3.1 Two Approaches to Measuring Performance: Social Return on Investment (SROI) and Ratings

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From the course by University of Pennsylvania

Social Impact Strategy: Tools for Entrepreneurs and Innovators

324 ratings

University of Pennsylvania

Social Impact Strategy: Tools for Entrepreneurs and Innovators

324 ratings

This course offers an introduction to social impact strategy and social entrepreneurship, including key concepts, an overview of the field, and tools to get started as a changemaker. Students will learn how to innovate and design new ideas and new organizational forms to implement those ideas. Students who take this course will be better prepared to launch social impact organizations of their own invention. By moving through four stages, Define, Design, Pilot, and Scale, students will turn their passion for changing the world into concrete plans for launching a nonprofit or for-profit venture designed to achieve a social goal. This course will allow students to systematically think through problems; develop and test an innovative solution; assess risk, competition, and performance; and spread impact in a way that is financially sustainable. Students who complete the course become eligible to apply for an in-person educational experience, called the Global Social Impact House. GSIH is a seven-day residential program that provides fellows with the tools, community and training they need to advance their ventures. Workshops are customized to the needs of fellows and explore advanced concepts in business models, design thinking and leadership. The program is also designed to help fellows build meaningful, global connections while living together in an inspirational host location. For more information on the Global Social Impact House, please visit: socialimpactstrategy.org/residential/gsih

From the lesson

Pilot and Scale

We must test our ideas in the real world, early and often, to determine if they can truly deliver on either their social or financial mission. Learn to build and use the balanced scorecard, a key tool to assess the real-world performance of a social innovation. The scorecard will allow you to measure and articulate both the initiative's current reach and health, as well as the work that is left to be done. An innovation achieves the intended social impact in a way that is financially supportable may be a candidate for scale. Learn to assess whether and how to approach scale for your social innovation.

3.1 Two Approaches to Measuring Performance: Social Return on Investment (SROI) and Ratings6:05

3.2 A Third Approach to Measuring Performance: The Balanced Scorecard4:31

3.3 Examples of Balanced Scorecards7:18

3.4 How to Develop a Balanced Scorecard - Overview2:19

3.5 How to Develop a Balanced Scorecard - Detail7:03

3.6 What is Scale?3:55

3.7 The Importance of Scale in the Social Sector2:15

3.8 Five Approaches to Scale - Overview3:16

3.9 Five Approaches to Scale - Details and Implications5:01

3.10 Approaching Scale Critically4:56

3.11. Carlos and Coco Pilot and Scale (Scorecard, Marketing Matrix, and Customer Segmentation)5:44

Meet the Instructors

Peter Frumkin
Professor
Nonprofit Leadership Program, School of Social Policy & Practice

[MUSIC]

In this slide-show I'm going to talk about measuring performance in social sector.

It's a complicated and challenging task, and

there are a lot of ways that you can do it.

I'd like to start up by focusing on three approaches that are out there.

And then we'll drill down into the third in the second lecture.

But first let's start with a basic question, why measure performance?

Why try to assess impact?

I think there are three good reasons.

One is, if you measure impact well,

it can make your organization function more effectively.

How could you possibly improve performance if you didn't know

how well you were doing?

You need to know if the organization's going up, down or sideways

to make the adjustments necessary to make the organization perform more effectively.

Secondly, you measure performance because the people outside the organization

want to know, are you getting results?

Are you effective?

So there are demand externally to your

project that are going to drive you towards performance measurement.

Third and

I think the best of the best reason is that performance measurement is a moment

where you can get much clear about what it is you're trying to accomplish.

When you ask the question, what should we measure?

You're really ask any question, what matters, what are we all about?

What are we trying to accomplish?

So for all three reasons there's a movement in the social sector towards

greater performance measurement.

Let's look at three different ways people started thinking about measuring and

tracking performance.

The first is what I would describe as an approach that

says let's measure in very quantitative terms social return on Investment.

This is an approach that says, we can quantify impact and

we can render it into a simple formula.

Second approach says, no, why don't we try a rating systems as a way of ranking and

assessing organizations that gives people inside and outside the organization's

sense of how these organizations stack up comparatively.

And the third approach is what I call scorecards and dashboards.

These are multi-dimensional performance measurement tools

that I think have the most promise.

So let's look at these three and then we'll drill down into the third area.

Social return of investment is simply a moment when an organization says

can we account for the net benefit of the work we do?

Can we monetize and be clear to the external world about the costs and

benefits of what we're undertaking?

But at its core there is this deep question,

can all social value really be monetized?

Can you really turn everything, from educational achievement,

to cultural enrichment, to environmental safety.

Can you turn all that into a dollar number and compute a net

benefit as a result of the work that's undertaken by social enterprise?

I have my doubts about how it can be used across a lot of different areas.

There's not doubt that it has some application in some areas, but

it ultimately is a rather narrow tool.

Let's look at one way in which people have tried to do this.

Here's a formula used by one of the biggest funders, the Hula Foundation.

And this is in your readings.

It's Paul Brest's article on calculated impact.

And what you'll see is the social return of investment model says that we can use

an equation with expected return,

outcome probability, the philanthropic contribution and the total cost.

And we can compute a number a returned number that give us a sense of, for

ever dollar we put in, how much social value do we get out?

Now there are some cases like the one in the article that Paul Brest uses,

of job training, where the number is monetized.

Earnings are achieved by people going through the program, and

that can be projected that over time and the costs of achieving those increase in

earnings can be calculated and a number can generated.

But there are many areas in the social sector where the ultimate benefit,

the ultimate end result doesn't lend itself so easily to monetization.

How would you translate the value of a child going to a museum?

How would you understand the value of religious revelation?

How would you understand the benefit of clean air in monetary terms?

So, this sort of approach, which is a narrow approach and

it has some applications but I have my doubts about it's capacity to be extended

across the broad range of purposes that we see in the social sector.

The second approach is a ratings approach.

It says, across organizations, can't we come up with ways that track

accountability, that count in terms of how open an organization is?

Can we track how well an organization treats its employees?

How open it is to listening to its consumers.

How engaged it is with the community, and how solid is its environmental record.

And there are tools out there that say across different categories, we're going

to give grades to organizations and then we'll sum up and we'll get a sense of how

these organization within different sub-domains match up against one another.

And B-Corporations are at the front edge of this movement.

These are benefit corporations, and as part of this movement to create this new

class of organizations, they undergo a screening which asks these very

basic questions about accountability, employee treatment,

consumer relations, community engagement and environmental record.

And across each of those areas,

after asking a whole series of questions doing field work,

they develop a scorecard or a simple statement about how the organization

sums up in terms of its measurement of its record across these different domains.

Nothing wrong with these rating systems but they tend to be rather rigid,

because they have to be applied each time the same way to different organizations.

And they have one limitation, which is there constantly trying to pose a grade or

a number on their organization.

[MUSIC]

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