Social Return on Investment,Valueing what matters

Context, 16. March 2009

Social Return on Investment

• What exactly are we ‘selling’?– A method, a technique?– More accounting work?– More registration / burocracy?– More complexities?Or:– Efficiency?– cost savings?– More income?

Why SROI

• To be more effective and efficient• To be more sustainable• To learn about value-drivers• To improve your work• To demonstrate the value the social work!

Financial Accounting

• How come nonprofits spent thousands of dollars on financial accounting bookkeeping

• The mission is not financial but social• Not willing to spent time and money on social

accounting• …no incentive…

SROI: Incentives

• Attract new donors / sponsors• Compete for scarce sources (money,

volunteers, etc); • Participate in tenders• PR and Marketing

SROI: what it is and what it is not

• SROI is not just a number• Based on good assumptions• Transparent• Future oriented• Context • It is a story about value-creation

What is Value?

• Value is subjective– It may be different for different persons– It can vary in different situations

• Something can have value without cashflows taking place

Value

Price

Costs

Value – Price - Costs

“Value is in the eye of the stakeholder”

Cost and cost savings

• Cost savings always reflect the ‘low’ level of value

• Prices in nonprofit are based on costs• Nonprofits tend to report about costs

• For-profits seek the highest value• For profit prices reflect value, not costs

The value of intangibles

• Nonprofit services are often intangible• Is it possible to value an intangible

service/good?• How can you “put a money value on self-

esteem”?

Nike

• Nike is not selling shoes…• Know the stakeholder(group): people

between 15-25 years of age• Research their value-perception of image• How much is the stakeholder prepared to

pay?– Can be different for different stakeholders– Can be different in different countries

Valuation • To put a money-value on a product or service, when

market-prices are not available.• Money expresses “value” into a number.• Money used as unit of measurement of value.• What is the magnitude of the value?

Project ABC +/-

Impact 1 +Impact 2 +Impact 3 -

Why percentages and symbols are not enough

Project ABC +/-

%

Impact 1 + 40Impact 2 + 60Impact 3 - 20

Project ABC +/-

% value result

Impact 1 + 40 10 + 4Impact 2 + 60 10 + 6Impact 3 - 20 100 - 20

- 10

Percentages and symbols are not enough…

Valuation Methods

• Willingness to Pay (WTP): How much are you prepared to pay?– Marketing

• Willingness to Accept (WTA): How much are you willing to accept?– Insurance– Taxes

The value-game

• Making cards (5-10) with different products/services from which you know the value (but do not show!) ; related to the situation of the client

• Insert one card with the issue you want to monetise

• Ask people to put the cards in order of preference

Case: Care for handicapped child

• Impact: less time spent on bringing child to special school

• Indicator: less time spent per year• Valuation:

– Cost savings method: • More extra time to work: extra income

Value-mapping • Put in order of preference (selected on basis of real use; with description)– A new car– Going out for diner– New television set– Less stress about childcare– Subscription on magazine– Holiday to Barcelona – Weekend Center Parks

Order of preference (example)

– Subscription on magazine – Going out for diner– New television set– Less stress about childcare– Weekend Center Parks– Holiday to Barcelona – A new car

Value

– Subscription on magazine (100 euro)– Going out for diner (150 euro)– New television set (300 euro)– Less stress about childcare– Weekend Center Parks (500 euro)– Holiday to Barcelona (1000 euro)– A new car (10.000 euro)

Value Assessment

• Always know what is important to your stakeholder group; what do they use/need?

• Issues related to their live/needs/environment– Young people: Ipod, PSP, Nike, lunch in

McDonalds, etc.– Older people: mobility, welfare facilities, meals,

etc.• Offer 5 till 10 ‘alternatives’;• Don’t ask for their WTP in ‘money’-terms

Ability to pay

• Maybe a stakeholder has the willingness to pay, but cannot afford it

• Government / foundation makes payment– But how do they know it has value to the

stakeholder?

Other way

• “If this project leads to time savings related to your child, would you be willing to…”– Do two days of voluntary work/month? – Ending subscription?– Skip your holiday this year?

– What is the ‘sacrifice’ the stakeholder wants to make?

Participatory Impact Assessment

Scholten&Franssen, 2008

Scientific proof

• Are data 100% accurate?– Biases in answers etc.– No real payments are made

• Marketing plans are based on perceived value-methods

• Do we need scientific proof? Or a range?• Cost - Benefit of analysis• Fuzzy Logic

The value of a disabled….

• The life of a disabled…is not what we are valueing!

• We are valueing the magnitude of value, created by an investment in changing an undesired situation

Ethics

• Is it ethical to spent money, without knowing how much value you are creating?

• If you do not create (enough) value, don’t spent the money!