When to consider Social Return on Investment (SROI) over a traditional evaluation approach

To SROI or not to SROI, that is the question...

Maybe it’s not the only question, but an important question for evaluators who are considering how best to describe the impact that a program has.

In this post, we’ll take a look at what SROI is (and isn’t), how it differs from other evaluation approaches, and some tips on when to consider using it to evaluate your work.

What is Social Return on Investment (SROI)?

At its most basic, SROI is an evaluative method of measuring the ‘social value’ generated by a program (or project, service). SROI is an approach that combines participatory evaluation with aspects of economic analysis.

The term ‘social value’ used here is critical to understanding what SROI is and how it works.

*Image source: The Guide to Social Return on Investment, The SROI Network.*

Social value in this context refers to describing social outcomes (changes in areas such as health, employment, education and inclusion) using financial values (called proxies).

By using a common language that all stakeholders are able to engage with—money—the overall impact of a social program can be readily understood more widely.

Social Return on Investment is about value rather than money

SROI emerged out of the UK from a consortium of organisations who originally developed the ‘Guide to Social Return on Investment’ as a resource to support the uptake of SROI in the social sector.

The extract below highlights the important distinction to remember when using financial measures of social value:

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…
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.
The Guide to Social Return on Investment, p8

This distinction is often overlooked by both funders and providers seeking to use SROI to estimate or forecast the real financial savings that might be generated as an outcome of a social program. This is not what SROI was designed for—this should rightly remain within the scope of more traditional and rigorous economic analysis.

Our opinion is there is often too much of a focus on the SROI figure that gets spat out at the end of the process (e.g. $4 of social value created for every $1 of financial investment), rather than what those numbers represent and where they came from.

When considering applying a SROI approach to evaluate your program or service, it is critical that you and your key stakeholders recognise what SROI is and isn’t able to do.

The process of measuring social value

Technically, a SROI analysis represents just the end product of a broader process of identifying, measuring and describing social value.

This process reflects many of the principles and activities common to any other participative evaluation process, just with the helpful contribution of using the common language of $$ to quantify the amount of impact a program has generated in the eyes of the stakeholders involved.

The UK-based organisation Social Value International has developed a set of principles—the Principles of Social Value—that underpin measuring social value. These principles are not only helpful when calculating SROI, but can also be used to guide anyone who is looking to evaluate the impact of the work they do.

The Principles of Social Value

The Principles of Social Value, published by Social Value International

Involve stakeholders
Understand what changes
Value the things that matter
Only include what is material
Do not over-claim
Be transparent
Verify the result

There are also guides, standards and templates published by Social Value International that set out what good looks like in relation to the seven principles above—worth a look!

It’s important to remember that SROI is a principle-based approach, meaning it does not prescribe what type of methods or processes you need to use. Your methods will depend on:

who your stakeholders are
the issue or impact you’re exploring
what changes you’re expecting to see
how much rigour or detail your evaluation needs have

It is worth noting that SROI is by design a quantitative methodology—this requires representing people’s views, opinions, experiences or stories as numerical values through the use of financial proxies, which may not always be appropriate in various settings.

While the process of analysing SROI does require some extra skills and knowledge around how to represent outcomes as values (or financial proxies), it doesn’t require qualifications in economics and there are plenty of great, free resources that can get you started.

Should I use SROI to evaluate my program?

The answer is ‘it depends’.

When used effectively, SROI provides a meaningful and practical method of program evaluation that can often lead to better communication about what changes a program led to. SROI is best used in scenarios where:

You are seeking to communicate the impact of your program with a wide audience who may not readily understand technical concepts or language, so a common language to communicate impact is helpful
You have adequate opportunities to engage with beneficiaries throughout the program to help define and measure value from their perspective, not just one-off surveys or focus groups
You aren’t expecting to calculate the real financial savings that arise from the outcomes that your program achieves
You don’t want to use qualitative data to describe the impact your program has (e.g. stories, beliefs, experiences)
You are hoping to use a consistent approach to evaluation that can be ‘assured’ by a network of trained reviewers prior to publication.

There are many examples that demonstrate how SROI can lead to really meaningful and engaging evaluation reporting ‘products’, such as this and this.

If you are going to go for a SROI approach, the most important thing is to be clear about what SROI can and can’t do in the expectations of your stakeholders and audience—it can offer a helpful means of communicating the amount of social impact a program has; it can’t claim to show real financial savings arising from social impact at a system level.

Want more information? A few of our team members have undertaken training in SROI. Reach out and ask us about how SROI could benefit your organisation’s next program evaluation.