to demonstrate cash savings. If you want to do this credibly you will

need to approach it rigorously and should consult the guidance on marginal costs and

displacement. The information you collect on costs will help you with this but it may

require a separate calculation.

Proxies that are more challenging

SROI also gives values to things that are harder to value so are routinely left out of

traditional economic appraisal. There are several techniques available.

In Stated preference and Contingent valuation we ask people directly how they value

things either relative to other things or in terms of how much they would pay to have

or avoid something. This approach assesses people’s willingness to pay, or accept

compensation, for a hypothetical thing. For example, you may ask people to value a

decrease in aircraft noise in their town – their willingness to pay for it. Conversely, you

may ask them how much compensation they would require to accept an increase in

crime.

Revealed preference techniques infer valuations from the prices of related market-

traded goods. A common technique for inferring preference is to look at the way in

which people spend money. Many governments produce data on average household

spending which includes categories like ‘leisure’, ‘health’ or ‘home improvement’.

Although flawed for a number of reasons, not least because it excludes the value of the

public services, this can also be useful.

Another form of revealed preference – hedonic pricing – builds up a value from the

market values of constituent parts of the service or good being considered. This

method could be used to value environmental amenities that affect the price of

residential properties. For example, it can help us value clean air (and the cost of

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48 A guide to Social Return on Investment

pollution) by estimating the premium placed on house prices in areas with clean air (or

the discount on otherwise identical houses in polluted areas). Another example might

be to look at wage differentials that people require to take on certain risks, to calculate

how they value different aspects of their lives.

Another approach recognises that people are generally willing to travel some distance,

or give up some time to access goods and services on which they place a value. This

inconvenience can be translated into money to derive the estimate of the benefits of

those goods and services. This is called the travel cost/time value method.

When identifying proxies it is important to remember that we are not interested in

whether money actually changes hands. It also doesn’t matter whether or not the

stakeholders in question could afford to buy something – they can still place a value on

it. We assume that health has a similar value to people on any income. So, for

example, you may want to use the average cost of health insurance as a proxy for

improved health amongst children in care. The fact that those children would not be in

a position to take out such insurance is beside the point – it gives generic guidance on

how people value health.

There are problems with each of these techniques, and there are no hard and fast

rules as to which you would use in given situations. We offer them to support you in

deriving proxies. Nonetheless, this section requires creativity and research on your

part. There is obviously a role for engaging stakeholders here. However, be careful

how you approach this. Stakeholders will be able to guide your thinking particularly

on the relative merits of different types of value. However, some stakeholders may find

it more difficult to attach a financial value to something. Again, you need to use some

judgement as to the appropriate way to involve stakeholders to assess the relative

importance of the outcomes that they experience.

The following table gives examples of proxies that have been used in previous

SROI analyses. For most outcomes we suggest a range of different possible proxies to

help your own brainstorming. Please refer to additional guidance from the SROI

Network and the database on values, outcomes and indicators for stakeholders (VOIS)6

for more information.

6 www.thesroinetwork.org/vois-database

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Stakeholder Outcome Indicator Possible proxies

Person with

mental

health

problem

Improvement

in mental

health

• Amount of time spent socialising

• Extent to which participants engage in

new activities

• Level of use of mental health services

• Cost of membership of a social club/network

• Percentage of income normally spent on leisure,

• Cost of counselling sessions

Local

community

Improved

access to

local services

• Take-up of those services, and by whom

• Savings in time and travel costs of being able to access

services locally

Person with

physical

health

problem

Improved

physical

health

• Number of visits to doctor

• Extent of improvements in health (self reported)

• How often they exercise

• Cost of visiting private doctor clinic

• Cost of health insurance • Cost of gym membership

The

environ-

ment

Less waste • Amount of waste going to landfill

• Level of carbon emissions

• Cost of landfill charges • Cost of CO2 emissions

Offenders Reduced

reoffending

• Frequency of offences for which participant is

charged

• Nature of offence

• Forgone wages due to time spent in prison or

doing community service

Care leaver Reduced

homeless-

ness

• Access housing upon leaving care

• Satisfaction with appropriateness of

housing

• Rent • Cost of hostel accommodation

Women

offenders

Improved

family

relationship

• Child continues living in the family home

• Amount that parents spend on their children

annually

• Value of time spent with children

• Cost of childcare

Local

community

Improved

perception of

the local area

• Residents report improvements in local

area

• Change in property prices • Amount spent on home improvements

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Identifying your financial proxies

Your stakeholders will be a good starting point for finding your proxies because

only they know what it is they value and so know best how this might be captured.

While they may not be able to identify a tangible value, they can guide you as to

what the change is worth to them.

As you check the proxy with stakeholders and see increasing agreement, the

proxy may gain credibility. Where there is disagreement on values it is possible

that the outcomes need to be expressed differently, otherwise it may be necessary

to use average values. Often you can find academic articles or other research that

has already assigned a monetary value to the outcome you are interested in.

You’ll still need to check that it is appropriate to your case.

Information on unit costs may be available from:

• websites maintained by the stakeholder who might gain from the cost saving (eg government departments like the Department for Work and Pensions);

• research into costs by government or independent bodies. The Personal Social Services Research Unit (www.pssru.ac.uk), for example, publishes comprehensive

unit cost data for health and social care on an annual basis;

• your own estimates or research with the stakeholder on how much the saving would be.

Information on changes in income can be obtained from a range of places, including:

• data from stakeholders;

• reference to the average increase in a sample of your stakeholders;

• reference to other research of average increases that occur as a result of similar activities relating to the same outcomes.

Be careful with unit costs when calculating actual financial savings

Information on cost savings is often available in the form of unit costs. Unit costs

are sometimes calculated as the total cost of an activity divided by the number

of people benefiting from the activity. This includes both fixed costs, like the cost

of a building, as well as variable costs, eg day-to-day running. The fixed costs

may remain the same regardless of the number of participants in an activity. For

example, the unit cost of housing a prisoner is in the region of £40,000 per annum

when the total cost of the prison estate is divided by the number of prisoners. But

if 100 people are prevented from going to prison that does not affect the fixed

costs and is unlikely to achieve the full unit cost reduction per prisoner.

When you use unit costs be careful not to overstate the savings. The cost savings

that you use should be the change in costs arising from your activity, called the

marginal costs. Marginal costs will vary depending on the scale of the activity.

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The problem is that data on marginal costs is harder to access, whereas unit

costs are more routinely calculated.

Remember also that the department investing is not necessarily the one that

makes the final saving. It is quite common for central government to benefit

from cost savings that result from a local government initiative (eg prison

savings from a reduction in crime) and vice versa. Even within an organisation it

is possible that the cost saving would not be made by the department funding

the activity but by another. Separating out stakeholders is necessary to avoid

confusion and help communication.

Choosing credible financial proxies

It is important when communicating social value to understand that some

proxies are more credible than others for different stakeholders. The most

credible proxies have been used before (by third party sources with existing

credibility), or are at least based on research undertaken by your organisation.

Other proxies are market comparisons (what it would cost to achieve the same

outcome) or working assumptions that will need to be related to proposed future

improvements. These latter two may be necessary but are usually less credible.

When we get to sensitivity analysis you will have the opportunity to test the

overall impact that the proxies have on your analysis. If you are having

difficulties choosing between two proxies, make a note of them and later test

what difference using either of them would make.

The worked example – financial proxies

Look at the Impact Map for Wheels-to-Meals on page 103: the blue section shows

you how the column for financial proxies has been completed.

For example, for the outcome of ‘fewer hospital admissions’, desk research showed

that this was not accounted for as a single figure. A hospital admission and stay was

built up of a number of interventions from admission, assessment and through

to continuing care7. Furthermore, costs varied for different patient groups, so the

proxies chosen by Wheels-to-Meals were specific to older people. Central government

information might be available to source these, for example in the UK there is a

National Health Service cost book.

These proxies are examples of indirect cost savings. The change would not by itself

result in a smaller budget or reduced spend for nearby hospitals in following years

as there would be many more people in need of these services. Also, seven fewer

admissions would not make a significant difference amongst all the other factors

that affect the budgets. However, the costs identified are proxies for this outcome

and produce a way of valuing the resources made available to the health service with

which it can now do other things.

7 The valuation of outcomes is developed in the supplement Wheels to Meals: one year on.

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Other proxies were considered for the reduction in ‘neighbourly care/shopping

and breakdown of informal community networks’ outcome. For example, Wheels-to-

Meals considered whether the value of the neighbour’s time might be a better

financial proxy to use. They found a median wage using NOMIS (Annual Survey of

Hours and Earnings – www.nomisweb.co.uk). If a neighbour were going shopping

anyway, then the time involved would be the extra time they spent with residents

before and/or after the shopping trip; they guessed this would total about half an

hour. At the hourly median wage of £11.97 for half an hour per shopping trip this

would be £5.99 per trip. As this was similar value to that used on the Impact Map for

a supermarket online delivery fee, they felt more certain using the latter proxy.

Over to you: Financial proxies

You can now complete the sections on the Impact Map relating to

financial proxies.

Remember that your choice of proxies needs to be well explained to the

reader. The logic of the decisions that you have made needs to be clear. If your

proxies seem implausible they will let down the whole analysis. Give this stage

sufficient time and effort. This will usually require some narrative on why you

have chosen the proxies you have and any relevant thought processes. Any

supporting evidence you have for choosing particular proxies should also be

used and alternative proxies that were considered may be discussed as they

help to give a sense of the value that has been used.

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54 A guide to Social Return on Investment

Stage 4:

Establishing

impact

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A guide to Social Return on Investment 55

This section provides a number of ways of assessing whether

the outcomes you have analysed result from your activities.

These methods provide a way of estimating how much of the

outcome would have happened anyway and what proportion of

the outcome can be isolated as being added by your activities.

This is what we mean when we use the term impact.

Establishing impact is important as it reduces the risk of over-

claiming and means that your story will be more credible. It is

only by measuring and accounting for all of these factors that

a sense of the impact that the activity is having can be gained.

Otherwise there is the risk of investing in initiatives that don’t

work, or don’t work as well as intended. As you will see,

establishing impact may also help you identify any important

stakeholders that you have missed.

There are four parts to this section:

4.1 Deadweight and displacement

4.2 Attribution

4.3 Drop-off

4.4 Calculating your impact

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4.1 Deadweight and displacement

Deadweight is a measure of the amount of outcome that would have happened even

if the activity had not taken place. It is calculated as a percentage. For example, an

evaluation of a regeneration programme found that there has been a 7% increase

in economic activity in the area since the programme began. However, the national

economy grew by 5% during this time. Researchers would need to investigate how

much of the local economic growth was due to wider economic changes and how

much to the specific intervention being analysed.

To calculate deadweight, reference is made to comparison groups or benchmarks.1

The perfect comparison would be the same group of people that you have affected,

but seeing what happened to them if they had not benefited from the intervention.

Since a perfect comparison is not possible, measuring deadweight will always be an

estimate. Instead, you need to seek out information that is as close to your population

as possible. The more similar the comparison group, the better the estimate will be. If

you cannot identify an appropriate comparator group or proxy, you may have to rely on

a ‘best estimate’.

Ask stakeholders about their services

In an evaluative SROI analysis, information on deadweight can be gathered during

the data collection phase. For example, you may be able to ask stakeholders what

other services they access and how helpful they find them. Or they may be able to

tell you if they could have accessed another similar facility in the area anyway.

However, you will often have to go elsewhere for the kind of information you need.

Data on some indicators will be available from government sources, both from

individual departments and from organisations like the Office for National Statistics.

Other information is sometimes available from infrastructure, member, trade or sector

groups that represent the interests of particular stakeholders.

The simplest way to assess deadweight would be to look at the trend in the indicator

over time to see if there is a difference between the trend before the activity started and

the trend after the activity started. Any increase in the trend after the activity started

provides an indication of how much of the outcome was the result of the activity.

There is a risk that the same change in the trend is happening elsewhere in a wider

population of which your stakeholder group is a part. It is therefore better to also

compare the trend in the indicator with trends in the wider population.

There is still a risk that whilst there is a change in the indicator relative to the wider

population, the change happened to similar groups elsewhere, relative to their wider

populations, where a similar intervention or activity was not available. The solution

to this risk would be to calculate and compare the relative changes for both your

stakeholder group and a similar group elsewhere.

1 Sometimes referred to as the counterfactual.

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Here are some examples of data you could use to calculate deadweight for different

kinds of outcome.

Outcome Benchmark indicator

Reduction in reoffending rates among

young ex-offenders (16-24 yrs) taking

part in a rehabilitation programme

National average reoffending rate among

16-24-year-olds

Improvement in educational outcomes

for young people in high-quality

residential care homes

Educational outcomes for children in the

residential care population as a whole

Increase in number of long-term

unemployed gaining a job after

participating in an employment training

programme

Average rate at which the long-term

unemployed come off benefits in the

same region

Decreased crime in a borough after a

borough-wide initiative increasing the

number of police on the streets

Change in crime rate in a borough with

similar socio-economic profile, but not

subject to a specific crime-reduction

initiative

Whether you want to understand your impact, or be more credible in your discussions

with stakeholders, one advantage of calculating deadweight is that it weights the

social value towards outcomes for stakeholders where deadweight is low. For what are

sometimes called ‘hard to reach’ groups, deadweight is likely to be lower than for other

groups. For example, the likelihood of someone who has been long-term homeless

moving into employment without support is low; the likelihood is that much, if not

all, of the change is due to the support received. This means that if the two groups

experienced similar outcomes the impact would be higher for the harder to reach

group.

As deadweight increases, your contribution to the outcome declines. When deadweight

is high this may mean that the outcome is no longer material to your analysis.

Deadweight will be measured as a percentage and then that percentage of the outcome

is deducted from the total quantity of the outcome.

Displacement is another component of impact and is an assessment of how much of

the outcome displaced other outcomes. This does not apply in every SROI analysis but

it is important to be aware of the possibility. Two examples show where displacement

is most relevant:

1. An evaluation of a state-funded street lighting programme in one borough found

a reduction in crime; however, the neighbouring borough reported an increase

in crime during the same period. It is possible that the reduced crime was simply

displaced.

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58 A guide to Social Return on Investment

2. A project supporting ex-offenders into employment counted the contribution to

economic output, decreased benefit payments and increased taxes in its analysis.

From the point of view of the state these benefits would have a high displacement

rate as these are most likely jobs that are now denied to someone else that could

have made similar contributions. This is irrespective of any other economic benefits

to the individual or community that this project might produce.

If you think that displacement is relevant and your activities are displacing

outcomes, you may find that there is now another stakeholder being affected by the

displacement. You could go back and introduce the new stakeholder into the impact

map or you could estimate the percentage of your outcomes that are double counted

because there is some displacement, calculate the amount using this percentage and

deduct it from the total.

The worked example – deadweight and displacement

Look at the Impact Map for Wheels-to-Meals on page 104: the yellow section shows

you how the column for deadweight has been completed.

For example, for the outcome of ‘healthier volunteers’, although the luncheon

club had a demonstrable effect on the amount of physical activity reported by all

volunteers, it was considered that if they hadn’t been volunteering for Wheels-to-

Meals they might have been volunteering somewhere else or doing other things

with this time (such as going for a walk) that would have led to the same outcome.

However, as part of the volunteer annual assessment the volunteers identified that

the luncheon club involved more physical exercise than they might have otherwise

sought. Volunteers were asked to estimate how much more. The average was

around 45% more. So if the benchmark is 100%, because all of them would have

done some other exercise anyway, the increase is therefore 145%. The estimate of

deadweight is 100%/145% or 70%. This was used as the estimate for the activity that

would have happened anyway.

For the outcome of ‘residents having nutritious meals’, the nutritious meals, and

resulting health improvements, were identified as the change that the local

government organisation expected. However, this change would have happened

anyway: if Wheels-to-Meals were not delivering this contract, the local government

organisation would have another provider deliver it, as a meals-on-wheels service,

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to a similar standard of nutrition (specified in the contract). So deadweight is 100%.

This will result in no impact on our impact map for this row. However, we will still

show the row as it is a part of the story of change.

In this example, displacement has not been considered.

Over to you: Deadweight and displacement

You can now complete the section on the Impact Map relating to deadweight and

displacement. Although there is no space to record the rationale and the sources,

you need to keep a record of these so that they can be included in your report.

4.2 Attribution

Attribution is an assessment of how much of the outcome was caused by the

contribution of other organisations or people. Attribution is calculated as a percentage

(i.e. the proportion of the outcome that is attributable to your organisation). It shows the

part of deadweight for which you have better information and where you can attribute

outcome to other people or organisations.

For example, alongside a new cycling initiative there is a decrease in carbon emissions

in a borough. However, at the same time, a congestion charge and an environmental

awareness programme began. While the cycling initiative knows that it has contributed

because of the number of motorists that have switched to cycling, it will need to

determine what share of the reduced emissions it can claim and how much is down to

the other initiatives.

It will never be possible to get a completely accurate assessment of attribution.

This stage is more about being aware that your activity may not be the only one

contributing to the change observed than getting an exact calculation. It is about

checking that you have included all the relevant stakeholders.

Reassess your stakeholders

The first question is whether there are any organisations or people that

contribute to the outcomes that you haven’t included – these are

missing stakeholders.

It is also possible that the contributions made by organisations and people in the

past should be taken into account. For example, a person seeking work may gain

that job because of your support in training as well as another organisation’s

support with preparing CVs and helping with interview techniques.

Where different stakeholders had other support in the past it may be useful to

consider them as different groups of stakeholders. For example, children in care

may have different journeys through the system depending on their experiences

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60 A guide to Social Return on Investment

prior to coming into care.

As a result you may want to reconsider your stakeholders and split them into

groups that had different experiences before their involvement with your

activity. If you don’t go back and include the new stakeholder and the inputs that

they make then you will need to estimate the attribution. Either you will increase

the overall inputs included in the Impact Map or you will have to reduce the

outcome attributed to the existing inputs.

There are three main approaches to estimating attribution. You may want to use a

combination of these methods to make your estimate as robust as possible:

1. Base your estimate on your experience. For example, you have been working

with other organisations for a number of years and have a good idea of how

you each contribute to the outcomes.

2. Ask stakeholders – both existing ones and any new ones you have identified

– what percentage of the outcome is the result of your activity. In an

evaluative SROI analysis this could be conducted during the data collection

phase, through surveys, focus groups or interview.

3. Consult with the other organisations to which you think there is attribution.

You could find out how much they all spend towards meeting the objective

and attribute according to the amount they spend on a unit of outcome. Of

course, this assumes that all expenditure is equally effective. Alternatively,

you could have conversations with these organisations (even a joint meeting)

to understand how they all contribute to the client’s journey and then work

out percentages that they can claim credit for on that basis.

Common mistakes with attribution

There are three common mistakes that people make with attribution:

1. Remember that the purpose of the estimate of attribution is to help your

organisation manage change – but it will be an estimate. So don’t spend too

long on this, but do explain how you have reached your estimate.

2. Take care not to attribute outcomes to organisations or people that are being

paid out of the inputs (investment) that you recorded in Stage 2, as the

investment takes account of their contribution.

3. As attribution may have been included as part of your estimate of

deadweight, take care not to take off more than you should from your

outcomes. This will depend on the quality of the benchmark used.

The worked example – attribution

Look at the Impact Map for Wheels-to-Meals on page 104; the yellow section shows

you how the column for attribution has been completed.

For example: for the attribution of ‘more socialising’ outcome, Wheels-to-Meals

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used a questionnaire to ask residents if they had joined clubs and groups as a result

of the luncheon club. Because it is difficult to justify that this is entirely down to

Wheels-to-Meals, the questionnaire also asked if other friends and organisations had

recommended or promoted clubs and groups, and, if so, how important this had

been to the decision to join. Based on the results in the questionnaire it was possible

to estimate that 35% of the outcome was the result of the contributions of others.

Over to you: Attribution

You can now complete the section on the Impact Map relating to attribution by

putting in a percentage. Although there is no space to record the rationale for

your attribution and its source you need to keep a record of this somewhere so

that it can be included in your report.

You should record a description of any organisations or people relating to attribution

and a description of the relationship to your work. This will form part of your report.

4.3 Drop-off

In Stage 3.3 we considered how long the outcomes lasted. In future years, the amount

of outcome is likely to be less or, if the same, will be more likely to be influenced by

other factors, so attribution to your organisation is lower. Drop-off is used to account

for this and is only calculated for outcomes that last more than one year.

For example, an initiative to improve the energy efficiency of social housing has great

short-term success in reducing energy bills and carbon emissions. However, as time

passes, the systems wear out and get replaced with cheaper but less efficient systems.

Unless you have built up some historical data on the extent to which the outcome

reduces over time, you will need to estimate the amount of drop-off, and we

recommend a standard approach in the absence of other information. You can inform

this estimate with research, such as academic sources, or by talking to people who

have been involved in similar activities in the past.

Drop-off is usually calculated by deducting a fixed percentage from the remaining level

of outcome at the end of each year. For example, an outcome of 100 that lasts for three

years but drops off by 10% per annum would be 100 in the first year, 90 in the second

(100 less 10%) and 81 in the third (90 less 10%).

Over the longer term you will need to have a management system that allows you to

measure this ongoing value more accurately. However, it is likely that you will need to

track your participants as part of your data collection anyway, so questions to evidence

drop-off can be included.

Over to you: Drop-off

You can now complete the section on the Impact Map relating to drop-off by

putting in a percentage. Although there is no space to record the rationale for

your drop-off and its source, you need to keep a record of this so that it can be

included in your report. You won’t make use of this until Stage 5, Calculating

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your SROI.

4.4 Calculating your impact

All of these aspects of impact are normally expressed as percentages. Unless you

have more accurate information it is acceptable to round estimates to the nearest 10%.

In some cases you might consider that there is an increase in the value rather than a

reduction. However, we do not recommend that you increase your impact as a result of

considering these issues. In this situation you would simply not make a deduction.

Your Impact Map should now have percentages filled in for deadweight, attribution,

drop-off and (if applicable) displacement. You can calculate your impact for each

outcome as follows:

• Financial proxy multiplied by the quantity of the outcome gives you a total value. From this total you deduct any percentages for deadweight or attribution.

• Repeat this for each outcome (to arrive at the impact for each)

• Add up the total (to arrive at the overall impact of the outcomes you have included)

The worked example – calculating impact

This is how Wheels-to-Meals staff calculated the impact for one of the indicators,

‘clubs and groups joined’.

First, they took the quantity of each outcome and multiplied by the financial proxy.

This gives the total value of the outcome.

Total outcomes 16 x £48.25 = £772.00

Then they deducted the deadweight, or what would have happened anyway.

Less deadweight £772 - 10% (or 90% of £772)

90% of £772

0.9 x £772 = £694.80

Next they accounted for attribution, or how much of the change was down to others.

Less attribution £694.80 - 35%

£694.80 x 0.65 = £451.62

For that row, this is the value of the impact created during the period of the scope

– the year of the luncheon club being analysed.

Look at the Impact Map for Wheels-to-Meals on page 104; the yellow section

shows you how these columns have been completed.

Over to you: Impact

You can now complete the section on the Impact Map relating to impact.

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64 A guide to Social Return on Investment

Stage 5:

Calculating the

SROI

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You will now have collected all the information together to

enable you to calculate your SROI. You will also have recorded

qualitative and quantitative information that you will need

in the report. As you will want people to read your report,

remember to keep the information you include to a minimum.

This stage sets out how to summarise the financial information

that you have recorded in the previous stages. The basic idea

is to calculate the financial value of the investment and the

financial value of the social costs and benefits. This results in

two numbers – and there are several different ways of reporting

on the relationship between these numbers.

If you are carrying out an evaluative SROI analysis, then the

evaluation should ideally take place after the period for which

the outcome was expected to last. However, interim evaluations

will still be useful in order to assess how well the intervention

is working and to provide information to support any changes.

If you are comparing actual results against a forecast you will

need the information relating to the time periods over which

your outcomes last.

There are four steps to calculating your ratio, with an

optional fifth:

5.1 Projecting into the future

5.2 Calculating the net present value

5.3 Calculating the ratio

5.4 Sensitivity analysis

5.5 Payback period

All these stages will be outlined below. We will discuss each

step before asking you to do your own calculations.

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5.1 Projecting into the future

The first step in calculating your ratio is to project the value of all the outcomes

achieved into the future. In step 3.3, above, you decided how long an outcome would

last. Using this, you will now need to:

• set out the value of the impact (from step 4.4) for each outcome for one time period (usually 1 year);

• copy the value for each outcome across the number of time periods it will last (as recorded in the Duration column on your impact map); then

• subtract any drop-off you identified (step 4.3) for each of the future time periods after the first year.

In the worked example this was done using Excel. We have not included an example

of a blank Excel sheet because different people have different approaches to Excel and

because we have found that standard approaches cannot be easily used for different

situations. It is easier to set up your own spreadsheet using the worked example and

the description in the text as a guide.1

The worked example – drop-off and impact projected in future years

Look at the impact map for Wheels-to-Meals on page 104: the yellow section shows

you how the columns for impact have been completed.

If we take the line for group sessions run by the nurse in a surgery, the duration is 5

years and the drop-off 10%. The 10% is an estimation of the likelihood that residents

will use the knowledge they gain less as time goes on as they forget the sessions.

So the calculation Wheels-to-Meals used to work out the effect of drop-off on the

projected impact into future years goes like this:

Impact in year 1 = £1,539.00

This is the same as the impact calculated at the end of the project. We only account

for the outcomes in the year after the activity and only calculate drop-off in

following years.

Impact in year 2 yr1 impact less drop-off

£1,539.00 less 10%

£1,539.00 x 0.9

= £1,385.10

Impact in year 3 yr2 impact less drop-off

£1,385.10 less 10%

£1,385.10 x 0.9

= £1,246.59

Impact in year 4 yr3 impact less drop-off

£1,246.59 less 10%

£1,246.59 x 0.9

= £1,121.93

1 See www.thesroinetwork.org for information on developments in software that will assist in completing this stage.

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Impact in year 5 yr4 impact less drop-off

£1,121.93 less 10%

£1,121.93 x 0.9 = £1,009.74

5.2 Calculating the net present value

In order to calculate the net present value (NPV) the costs and benefits paid or received

in different time periods need to be added up. In order that these costs and benefits

are comparable a process called discounting is used. Discounting recognises that

people generally prefer to receive money today rather than tomorrow because there is

a risk (eg, that the money will not be paid) or because there is an opportunity cost (eg,

potential gains from investing the money elsewhere). This is known as the ‘time value

of money’. An individual may have a high discount rate – for example, if you would

accept 2 units of currency in one year’s time, instead of1 now, that implies a discount

rate of 100%.

This is a controversial area and one where there is ongoing research and discussion.

The main problem with using discounting in SROI is that it encourages short-termism

by discounting the future. This is especially problematic for environmental outcomes,

where the value may even increase. This betrays the extent to which people actually

value their future and their children’s future.

There is a range of different rates. For the public sector, the basic rate recommended

in HM Treasury’s Green Book is 3.5%. The Stern Review on the economics of climate

change argued that it was not ethically defensible for pure time preference to be

applied to cost-benefit calculations where these involved significant wealth transfers

from the future to the present and used lower rates. Following the Stern Review, HM

Treasury published supplementary guidance on intergenerational wealth transfers,

in which a reduced discount rate of 3%, which eliminates the pure time preference

element, is applied alongside the usual discount rate.2

This issue is under review and the aim is to produce further guidance on discounting

in due course.

The process is to discount the projected values over time, as you set out in stage

5.1, above. This can be easily done if you are using Excel, which has functions for

calculating Present Value and Net Present Value.

Although this calculation is automated in Excel (=NPV, discount rate, value1, value 2…),

it may be useful to know how the calculation for Present Value works and this is shown

below (‘r’ represents the discount rate):

2 More information on the different elements that make up the discount rate is set out in Annex 6 of the Green Book.

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Present = Value of + Value of + Value of + Value of + Value of

Value impact in impact in impact in impact in impact in

Year 1 Year 2 Year 3 Year 4 Year 5

(1+r) (1+r)2 (1+r)3 (1+r)4 (1+r)5

Here is a fictional example for an organisation called Youth Work, where r = 3.5%,

or 0.035.

Year 1 Year 2 Year 3 Year 4 Year 5

Benefits £448,875 £414,060 £389,935 £355,648 £319,005

Discounted = £448,875 + £414,060 + £389,935 + £355,648 + £319,005

Values (1.035) (1.035)2 (1.035)3 (1.035)4 (1.035)5

Present

Value

= 1,750,444

Having calculated the Present Value of your benefits, you can deduct the value of your

inputs (the investment) to arrive at the Net Present Value (NPV).

NPV = [Present value of benefits] - [Value of investments]

In the Youth Work example the investment was £576,000. Therefore, the net present

value would be calculated as follows:

NPV = £1,750,444 - £576,000

= £1,174,444

5.3 Calculating the ratio

You are now in a position to calculate the initial SROI ratio. This is a very simple sum.

You divide the discounted value of benefits by the total investment.

SROI ratio = Present Value

Value of inputs

An alternative calculation is the net SROI ratio. This divides the NPV by the value of the

investment. Both are acceptable but you need to be clear which you have used.

Net SROI ratio = Net Present Value

Value of inputs

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The worked example – calculating the SROI

(discounting and net present value)

Look at the Impact Map for Wheels-to-Meals on page 105: the green section shows

you the value of the discounted benefits.

Using Excel and the NPV function, the total present value of our example has been

calculated following the above method. Wheels-to-Meals also used the 3.5%

discount rate.

Total present value = £81,741.93

Net present value total present value - total inputs

£81,741.93 - £42,375 = £39,366.93

SROI total present value / total inputs

£81,741.93 / £42,375 = £1.93: 1 or rounded up to 2:1

So for Wheels-to-Meals, there are £2 of value for every £1 of investment.

5.4 Sensitivity analysis

One of the strengths of setting up a spreadsheet is that it is possible to assess the

importance of elements of the model relatively easily; by altering the figures, the

spreadsheet will make all the changes to the calculation for you. After calculating the

ratio, it is important to assess the extent to which your results would change if you

changed some of the assumptions you made in the previous stages. The aim of such an

analysis is to test which assumptions have the greatest effect on your model.

The standard requirement is to check changes to:

• estimates of deadweight, attribution and drop-off;

• financial proxies;

• the quantity of the outcome; and

• the value of inputs, where you have valued non-financial inputs.

The recommended approach is to calculate how much you need to change each

estimate in order to make the social return become a social return ratio of £1 value

for £1 investment. By calculating this, the sensitivity of your analysis to changes in

estimates can be shown. This allows you to report the amount of change necessary to

make the ratio change from positive to negative or vice versa.

We are interested in which changes have a significant impact on the overall ratio.

It is these that you would consider as potential priority areas in managing

the value you are creating. For example, if your result is sensitive to changes in a

particular indicator you may want to prioritise investment in systems to manage

(and resources to improve performance in) that indicator.

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In general the greater the change that you need to make in order for the SROI

to become £1 for every £1 invested, the more likely it is that the result is not

sensitive. It is also possible that a choice you made earlier between two proxies

is now resolved because the choice doesn’t affect the overall ratio. All of these

findings should be discussed in the final SROI report.

This focus on the significant issues will help you keep your report short.

The worked example – sensitivity analysis

Let us consider, as an example, how Wheels-to-Meals explored the sensitivity of the

top row of the Impact Map, which covers the outcome ‘fewer falls’ (you will need to

consider all rows). This was a useful row to work with as it resulted in the biggest

financial value on the Impact Map, so needed scrutiny.

• Impact. Low deadweight and attribution were identified in this row. This could be an issue. What if this was wrong and, for example, more of this change was down to

others than Wheels-to-Meals had realised? How far out would the attribution figure

have to be for the SROI to fall to £1: £1?

Using the spreadsheet to change the numbers and repeat the calculations, attribution

would have needed to be 53% for the SROI to become 1:1 rather than the 5% we

have identified. If this were the case, the impact would fall from a total for this row of

£81,648 (for all three elements of the financial proxy) to £40,394, reducing the SROI

to £1: £1.

The change in attribution from 5% to 53% is a 960% increase.

• Financial proxies. There are three elements to the financial proxy in this row. As an example, we will see how Wheels-to-Meals assessed the sensitivity of the element

from the NHS cost book for ‘geriatric continuing care inpatient’.

The change required to this figure (in this case a reduction) for the SROI to fall to

£1: £1 is for the financial proxy element to drop from £7,220 per admission/stay to

£1,093 – a change of nearly 85%. This figure is, therefore, more sensitive, although

the value would still need to change significantly, so Wheels-to-Meals felt that the

proxies it had chosen were adequate.

Remember that the SROI figure is based on an incomplete example and this has

implications for the sensitivity analysis. The point of the example is to show how it

is applied.

It would also be possible to now present the results from a different perspective.

For example, even if the cost of admission/stay fell to just over £1,093, the social

return of Wheels-to-Meals would still be more than £1: £1.

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5.5 Payback period (optional)

The ‘payback period’ describes how long it would take for an investment to be paid off.

Specifically, it answers the question: at what point in time does the value of the social

returns start to exceed the investment? Many funders and investors use this kind of

calculation as a way of determining risk in a project. While a short payback period may

be less risky, a long payback period is often a feature of activities that can generate

significant long-term outcomes, thus longer-term core funding is required.

Often the investment will be paid back over a period of months rather than whole years

and so is reported in months. Assuming that the annual impact is the same each year,

the first step is to divide the annual impact for all participants by 12 to get impact per

month. Then divide the investment by the impact per month to get payback period in

months.

The basic formula is:

Payback Period in Months = Investment

Annual impact/12

Over to you: Financial projections

You can now complete your financial projections on your Impact Map.

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Stage 6:

Reporting, using

and embedding

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Congratulations! You now have a completed SROI analysis.

However, the process is not complete. There is a

final, important stage: reporting to your stakeholders,

communicating and using the results, and embedding the SROI

process in your organisation. This stage gives guidance on how

to make the most of all of your hard work so far.

The three issues to consider are:

6.1 Reporting to stakeholders

6.2 Using the results

6.3 Assurance

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6.1 Reporting to stakeholders

You need to make sure that the way in which you communicate the results is relevant

to the audiences that you decided upon when you set your scope. Your findings may

be for internal management use, for public distribution or as the basis for different

discussions with different stakeholders. Preparing a report is useful because it is the

place where you can make recommendations to influence what happens as your

organisation or project moves forward.

SROI aims to create accountability to stakeholders. As such it is important that the

results are communicated to stakeholders in a meaningful way. This involves

more than publishing the results on your website. You may well find that external

stakeholders are very interested to hear about your work with SROI – both the process

you went through and the results.

Your final report should comprise much more than the social returns calculated. The

SROI report should include qualitative, quantitative and financial aspects to provide

the user with the important information on the social value being created in the course

of an activity. It tells the story of change and explains the decisions you made in the

course of your analysis.

The report should include enough information to allow another person to be assured

that your calculations are robust and accurate. That is, it needs to include all the

decisions and assumptions you made along the way. To help your organisation

improve it should include all the information that you were able to find out about the

performance of the organisation which might be useful to strategic planning and the

way it conducts its activities. You will need to be aware of commercial sensitivities in

deciding what you include in the report.

An SROI report should be as short as possible while meeting principles of transparency

and materiality. It should also be consistent, using a structured framework that allows

comparison between reports. Details of the contents of an SROI report can be found in

the Resources section (see page 82). However, the following quantitative and

qualitative information is usually included in a comprehensive and considered SROI

report:

• information relating to your organisation, including a discussion of its work, key stakeholders and activities;

• description of the scope of the analysis, details of stakeholder involvement, methods of data collection, and any assumptions and limitations underlying the analysis;

• the impact map, with relevant indicators and any proxies;

• case studies or quotes from participants that illustrate particular findings;

• details of the calculations, and a discussion of any estimates and assumptions. This section would include the sensitivity analysis and a description of the effect of

varying your assumptions on social returns;

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• an audit trail for decision-making, including which stakeholders, outcomes or indicators were included and which were not, and a rationale for each of these

decisions;

• an executive summary aimed at a broad audience, including participants.

Try and present your findings in a balanced way; how you phrase your

recommendations may affect how they are taken up. It is important, therefore, to stress

the positive as well as negative findings and to present them in a sensitive fashion.

It is also important to be able to distinguish between benefits that are not happening

and benefits that may be happening but cannot be evidenced. Make sure to include

recommendations for ways to improve data collection and evidencing outcomes.

Example: Executive summary for MillRace IT, UK

This is an extract from the executive summary of MillRace IT’s SROI report. It is an

example of how to combine the rest of the story about social value creation with the

numbers generated by the calculations.

‘The aggregate social value created by MillRace IT each year is projected to be

approximately £76,825. MillRace IT’s SROI ratio of 7.4:1 implies that, for every £1

invested, £7.40 of social value is created each year for society in terms of reduced

healthcare costs, reduced benefits costs, and increased taxes collected.’

As the SROI analysis demonstrates, MillRace IT creates value in two key ways. First, by

participating in MillRace IT, clients get long-term support and avoid a relapse in their

condition. Second, a number of participants leave MillRace IT to go on to employment.

By creating a supportive environment and teaching marketable skills in an area where

there is much demand, MillRace IT effectively combines financial sustainability and

high-quality support for those recovering from mental ill health.

Over to you: Preparing the SROI report

Prepare your SROI report. Include findings, analysis, and recommendations as

to what the organisation can learn from the information generated through the

entire SROI process.

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6.2 Using the results

Unless you do something as a result of carrying out your SROI analysis there was not

much point in undertaking it in the first place. This is one of the most important

parts of the SROI analysis but, often, one to which the least time and resources are

dedicated. It is easy to overlook it after the ‘excitement’ of reaching the SROI ratio.

To be useful, the SROI analysis needs to result in change. Such change might be in

how those that invest in your activities understand and support your work, or how

those that commission your services describe, specify and manage the contract with

you. However, there will also be implications for your organisation, whether you

carried out an evaluative or forecast SROI analysis.

Changes following a forecast SROI analysis

The results of a forecast SROI analysis may make you review your planned activities

in order to try and maximise the social value you plan to create. Its findings may also

require you to review your planned systems for gathering information on outcome,

deadweight, attribution and displacement. See if they need to be adapted for your next

SROI analysis and change them accordingly. Following a forecast SROI analysis you

may also want to build in ways to:

• systematically talk to your stakeholders about their intended outcomes and what they value; and

• work with partners to explore attribution.

Changes following an evaluative SROI analysis

An evaluative SROI analysis should result in changes in your organisation. Your

organisation will need to respond to findings and think through implications for

organisational objectives, governance, systems and working practices. Ensure that the

organisation acts on the recommendations and that findings feed into your strategic

planning process.

Your ratios will be very useful in communicating with stakeholders. However,

where the ratio has most value is in how it changes over time. This can tell you

comprehensively whether your activities are improving or not. This should also give

your organisation information about how to change its services to maximise social

value in future.

It is important to secure commitment to further SROI analyses. The way you approach

this will vary depending on your role in the organisation. A starting point might be to

present the findings from the study to staff, trustees and stakeholders, stressing the

benefits as well as the challenges of the process. This would give you the opportunity

to also present a plan for making SROI analysis a routine and regular component of the

organisation’s reporting. Such a plan should set out:

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• a process for regular data collection, particularly for outcomes;

• a process for training staff to ensure knowledge and expertise is retained in your organisation even if there is turnover;

• a clear timeline for the next SROI analysis;

• a description of the resources that will be required for ongoing monitoring of SROI; and

• how data security will be ensured.

Change can be difficult, especially if you are a large organisation with complex

management systems. Remember that the extent to which recommendations are taken

up by your organisation will depend on the level of organisational buy-in you have

achieved. This is why we have stressed involving stakeholders throughout the process.

It is helpful to allocate responsibility for future SROI analyses. It may be that once the

data collection mechanisms are in place the responsibility for assessing SROI can sit

with your finance team and become integrated with the financial accounting system.

Remember that these changes do not have to be put in place overnight, so set yourself

a realistic timescale.

Over to you: Communicating and using findings, and embedding SROI

In presenting the results of your analysis, consider your audience, tailoring

the discussion to each group of stakeholders. Stakeholders will have different

objectives, and the relationship of each stakeholder to your organisation

will vary.

Prepare a plan for using the findings and embedding the process within your

organisation.

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6.3 Assurance Assurance is the process by which the information in your report is verified. The

principle requires that there should be appropriate independent assurance of your

report’s claims. There are two levels of assurance:

Type 1 Assurance focuses on assurance that the analysis has complied with the

principles of good practice in SROI.

Type 2 Assurance covers assurance of both principles and data.

For more information on the assurance processes and sources of support, refer to

www.thesroinetwork.org.

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80 A guide to Social Return on Investment

Resources

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This section contains a number of resources that can be used

as you go along.

1 Format for an SROI report

2 Glossary

3 Note on cost allocation

4 Note on capital or loan-financed projects

5 Sources of support and further information

6 Downloads

7 A summary of the relationship between SROI and

other approaches

8 The seven principles of SROI

9 Checklist for SROI analysis

10 The worked example

11 A blank Impact Map (provided as a loose insert in the

printed version of this guide, and also available as a

download)

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1 Format for an SROI report

The following sets out the key elements of an SROI report. Within the structure of

the six stages there is flexibility about how the information can be presented. The

information will be a balance between qualitative, quantitative and financial data that

together describe the value resulting from the activities set out in the scope. The aim

will be to provide enough information to comply with the principles and to provide

evidence that the process has been followed.

Executive summary

1 Scope and stakeholders

A description of your organisation: its activities and values (if relevant), the activity

under analysis, including location, main customers or beneficiaries.

An explanation of SROI, whether it is forecasted or evaluative, the purpose and

scope of the analysis.

A discussion of stakeholders i.e. types and numbers.

A description of how stakeholders were involved and the numbers that were

consulted.

2 Outcomes and evidence

A description of the theory of change for each stakeholder i.e. how inputs lead to

outputs and outcomes. This should be presented in a table as well as in narrative

form.

Description of the indicators and data sources used for each outcome. Give

particular attention to each outcome and how it is (will be) achieved.

Quantity of inputs, outputs and outcomes achieved for each stakeholder group.

Analysis of the investment required for the activity.

The length of time over which the outcome is expected to last, or against which the

outcome will be attributed to the activity.

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Description of the financial proxy to be used for each outcome, together with the

source of the information for each proxy and a disussion of the proxies you have

chosen.

3 Impact

Description of the other areas or groups against which deadweight is estimated.

Description of the other organisations or people to which outcomes have been

attributed.

The basis for any estimates of attribution and deadweight, flagging up any data gaps

and areas for improvement.

Description of displacement, if included.

The total impact.

4 Social return calculation

Calculation of the social return, showing sources of information, including a

description of the type or types of social return calculation used.

A description of the sensitivity analysis carried out and why.

A description of the changes to quantities as a result of the sensitivity analysis.

A comparison of the social return in the sensitivity analysis.

5 Audit trail

Stakeholders identified but not included, and rationale for this.

Outcomes identified but not included, for each stakeholder, and the rationale.

Any financial proxies not included, and the rationale.

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2 Glossary

Attribution An assessment of how much of the outcome was caused by

the contribution of other organisations or people.

Cost allocation The allocation of costs or expenditure to activities related to a

given programme, product or business.

Deadweight A measure of the amount of outcome that would have

happened even if the activity had not taken place.

Discounting The process by which future financial costs and benefits are

recalculated to present-day values.

Discount rate The interest rate used to discount future costs and benefits to

a present value.

Displacement An assessment of how much of the outcome has displaced

other outcomes.

Distance travelled The progress that a beneficiary makes towards an outcome

(also called ‘intermediate outcomes’).

Drop-off The deterioration of an outcome over time.

Duration How long (usually in years) an outcome lasts after the

intervention, such as length of time a participant remains in a

new job.

Financial value The financial surplus generated by an organisation in the

course of its activities.

Financial model A set of relationships between financial variables that allow

the effect of changes to variables to be tested.

Impact The difference between the outcome for participants, taking

into account what would have happened anyway, the

contribution of others and the length of time the

outcomes last.

Impact Map A table that captures how an activity makes a difference: that

is, how it uses its resources to provide activities that then lead

to particular outcomes for different stakeholders.

Income An organisation’s financial income from sales, donations,

contracts or grants.

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Inputs The contributions made by each stakeholder that are necessary

for the activity to happen.

Materiality Information is material if its omission has the potential to affect

the readers’ or stakeholders’ decisions.

Monetise To assign a financial value to something.

Net present

value

The value in today’s currency of money that is expected in the

future minus the investment required to generate the activity

Net social

return ratio

Net present value of the impact divided by total investment.

Outcome The changes resulting from an activity. The main types of

change from the perspective of stakeholders are unintended

(unexpected) and intended (expected), positive and

negative change.

Outputs A way of describing the activity in relation to each stakeholder’s

inputs in quantitative terms.

Outcome

indicator

Well-defined measure of an outcome.

Payback period Time in months or years for the value of the impact to exceed

the investment.

Proxy An approximation of value where an exact measure is

impossible to obtain.

Scope The activities, timescale, boundaries and type of SROI analysis.

Sensitivity

analysis

Process by which the sensitivity of an SROI model to changes in

different variables is assessed.

Social return

ratio

Total present value of the impact divided by

total investment.

Stakeholders People, organisations or entities that experience change,

whether positive or negative, as a result of the activity that is

being analysed.

86 A guide to Social Return on Investment

3 Note on cost allocation

The value of the contribution made by whoever is financing the activity will often be

relatively easy to calculate – for example, where the activity is funded completely by

one or more sources then the value of the contribution is known.

If the analysis relates to part of an organisation then it may be more difficult to

calculate the investment being made. It is important to get this right so that the cost

of producing social value is not understated. This is similar to full cost recovery in

grant applications. Unless you identify the full cost of your activities (not just the grant

funding, for example), you will not get an accurate ratio.

For example: in an organisation with two departments, where the analysis only relates

to one department, it will be necessary to start by calculating how much the department

costs. Most of the costs will be known and could be obtained from the accounts. The

problem arises if the organisation buys things that are used by both departments (such

as electricity or the organisation’s manager). It will be necessary to allocate these costs

to the department and then identify who provided the inputs (the investment that

covered the costs). This may need some proportioning between sources of finance.

It may be helpful to involve your accountant, if you have one, at this point.

Even when you are analysing the social return arising from, say, a grant, you will need

to take care that the activity does not depend on other contributions from elsewhere in

the organisation that are not being funded through the grant.

The steps are:

A. Identify costs for goods and services that are required for the activity you are

analysing.

B. Identify and allocate the costs of goods and services that are shared by different

departments.

C. Identify the sources of income for these goods and services.

D. If necessary, identify proportions of income from different sources.

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A. Identify costs for goods and services that are required for the activity you are

analysing

This can normally be done by reference to the organisation’s accounts. If

expenditure is not divided between different departments you will need to go

through each type of expenditure and identify which costs wholly relate to the

department you are analysing.

B. Identify and allocate the costs of goods and services that are shared by different

departments

For those costs that are shared, you will need to decide how to allocate them. There

are three main methods.

For salary costs, the costs can be allocated according to how much time the member

of staff spends working for each department. If there are timesheets, these will

provide the information. If there are not, then you will need to estimate. Some staff,

such as the chief executive, may work across all the departments. In this

case you can allocate their costs according to the relative size of the budget for

each department.

For non-salary costs, it may be appropriate to allocate costs based on a measure of

activity within the department – such as allocating electricity costs according to the

overall expenditure on goods and services.

For rent, however, it would be more appropriate to allocate using the share of the

overall floor space.

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Example 1:

Costs in £000 Total costs Department 1 Department 2

Manager (see point

1 below)

45 26 19

Training manager

(see point 2 below)

40 24 16

Department staff, 1

in each department

30 15 15

Department non-

staff costs, 20 for

department 1 and

10 for Department 2

30 20 10

Subtotal for

departments

60 35 25

Heat and light (see

point 3 below)

20 13 7

Rent (see point 4 on

next page)

20 5 15

Total 185 103 82

Figures have been rounded to the nearest whole number.

1 The manager’s costs of £45,000 can be allocated according to the relative project

costs. Overall, the project costs are £30,000 for staff and £30,000 for non-staff, a

total of £60,000. However, this is not split evenly between the two departments. For

Department 1 the costs are £35,000 (£15,000 for staff plus £20,000 for non-staff) and

£25,000 (£15,000 for staff and £10,000 for non-staff) for Department 2.

£35,000 divided by £60,000 multiplied by £45,000 equals £26,250 for Department 1.

£25,000 divided by £60,000 multiplied by £45,000 equals £18,750 for Department 2.

Rounded up or down, these are the relative costs of the manager’s time spent on

each project.

2 The training manager, who costs £40,000, spends 60% of their time in Department 1

and 40% in Department 2. 60% times £40,000 is £24,000.

3 The organisation cannot measure electricity usage by department and so has

allocated costs based on department non-staff costs. £20,000 divided by £30,000

multiplied by £20,000 equals £13,333.

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4 For rent, 20% of the available space is used by Department 1 and 70% by

Department 2 The remaining 10% is used by the manager. 20% of £20,000 is £4,000.

70% of £20,000 is £14,000.

This still leaves £2,000 unallocated (£20,000 minus £14,000 minus £4,000) that relates

to the manager. If this were allocated according to the share used by the manager

(the departmental subtotal of £35,000 divided by £60,000), it would be split £1,200

and £800. So the total rent for Department 1 is £4,000 plus £1,200 equals £5,200

(rounded to £5,000). The rent for Department 2 is £14,000 plus £800 equals £14,800

(rounded to £15,000).

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C. Identify the sources of income for these goods and services

These costs must now be allocated a second time, to those financing the activity. In

Example 2, below, one of the sources has stated that all the finance must be used

for Department 1 costs and has accepted the method for allocating these, as used

above. The other source of income covers the balance in Department 1 and all of

Department 2.

Example 2:

Income £000 Department 1 Department 2

Funder 1 100 100

Funder 2 85 3 82

Total 185 103 82

D. If necessary, identify proportions of income from different sources

In contrast to Example 2, in Example 3, below, the sources can be used for the whole

organisation’s expenditure. 100,000 divided by 185,000 multiplied by 103,000 equals

56,000.

Example 3:

Income £000 Department 1 Department 2

Source 1 100 56 44

Source 2 85 47 38

Total 185 103 82

You are now in a position to include the stakeholders for income sources 1 and 2,

and the contributions of 100,000 and 3,000 in Example 2, or 56,000 and 47,000 in

Example 3, can be entered in the input column on the Impact Map.

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4 Note on capital or loan-financed projects This is an area in which the SROI Network will be developing further guidance.

Where the investment is for an asset that will have a long life expectancy, such as a

building, the calculation of the social return is more complex. It is made more complex

still if the investment is financed by a loan.

Firstly, a building may have a life expectancy of many years and the activity in the

building will generate value each year – a value that may itself last for more than one

year. The value created depends, however, on the activities that happen in the building:

activities that can only be supported by additional regular income.

Secondly, in the case of a loan, repayments over the period of the loan offset the

investment in the first year. The only net cash flows over the life of the loan are the

interest payments on the loan.

Currently, the guidance for using SROI in these situations is to focus on one year only

and to emphasise that the SROI only examines the social value created by inputs that

were necessary for the activity in that one year. Again, it may be helpful to involve your

accountant here, if you have one.

In the case of a building, the inputs would be the costs of the activity, as discussed

above, plus the depreciation for one year of the expected life of the building. There are

accounting conventions for the life of buildings and your accounts will state what these

are. This represents an allocation of the cost of the building to the overall costs that are

required for the activities in the building.

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5 Sources of support and further information

General

There are a number of online tools that are available to help you with SROI, as

well as a set of four supplements to complement this guide. These include

Supplementary Guidance on Using SROI, Stakeholder Involvement and

Materiality. For more information go to the SROI network website:

www.thesroinetwork.org/publications

nef has been working on SROI since 2001 and has pioneered its use in public policy.

For more information go to:

www.neweconomics.org

For an overview of evaluation in the voluntary sector, see Practical Monitoring and

Evaluation: a guide for voluntary organisations, by Jean Ellis:

www.ces-vol.org.uk/index.cfm?pg=140

There are a number of tools on, including ones for full cost recovery, at:

www.thinknpc.org

For guidance on the economic assessment of spending and investment, and for related

guidance, including the preparation of business cases for the public sector, see:

www.hm-treasury.gov.uk/data_greenbook_index.htm

To learn more about social accounting and social audit, see the SAN Social Accounting

and Audit Workbook, Social Audit Network:

www.socialauditnetwork.org.uk

Really Telling Accounts!, by John Pearce and Alan Kay, can be found at:

www.socialauditnetwork.org.uk

Materiality

A number of reports relating to AccountAbility’s work on redefining materiality can be

found at:

www.accountability.org/

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Stage 1: Establishing scope and identifying stakeholders

Stakeholder involvement

Lots of information on engaging with people can be found at:

www.peopleandparticipation.net/display/Involve/Home

Participation Works! is available from:

www.neweconomics.org

AccountAbility has also produced a standard and a manual on stakeholder

engagement, both of which are available from its website:

www.accountability.org/

Stage 2: Mapping outcomes

Cost analysis

A guide and a toolkit on cost allocation are available from ACEVO at:

www.acevo.org.uk/index.cfm/display_page/FCR_3rdsec_tools

Valuing inputs

Further information on valuing inputs is available at these three websites:

www.esf.gov.uk/_docs/July2006Rules_regs_-_Match_funding_trac.doc

Stage 3: Evidencing outcomes and giving them a value

Sampling

Creative Research Systems provides information on sample design at:

www.surveysystem.com

Mapping outcomes and indicators

The Charities Evaluation Services website contains a range of resources on outcomes

assessment in the voluntary sector:

www.ces-vol.org.uk

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The following publications give guidance on outcomes assessment and

outcomes tools:

Managing Outcomes: a guide for homelessness organisations, by Sara Burns

and Sally Cupitt:

www.ces-vol.org.uk/index.cfm?pg=171

Your Project and its Outcomes, by Sally Cupitt:

www.ces-vol.org.uk/index.cfm?pg=165

Indicator Databank

A crowd sourced online database of values, outcomes and indicators for stakeholders

run by the SROI Network:

www.globalvaluexchange.org

The catalog of generally-accepted performance metrics that leading impact investors use

to measure social, environmental, and financial success, evaluate deals, and grow the

credibility of the impact investing industry, managed by the Global Impact Investing

Network (GIIN):

https://iris.thegiin.org/

Valuation HM Treasury (2003) Green Book:

www.hm-treasury.gov.uk/data_greenbook_index.htm

The following publications focus on valuing social goods:

Measuring the Value of Culture, Snowball J, Springer Verlag, Heidelberg DE, 2008.

A Primer on Nonmarket Valuation, Champ, Boyle and Brown, Kluwer,

Dordrecht NL, 2003.

Using Surveys to Value Public Goods; the Contingent Valuation Method, Carson and

Mitchell, Washington, USA, 1989.

The Department for Work and Pensions Social Cost-Benefit Analysis Framework (working

paper no.86), Daniel Fujiwara, 2010.

Stage 4: Establishing impact

Deadweight

A guide to Additionality published in 2008 by English Partnerships is available through

the website of its successor body, the Homes and Communities Agency, at:

http://www.homesandcommunities.co.uk/ourwork/best-practice-and-guidance

http://collections.europarchive.org/tna/20100911035042/englishpartnerships.co.uk/

communitiespublications.htm

Stage 5: Calculating SROI

There are a number of case studies on the SROI Network website which include

A guide to Social Return on Investment 95

examples of how SROI has been calculated:

www.thesroinetwork.org

94 A guide to Social Return on Investment

Stage 6: Reporting, using and embedding

Assurance

For more information on the options for the assurance of your report go to:

www.thesroinetwork.org

Other

Procurement

nef and the London Borough of Camden jointly developed an outcomes-focused

commissioning model based on SROI principles. Further details of the Sustainable

Commissioning Model can be found on the Sustainable Procurement website:

www.procurementcupboard.org

6 Downloads

Documents available from www.thesroinetwork.org include:

The guide (in full and in sections), the supplements, investor and commissioner guides,

examples of SROI analyses

A blank Impact Map

Further examples of Impact Maps

7 A summary of the relationship between SROI and other approaches

Cost-benefit analysis

One difference between SROI and economic appraisal as described in HM Treasury’s

Green Book is that SROI is designed as a practical management tool that can be used

by both small and large organisations, rather than from a macro perspective. SROI

focuses on, and emphasises, the need to measure value from the bottom up, including

the perspective of different stakeholders, while the Green Book appraisal is about

valuing costs and benefits to the whole of UK society. The main similarity between

SROI and the Green Book is that they both use money as a proxy of costs and benefits

arising from an investment, activity or policy.

Social accounting

Both SROI and social accounting are approaches used to measure the creation of

social value. SROI focuses on the perspective of change that is expected or happens

to different stakeholders as a result of an activity. Social accounting starts from an

organisation’s stated social objectives. SROI and social accounting share a number of

common principles but social accounting does not advocate the use of financial

proxies and a ‘return’ ratio. SROI and social accounting can be compatible: the

completion of an SROI report is much easier if it is built on the basis of a good set of

social accounts, for example.

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Outcomes approaches

The process of measuring outcomes as part of a theory of change is common to other

outcomes models, such as that used by Charities Evaluation Services. The involvement

of stakeholders is also a key feature of SROI that is emphasised, to a greater or lesser

extent, in other outcomes models. The main difference between SROI and many other

outcomes approaches is the importance of giving financial value to their outcomes.

The common ground between the initial stages of SROI and other outcomes

approaches means that organisations that have already done a lot of work on

outcomes are likely to find undertaking an SROI analysis much easier than

organisations looking at outcomes for the first time.

Sustainability reporting

SROI shares basic principles, such as the importance of engaging with stakeholders,

with approaches like the Global Reporting Initiative and AccountAbility’s AA1000

standards.1 SROI differs in that it develops simple theories of change in relation to

significant changes experienced by stakeholders and includes financial proxies for the

value of those impacts.

Other methods of economic appraisal

SROI is similar to other economic analyses that attempt to value and compare the costs

and benefits of different kinds of activities that are not reflected in the prices we pay.

This approach is particularly well developed in environmental economics.

Environmental impact assessment (EIA)

EIA is a methodology for assessing a project’s likely significant environmental effects.

It enables environmental factors to be considered alongside economic or social factors.

EIA has to be completed as part of planning consent for major projects, as defined by

European Community legislation. Like SROI, the assessment of what is considered

‘significant’ is critical.

8 The seven principles of SROI

1 Involve stakeholders:

Inform what gets measured and how this is measured and valued by involving

stakeholders.

Stakeholders are those people or organisations that experience change as a result of

the activity and they will be best placed to describe the change. This principle means

that stakeholders need to be identified and then involved in consultation throughout

the analysis, in order that the value, and the way that it is measured, is informed by

those affected by or who affect the activity.

1 AccountAbility’s standards, the AA1000 Series, are principles-based standards that provide the basis for improving the sustainability performance of organisations. They are applicable to organisations in any sector, including the public sector and civil society, of any size and in any region.

A guide to Social Return on Investment 97

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2 Understand what changes:

Articulate how change is created and evaluate this through evidence gathered,

recognising positive and negative changes as well as those that are intended and

unintended.

Value is created for or by different stakeholders as a result of different types of

change; changes that the stakeholders intend and do not intend, as well as changes

that are positive and negative. This principle requires the theory of how these

changes are created to be stated and supported by evidence. These changes are

the outcomes of the activity, made possible by the contributions of stakeholders,

and often thought of as social, economic or environmental outcomes. It is these

outcomes that should be measured in order to provide evidence that the change has

taken place.

3 Value the things that matter:

Use financial proxies in order that the value of the outcomes can be recognised.

Many outcomes are not traded in markets and as a result their value is not recognised.

Financial proxies should be used in order to recognise the value of these outcomes

and to give a voice to those excluded from markets but who are affected by

activities. This will influence the existing balance of power between different

stakeholders.

4 Only include what is material:

Determine what information and evidence must be included in the accounts to give

a true and fair picture, such that stakeholders can draw reasonable conclusions

about impact.

This principle requires an assessment of whether a person would make a different

decision about the activity if a particular piece of information were excluded. This

covers decisions about which stakeholders experience significant change, as well as

the information about the outcomes. Deciding what is material requires reference to

the organisation’s own policies, its peers, societal norms, and short-term financial

impacts. External assurance becomes important in order to give those using the

account comfort that material issues have been included.

5 Do not over-claim:

Only claim the value that organisations are responsible for creating.

This principle requires reference to trends and benchmarks to help assess the

change caused by the activity, as opposed to other factors, and to take account

of what would have happened anyway. It also requires consideration of the

contribution of other people or organisations to the reported outcomes in order to

match the contributions to the outcomes.

98 A guide to Social Return on Investment

6 Be transparent:

Demonstrate the basis on which the analysis may be considered accurate and

honest, and show that it will be reported to and discussed with stakeholders.

This principle requires that each decision relating to stakeholders, outcomes,

indicators and benchmarks; the sources and methods of information collection; the

different scenarios considered and the communication of the results to stakeholders,

should be explained and documented. This will include an account of how those

responsible for the activity will change the activity as a result of the analysis. The

analysis will be more credible when the reasons for the decisions are transparent.

7 Verify the result:

Ensure appropriate independent assurance.

Although an SROI analysis provides the opportunity for a more complete

understanding of the value being created by an activity, it inevitably involves

subjectivity. Appropriate independent assurance is required to help stakeholders

assess whether or not the decisions made by those responsible for the analysis were

reasonable.

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A guide to Social Return on Investment 99

9 Checklist for SROI analysis

This is for your own use, to check your progress as you work through the guide.

For more information on the assurance process, go to: www.thesroinetwork.org

Checklist Complete?

Stage 1: Establishing the scope and identity of stakeholders

Have you provided background information on the organisation?

Have you explained why you are carrying out the analysis and for

whom, including considering how you will communicate with them?

Have you decided if you are analysing part of the organisation or all of

it?

Have you decided if you are analysing the social return in relation

to a specific source of income or for activities funded by a number

of sources?

Have you decided whether this is an evaluation of the past or a forecast

of the future?

Have you decided what timescale to cover?

Have you identified the resources you need (eg sufficient time,

resources and skills)?

Have you drafted a list of your stakeholders and completed the

stakeholder table?

Have you considered that some of these changes may happen to

stakeholders that are outside your scope and whether you should

revise the scope to include them?

Stage 2: Mapping outcomes

Have you completed the first two columns of the Impact Map for

stakeholders and what you think happens to them?

Have you documented your decisions on which stakeholders are

included at the start?

Have you completed a plan for involving stakeholders explaining how

they are involved in completing the next sections?

For each stakeholder, have you included their contribution (input) to the

activity (there may be some stakeholders that do not make an input)?

Have you given the inputs a value?

Have you checked to make sure that the inputs you have recorded

include whole costs of delivering the service (eg overheads, rent)?

Have you identified the inputs and outputs for the stakeholders?

R e s o

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100 A guide to Social Return on Investment

Have you included a description of the outcomes in which stakeholders

are involved in determining the outcomes?

Have you included intended and unintended changes?

Have you included positive and negative changes?

Have you checked to make sure there is no double counting?

Are experiences of all stakeholders within a stakeholder group

accounted for?

Have you completed the columns on the impact map for inputs, outputs

and outcomes?

At this point, do you want to add or remove stakeholders or

stakeholder groups?

Stage 3: Evidencing outcomes and giving them a value

Have you identified indicators for the outcomes including subjective

and objective indicators where appropriate?

How long do the outcomes last?

Do you already have information in relation to each indicator?

If not, do you have a plan for how you will gain this information?

Have you completed the column for the source of the information?

Have you completed the column for each indicator?

For each outcome where you have not recorded one or more indicators,

have you included the reason in your report?

Can you record or forecast the amount of change in relation to

each indicator?

Have you identified a financial proxy for each outcome?

Have you completed the column for the financial proxy?

Have you completed the column for the source of the proxy?

Are there any indicators for which you have not recorded a financial

proxy? Have you included these in your report?

Stage 4: Establishing impact

Do you have information for deadweight in relation to each outcome?

Do you think any of your estimates for deadweight can be explained by

reference to displacement or attribution?

If some deadweight can be explained by displacement, have you

decided to add a new stakeholder (and/or change the scope)?

If there is attribution, does this mean that you have missed out

contributions made by other stakeholders who should now be added?

Have you estimated attribution and recorded how you made

the estimate?

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A guide to Social Return on Investment 101

If the outcomes last for more than one time period, what happens to

the outcome over this time period (drop-off)?

Have you calculated impact (indicator multiplied by financial proxy

minus percentages for deadweight, displacement and attribution)?

Have you calculated any drop-off?

As a result, are there any changes where the activity(ies) in the scope

do NOT contribute to a significant change?

Have you completed the columns for deadweight, attribution,

displacement and drop-off?

Stage 5: Calculating the SROI

Have you set out the financial values of the indicators for each

time period?

Have you selected a discount rate?

Do you have a total value for the inputs?

Have you calculated: a) social return ratio, b) net social return ratio, c)

payback period?

Have you checked the sensitivity of your result for amounts of change,

financial proxies, and measures of additionality?

Stage 6: Reporting, using and embedding

Have you summarised the changes required to the organisation’s

systems, governance or activities in order to improve ability to account

for and manage social value created?

Have you prepared a plan for these changes?

Have you planned how to communicate your value in formats that meet

your audiences’ needs?

If you have decided to produce a full report, does it include an audit

trail of all decision-making, assumptions and sources?

If you have decided to produce a full report, have you included a

qualitative discussion of the assumptions and limitations underlying

your analysis?

Have you reviewed whether your communications created the

desired effect in your audiences, and whether they liked the content

and format?

Have you decided on your approach to verification?

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102 A guide to Social Return on Investment

the GP practise nurse group

sessions helped residents

manage their health and

symptoms better and they

were healthier

material outcomes for resi-

dents only (not for council).

All outcomes for this

stakeholder already consid-

ered above.

Social Return on Investment – The Impact Map for the worked example

Stage 1 Stage 2

Stakeholders Intended/unintended changes

Inputs Outputs The Outcomes

Description Value £ Description

Who do we have

an effect on?

Who has an

effect on us?

elderly / disabled

residents

What do you think will

change for them?

residents use health

services less

residents get out of the

house more

What do

they invest?

time £0

Summary

of

activity

in numbers

luncheon

club:

– group

activities

(board

games,

craft, mild/

therapeutic

exercise,

info and

awareness

sessions)

How would you describe the

change?

the mild/therapeutic group

exercise sessions made

residents fitter, they had

fewer falls and ended up in

hospital less

the nurse led group sessions

helped residents manage their health and symptoms

better and they were

healthier

residents made new friends

and spent more time with

others through the group

activities

residents had nutritious

meals with 3 (out of) 5-a-day

and they were healthier

local authority residents provided with

nutritious meal

meals on wheels

contract (annual)

£24,375 material outcomes for

residents only (not for local authority). All outcomes

for this stakeholder already considered above.

Wheels-to-Meals

volunteers

(retired)

keep active time (at min wage)

4 volunteers x 3

hrs x 5 days x 50

wks x £6 (forecast)

£18,000 – transport

for 30

people

healthier volunteers

(retired)

neighbours of look out for neighbours time £0 reduction in neighbourly

elderly/ disabled

residents – 7500 hot

meals

annually

care/shopping and break-

down of informal commu-

nity networks

Total £42,375

Organisation Wheels-to-Meals

Objectives Provide luncheon club for 30 elderly local residents with additional health and social benefits

by bringing residents to meals

Scope

Activity 30 places for eligible elderly and/or disabled local

residents 5 days a week, 50 weeks of the year

Contract/Funding/Part of organisation Local Authority Grant

A guide to Social Return on Investment 103

questionaire

questionaire and

interviews

GP consultation fewer GP visits annually (appointments) and

residents report improvement in physical health

questionaire

(continues on the next page)

Stage 3

The Outcomes (what changes)

Indicator Source Quantity Duration Financial proxy Value £ Source

How would

you measure it? Where did

you get the

information from?

How much

change

was there?

How

long

does it last?

What proxy would

you use to value the

change?

What is

the value

of the change?

Where did

you get the

information from?

fewer falls and associated

hospital admissions/stays annually

oneoff

research

7 1 year accident&emergency £94.00 NHS cost

book 07/08 1 year geriatric assessment inpatient

£4,964.00

1 year geriatric continuing care-Inpatient (aver-

age 5 wks x £1,444)

£7,220.00

fewer visits to the doctor annually (appointments)

and residents report improvement in physical health

questionnaire and

interviews

90 5 years consultation with doctor

£19.00 NHS cost

book 2006

new clubs/group activities

joined during year and residents report an increase

in personal wellbeing/

feeling less isolated

questionnaire 16 1 year average annual mem-

bership/cost

£48.25 current

average costs of bus trips,

bingo and

craft clubs

fewer District Nurse visits and residents reporting

increased physical activity of 3 hours or more a week

questionnaire 14 2 years District Nurse visits £34.00 NHS cost book 07/08

volunteers report increased

physical activity of 3 hours or more a week since

volunteering

volunteer an-

nual assess- ment

4 1 year annual elderly

residents swimming pass

£162.50 local

authority

fewer instances of

neighbours shopping for residents annually

One-

off survey

275 3 years supermarket online

shopping delivery fee

- £5.00 www.tesco.

co.uk

Name

Date

Objective of Activity

Time Period 1 year (2010)

Purpose of Analysis Forecast or Evaluation Forecast

104 A guide to Social Return on Investment

the GP practise nurse

group sessions helped resi-

dents manage their health

and symptoms better and

they were healthier

material outcomes for resi-

dents only (not for coun-

cil). All outcomes for this

stakeholder already con-

sidered above.

Social Return on Investment – The Impact Map for the worked example (continued from previous page)

Stage 1 duplicate Stage 2 duplicate

Stakeholders The outcomes

Description

Groups of peo-

ple that change

as a result of the

activity

How would you describe

the change?

elderly /

disabled

residents

the mild/therapeutic

group exercise sessions

made residents fitter,

they had fewer falls

and ended up in

hospital less

the nurse led group

sessions helped residents

manage their health and symptoms better and they

were healthier

residents made new

friends and spent more

time with others through

the group activities

residents had nutritious

meals with 3 (out of)

5-a-day and they were

healthier

local authority material outcomes for residents only (not for local

authority). All outcomes

for this stakeholder already considered above.

Wheels-to-

Meals volun-

teers (retired)

healthier volunteers (retired)

neighbours of

elderly/ disabled

residents

reduction in neighbourly care/shopping and break-

down of informal commu-

nity networks

Stage 4

Deadweight Attribution Drop Off Impact

% % %

What would

have happened

without the

activity?

Who else

contibuted to

the change?

Does the

outcome

drop off in

future years?

Quantity times financial

proxy, less deadweight,

displacement and

attribution

0% 5% 50% £625.10

£33,010.60

£48,013.00

0% 10% 10% £1,539.00

10% 35% 0% £451.62

100% 0% 0% £0.00

£0.00

70% 10% 35% £175.50

5% 0% 5% -£1,306.25

Total £82,508.57

Organisation Wheels-to-Meals

Objectives Provide luncheon club for 30 elderly local residents with additional health and social benefits

by bringing residents to meals

Scope

Activity 30 places for eligible elderly and/or disabled local

residents 5 days a week, 50 weeks of the year

Contract/Funding/Part of organisation Local Authority Grant

Present Value* £79,718.43 £134.58 £61.06 £977.70 £850.17

Total Present Value (PV) £81,741.93

Net Present Value £39,366.93

Social Return £ per £ £1.93: £1

* See page 68 for an explanation of these calculations AA gguuiiddee ttoo SSoocciiaall RReettuurrnn oonn IInnvveessttmmeenntt 105

Stage 5

Calculating Social Return

Discount rate (%) 3.5%

Year 1 (after activity)

Year 2 Year 3 Year 4 Year 5

£625.10 £0.00 £0.00 £0.00 £0.00

£33,010.60 £0.00 £0.00 £0.00 £0.00

£48,013.00 £0.00 £0.00 £0.00 £0.00

£1,539.00 £1,385.10 £1,246.59 £1,121.93 £1,009.74

£451.62 £0.00 £0.00 £0.00 £0.00

£0.00 £0.00 £0.00 £0.00 £0.00

£0.00 £0.00 £0.00 £0.00 £0.00

£175.50 £0.00 £0.00 £0.00 £0.00

-£1,306.25 -£1,240.94 -£1,178.89 £0.00 £0.00

£82,508.57 £144.16 £67.70 £1,121.93 £1,009.74

Name

Date

Objective of Activity

Time Period 1 year (2010)

Purpose of Analysis Forecast or Evaluation Forecast

106 A guide to Social Return on Investment

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This guide was produced by Society Media,

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Printed on recycled paper made from 100%

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“Our departmental researchers necessarily tend

to focus very much on the costs and benefits in

terms of ‘pure’ costs of prisons or community

sentences. Through using SROI in our work on

women offenders and women at risk of offending

– women who are often primary carers too – it

vividly illustrates the broader costs that need to be

considered within and beyond the department.”

Liz Hogarth, Criminal Justice Women’s Strategy Unit,

Ministry of Justice

“I think the guide is excellent – it works through

the processes clearly and logically; sets out the

different elements of judgement, caution, and

looking back; and overall I was very impressed.”

David Emerson, Chief Executive,

Association of Charitable Foundations

FSC® approved

a CarbonNeutral® publication

This guide was originally published in April 2009

and this second edition was published in January

2012. It was produced for The SROI Network by

Matter&Co, www.matterandco.com

Illustrations: Sofia Sköld

ISBN: 978-0-9562274-0-9

A guide to Social Return on Investment

107

in association with