All these years in the corporate world, we have been taught to work with SMART goals – Simple, Measurable, Attainable, Relevant & Time bound. Our appraisal systems are designed to reward employees delivering tangible results…. In other words, cost-benefit equations are ingrained in our professional lives.

So, when you ask a crossover candidate (from corporate to social sector) about results of work being done by him/her in the social sector, in all probability, he/she will be groping in the dark…. Because assigning a number to the cultural value, social value or environmental value created by a social project is as elusive as snow in a tropical forest. That is the reason we generally avoid bringing numbers into the cost-benefit equation of a social project.

Now, put yourself in the shoes of a potential funder who traditionally comes from the world where value creation is the name of the game…. where delivering value to the shareholders is a necessary mandate. How do you answer her/his questions on the value creation or impact of your project….in other words, how do you help this person justify her/his company’s investment in your project?

The impact of the work we are doing can be of two types – Qualitative, i.e., improvement in quality of life (higher education for children, nutrition, access to better sanitation & hygiene, better healthcare facilities, etc) which are good for storytelling and mostly reported as Success Stories, Case Studies, etc and Quantitative with output being measured in monetary terms which in turn gets reported as Social Return on Investment (SROI)

Basis discussion with various stakeholders in the value chain, indicated below are few of the parameters that can be used to measure the impact of a livelihood-based project –

In addition to the above, a few more short-term parameters can also be tracked to measure outcome / impact – 100% enrollment as per capacity, Successful completion of the course with minimal drop outs, 100% placements, XX no. of ideas converted to enterprise and No. of students trained during the first year of operation.

Why is it so important to capture the impact of the work we are doing?

We owe it to them - Measuring impact of the work that we are doing helps bring about a sense of purpose, more clarity, builds transparency and trust among all stakeholders in the value chain – right from funders to employees of the organization and to the beneficiaries.

Funders are asking for it - Helping funders justify their “investment” in your cause in turn helps them raise more capital for your project.

So, if it is so important, how do we measure the Social Return on Investment (SROI). In fact, there are a few guidelines that must be followed to measure the SROI of any project. 

Involve stakeholders: We need to talk to the stakeholders who are the actual beneficiaries of the work that we are doing, local government officials who are in-charge of the development in the region, academicians, etc to understand as to how they interpret the benefits accrued due to the work both in the short term and long term. The idea is to find the measurable parameters that represent the impact of the work done being done.

Understand the changes: We need to articulate how the change is created on the ground – try to make it based on evidence as much as possible – need to capture both positive and negative changes that result out of the work that we are doing. It is to be noted that it is very easy to capture the intended changes – we also need to keep our eyes open for unintended / unplanned change that may emerge over a period of time.

Value the things that matter: Many parameters may emerge that could be relevant to capture the impact of the work that we are doing – but it is very important to understand the value that the stakeholders (particularly, the beneficiaries) place on the outcomes, i.e. the relative importance of different outcomes based on stakeholders’ preference. Capturing the stakeholders’ preference will go a long way in building a long-term acceptance of the work that we are doing.

Include what is material: Determine what information and evidence must be included to give a true and fair picture – such that the stakeholder can draw reasonable conclusion about the impact.

Do not over-claim: Only claim the value that your work is responsible for creating.

Be Transparent: Demonstrate the basis on which the analysis may be considered accurate and honest – ensure that the report has been discussed with the stakeholders before presenting it to the world. 

Verify the results: We need to ensure appropriate independent assurance. It will be great if peer review of the report is also done before it is finally published.

Calculating Social Return on Investment – Having understood the various parameters that can used to measure the impact of the work that we are doing, it is now important to define the process to calculate SROI… 

Just like the typical ROI calculation, the ratio of Incremental income generated for the students (over 12 months period after completion of the training session) to the total amount spent to conduct the classes is defined as the SROI

As of now, it appears that incremental income of the family over a period of 12 months post completion of the training program is the only parameter that is measurable in monetary terms. Hence, it is proposed to use this parameter to predict the SROI for our project.

SROI = (Incremental Income Generated) / (Amount spent to conduct the training session)

Calculation of SROI has been depicted using a practical example pertaining to our institution – all numbers indicated below are real except for the incremental income which we feel is a fair assumption to consider.

Two scenarios can be created – Pessimistic & Optimistic.

So, it is estimated that a livelihood project with a scale like ours can have a SROI of anywhere between 1.35 and 5.60

Credits: a. Global Partnership for Youth Development – Measuring success of youth livelihood Interventions By Kevin Hempel & Nathan Fiala; b. How to calculate Social ROI – By Alan Pierce