www.justeconomics.co.uk

Social Return on Investment (SROI)

Workshop

Eilís Lawlor

08 November 2012

Structure

• What is SROI and why is important?

• Introduction to SROI principles?

• Step-by-step guide to doing an SROI

• Practical exercise: theory of change

• Guidance on commissioning an SROI

• Guidance on becoming a practitioner

What is SROI?

• A form of cost benefit analysis/a tool for

assessing the value for money from a

programme or policy:

SROI = [Value of positive and negative

outcomes]

[Cost of intervention]

e.g. Every €1 invested in X, generates €3 in social value

• Social value is generated when resources,

inputs, processes or policies are combined to

generate improvements in the lives of individuals

or society as a whole.

History

Mid 1990s:

REDF

California

Early 2000s:

nef and SROI Network

UK

Late 2000s/10s

mainstreaming and

international growth

Africa, Argentina, Australia, Bangladesh, Belgium, Bulgaria, Canada, China, Germany, Greece, India,

Japan, Korea, Netherlands, Nigeria, Poland, Ireland, South Africa, Spain, UK, US

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Why SROI?

Problem 1: Over-focus on wrong

things

Problem 2: Accountability

Problem 3: Leaving out what

matters

Value what we

measure

Allocate resources to what

we value

What really matters is left

out of decision-making

Measure the wrong

things

Leads to…unequal distribution of

resources

So why SROI?

• SROI sets out to improve decision-making by:

– Measuring the things that matter

– Involving stakeholders that are often excluded

– Valuing the things that matter

– Focus resources where they can maximise impact

– Distinguish between initiatives/policies that are more

and less effective for their intended beneficiaries

Value for money

• More and more focus on achieving ‘value for money’

– Squeeze on resources

– Increasing demand

• Often interpreted narrowly as lowest cost

• An outcomes approach puts quality and effectiveness at

the heart of the analysis

Value for Money

Money

Environment

People (time & skills)

Inputs Outputs

Service & Wider Outcomes

Economic

Environmental

Social

Often VfM is understood by

comparing unit costs

Real VfM is achieved by comparing outcomes

/ impact with investment

Impact / SROI

Impact

Resources / Investment

Principles

1. Involve Stakeholders

2. Understand what changes

3. Value the things that matter

4. Only include what is material

5. Do not over claim

6. Be transparent

7. Verify the result

SROI step-by-step

Engage stakeholders to establish the theory of change

Data collection to evidence outcomes and impact

Build the SROI model and calculate SROI ratio

Report

Step 1:

Engaging Stakeholders

Stakeholders

• Definition: Any actor that has an effect on, or is effected

by the intervention

– i.e. they contribute to the change or experience the change

– Does not have to be individuals (e.g. the State, the environment)

• SROI is concerned with the value to material

stakeholders

Objective: Develop theory of change

Stakeholder Activity Outputs Medium-term change

Long-term change

Apprentices Training Sourcing trips Emotional support

Numbers completing training Numbers of qualifications

Improved skills (cookery, social, financial)

Stable employment Improved family life Reduced risk of homelessness

State Apprenticeship programme

Annual number of graduates

Fewer ‘NEET’ young people More opportunities for young people

Increased social mobility Reduced risk of homelessness

Family members Apprenticeship programme

Numbers of families affected

Improved relationships

Improved family life

Children Children have positive role model and

Numbers of children affected

Children have increased opportunities

Improved career choice and life chances

Develop a theory of change

•

Output: Tells you an activity has

taken place and is usually

quantitative (e.g. number of

people trained)

Outcome: The change that occurs

as a result of an activity (e.g.

improved well-being of training

participants)

Understanding outcomes

Hours spent with clients

Families engaged

Incidence of depression

Number of GP visits

Quality of family relationships

Length of engagement

Educational attainment

Output

Output

Outcome

Output

Outcome

Output

Outcome

Local

service,

meeting

place

Emergency

relief

Make new

friends

People learn to

communicate in

a new

environment

(e.g. new

migrants learn

English)

Social

interaction

(sometimes the

only interaction

recipients have)

REDUCED

ISOLATION

Personalised

service

Meet immediate

hunger needs for

self and/or family

in a nutritious

way Availability of

nutritious and

regular

meals (either

prepared or

via food

hamper)

Have a

peaceful

night’s sleep

Able to afford

previous

“luxuries” –e.g.

toiletries, cup of

coffee at a café,

petrol for the car,

visit to relatives

INCREASED

CONFIDENC

E

IMPROVED

PHYSICAL

HEALTH

IMPROVED

QUALITY OF

LIFE

Better

attendance at

school as no

longer

embarrassed

to send

children

Confidence in

welfare

providers

Develop

regular food

habits

Build up

immune system

Learn how to

cook nutritional

food

No need to make

choices between

life’s essentials

Have money

leftover for bills

Able to pay

for school

related costs:

uniforms,

fees, food in

lunchbox

Better financial

resilience for

the future

Ability to plan

for the future

Able to cope

with life’s

demands and

pursue non-

subsistence

goals (e.g.

job, housing)

BETTER

PERFORMAN

CE AT

SCHOOL

Identify services to meet other needs

(e.g. debt advice, housing support)

Theory of change: Food Bank

Improved social

skills

Provision of

breakfast

before school

and regular,

nutritious

meals

Interaction with

classmates and

other children

outside the

classroom

Develop

consistent eating

habits

Kids are equipped

to concentrate in

class

Kids are more

settled in class

Improved

performance in

school

School Meals Programmes

Better life

chances

One stakeholder: Children

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Exercise:

Theory of change

Step 2:

Data Collection

Summary: Indicators

• Translate outcomes into something measurable

• Use a mix of: – Objective indicators

– Subjective reports

– Third party reports

Outcome Indicators Type

Reduced social isolation

Key worker reports change in participants social life

Third party

Participant reports feeling less isolated

Subjective

Participant takes part in new social activities

Objective

Distance-travelled tools

• Most outcomes are not binary

– Has physical health improved? Yes/No

• Outcomes often have:

– Size: how much change?

– Qualitative dimensions: what does it look like?

– Time: over how long?

• Best Practice: Use a distance-travelled tool

Distance-travelled outcomes

Impact

Impact

Who else

takes credit?

What if we

weren’t here? Any

negatives?

Who

else is

affected?

What if we weren’t here?

• Need benchmarks to estimate what would have happened

anyway

• Ideally this would be a control group (e.g. matched comparison

groups, randomised controlled trials)

• In absence SROI asks to make adjustments for deadweight:

o Trend data

o Estimates from other controlled evaluations

o Other literature/judgement

Other adjustments

• When benefits are displaced/substituted from another

place or person i.e. no new benefit is created

• When a proportion of the observed benefit is attributable to other actors (attribution)

• Benefit period – the length of time over which outcomes are expected to endure

– e.g. benefits of an employment training programme may endure for some years after the course

• Drop off – the rate at which benefits decrease over time

– e.g. it is likely that benefit for training participants wears off as time goes on

Step 3:

Build the model

Valuation in SROI

• All prices are approximations of value, or what are

known as proxies

• Look at value to all stakeholders, not just the state

• Use various techniques to understand how stakeholders

value outcomes & to identify financial proxies

• Proxies act like a conversion rate – they allow different

outcomes to be compared in the same currency

• Negative outcomes are given a minus sign in front of the

value so that they are ‘netted off’

“Wider social and environmental costs and

benefits for which there is no market price

also need to be brought into any assessment.

They will often be more difficult to assess but

are often important and should not be ignored

simply because they cannot easily be costed.”

HM Treasury Green Book

Treasury VfM Definition

Financial proxies

• SROI uses financial proxies to estimate the

social value of non-traded goods to different

stakeholders.

• Financial proxies are values that are close to the

outcome that we are interested in

• Value is contextual: it means different things to

different people.

Subjectivity of value

Some examples

Stakeholder Outcome Possible Proxy

Individual Improved financial skills

and budgeting

• Difference in cost of

banking and loans for

people on low incomes

• Actual average change

in income as a result of

dealing with problematic

debts

• APR charged by

payday loans

Individual Avoidance of reoffending • Value of time not spent

in custodial sentence

• Wage penalty for ex-

offenders

State Reduction in reoffending • Avoided criminal justice

costs (police, courts,

prison etc.)

Cashable savings

• In some cases, financial values are more readily

available (e.g. costs of services)

• However, these are are also proxy values:

– Unit vs. marginal costs

– Resources are ‘freed up’ rather than ‘paid back’ to Exchequer or

taxpayer

– Representation of the value of that outcome to society, rather

than a saving per se

Why value non-traded

outcomes?

“There is a distinction to be made…between the sort of borrowing you incur to pay civil servants, for defence, or for schools and hospitals and what we are doing here, where we are taking an investment in two particular banks…those banks are worth a great deal…there is every reason to be confident that…the British taxpayer will get its money back” [Alistair Darling, 2008]

Final calculations

• Sensitivity analysis – tests how the SROI ratio changes when key assumptions are altered (e.g. the value of proxies)

• Key checks – Deadweight, attribution and drop off

– Financial proxies

– Outcomes

– Monetised inputs (e.g. volunteer time)

• Check how much change would be required to get a ratio of 1:1 (increase/decrease!)

• Very useful for strategic planning

Making the most of your SROI

• Measurement

– Put in place/improve outcomes data collection

– Embed SROI knowledge and practice across

organisation (e.g. training of staff)

– Plan for updates

• Intervention

– Respond to recommendations for improvement of

intervention

– Use to help decision making

Commissioning an SROI

• Accredited practitioner

• Experience in M&E/economic evaluation

• Clarity on scope – should determine price

• If forecast, plan for data collection to update in the future

• Guarantee of ‘assurance-ready’

SROI Practitioner Accreditation

• Approximately 4 assurance rounds per year

• Cost is £320 + VAT

• Principles-based assessment by two accredited

practitioners

• Opportunity for feedback and resubmission

• Must have completed SROI training

• Also possible to have report assured only

Contact

Eilis Lawlor

Just Economics

eilis@justeconomics.co.uk

+44 20 77545991/07917276127

www.justeconomics.co.uk

© Just Economics Research Ltd.