All right. So we've looked at level one, level two, level three, level four, level five, and now we are at level Q. At level Q, you want to know, how cost effective is your program? You have some evidence of output, outcomes, and impact. You want to know, how much does it cost for me to create those outputs, outcomes, and impact? And is it worth it? In this segment, I'll focus on what's called SROI. That stands for Social Return on Investment. It's essentially a form of cost benefit analysis. You're trying to learn, what's my bang for the buck for every dollar that goes into delivering this program, this intervention, this product or service? What's the benefit I achieve? So, fundamentally, SROI is a calculation. It's a process that allows you to calculate a dollar value, showing how great, in dollar terms, the social and environmental outcomes and impact of your company or your program are, what's the dollar value of all that impact, and how does that compare to the dollar value it cost me to deliver those outcomes and to create that impact. As you'll see, SROI builds on the previous steps in the process and impact measurement. It builds on level one and level two and level three. The more rigorous your impact measurement, the higher that level of rigor that you've used to measure your impact, the more credible your conclusions regarding your organization's return on investment will be. So, that's why I call this level Q. Because the rigor here is really a question, it's a question mark. The rigor that goes into collecting the data that feeds your analysis of SROI, that determines how credible the SROI is. When you don't have very rigorous data to inform your calculation of SROI, SROI is more suspect, it lacks credibility. So, what is SROI good for? Well, the process of calculating SROI, again, your Social Return on Investment, the process of working through all the steps that go into this calculation, that's extremely thought provoking. So, by going through this process, you'll understand a whole lot more about your program, its costs, you'll understand more about the outputs, the outcomes, the potential impact, you'll learn a lot by taking this deep dive as you'll see. So that's very helpful. It can be very helpful for tracking your organization or companies over time. By doing this SROI and having a number, what is my return on investment? Am I getting two dollars, for every dollar I put in? Five dollars for every dollar I put in? What's this impact when I put it into dollar terms? You're able to say, are we getting better? Are we creating more impact? Are we getting more efficient? That can be very helpful. You can also use, as our ally in the planning stage, you can be thinking through, if I do this, if I do that, if we spend this money, if we spend that money, what will be my social return on investment? And thinking that through in advance, says it can really improve your program and inform the steps you take to deliver your products and services and create the outcomes and impact you hope. So, an obvious question that comes to mind is, well, wait a minute, does SROI really let me compare the social returns of two different organizations or companies? I'm putting the outputs, outcomes, and impact in dollar terms. I know what the costs are in dollar terms. So, can I compare the SROI of one company to another company and say, hey the SROI of Company A is five and the SROI of company B is eight. And so, I know where to invest or I know where to donate. I'm pretty skeptical about that. I said more about why, as we go along. But fundamentally, the challenge here is that, calculating your SROI requires a lot of judgment calls. And I think it could be difficult to really use SROI to compare different companies over time. It's probably helpful if you're trying to do this comparison, if those companies at least have very similar missions. So, for example, maybe there are two companies that train and employ local artisans in making products, jewelry or clothing. And, the company sells those products on the web to international customers. I know of a lot of companies that do this. Perhaps, we could use SROI to compare two of those different companies that have a very similar business model. At least, in this case, we're comparing apples to apples. Maybe there are red apples to yellow apples, but we're not comparing apples to umbrellas. So, what do I mean about comparing apples to umbrellas? Well, maybe you're interested in the social return on investment for an organization working to increase high school graduation rates in the United States. And you're thinking, well, I wonder what it's SROI is and how it compares to a company trying to bring safe drinking water to very low income customers in rural and urban areas of South Africa? And, oh by the way, I'd also like to compare this to the SROI of an online platform that brings educational programs, like this one, to customers around the world. I would tell you, don't do that. I would really encourage you not to try to compare SROI across organizations and companies that are this dissimilar. I just don't have confidence that we have the level of precision and the level of standardization to make it possible to compare. Well, as I put it earlier, apples and umbrellas. So, I've said that there's a whole lot you can learn by doing an SROI. I've outlined some cautions but there's really a lot you can learn from the process. Let me explain to you a little bit about what this process is. I'll go through the seven steps it takes to create an SROI. I've been trying to do this at a pretty high-level to give you a sense of how you do this but you'll need to read more if you really want to actually, conduct an analysis of SROI. We have some resources and additional readings that allow you to get a deeper sense of how to do this. Okay. Step one in calculating SROI. Step one is establishing scope and identifying stakeholders. So scope is just this question of, are you trying to analyze the return on investment for absolutely every aspect of your company or program or just a part of it? For a university, do I want to know the return on investment from teaching? Or also from other extracurricular programs and also from research? That's this question, what's the scope, where am I focusing? Am I focusing on the entire company or program or are just a part of it? Clearly, the bigger the program, the more you're tackling the entire activity of this program or company, or in my example, university, the more complicated it's going to be to do this analysis of SROI. You're also in this first step of the process, specifying who are your stakeholders, who are the people or the organizations that may benefit or may actually be harmed by your organization. These are people who as you think about what the outcomes and impact of your program or business are, you need to be thinking about what are they experiencing. It's an interesting and useful exercise to think through all the people who can benefit and all of the people who might be experiencing unintended negative consequences too. So this could be your employees, your customers, organizations in your supply chain, members of the local community, the local government, tax payers, and so on. So, a useful part of the process; determining the scope and who are your stakeholders. Next step in the process is building your logic model. Sometimes, in the context of SROI, they'll talk about mapping your outcomes. We've talked a lot about logic models. I think we can skip over that. Your a pro at figuring out how to do your logic model with your inputs, your activities, your outputs, outcomes, and impact. Step three is calculating your inputs. In theory, this is not so complicated either. You take stock of, what does it cost me to deliver this program or service? What are all the salaries involved? What are the materials? What are other expenses that are involved for me to produce as my nonprofit organization, my government or agency, my for-profit? What does it cost me to run this operation? And of course, if you're revenue generating, you'll want to take stock of what revenues am I making in the process. In theory again, this isn't that difficult. The reason I use the words "in theory" is just that sometimes we don't know exactly what it cost to deliver a particular program. We know what it costs to deliver all of our programs but we don't know what it costs to deliver just one aspect, unless we happen to have great accounting systems for that one aspect. So this brings us to step four, when things get more complicated. Step four is evidencing outcomes and giving them value, specifically giving them monetary value. And there's a lot to this step. It's pretty complicated. It's pretty time consuming. Let's go through it. You've got your logic model. You've got to develop outcome indicators, things that you can actually measure or count to describe your outcomes. Note that some outcomes are just really hard to measure and quantify. You know, if my program is designed to build self-esteem, if my company's products are designed to reduce stress, those are difficult outcomes to quantify. Other outcomes can be more straightforward to measure but they still may be time consuming to measure. Does my product or service lower obesity? Does my training program increase literacy? Does this program or this company or this product increase disposable income and consumption? I can measure all those things but it may be time consuming to do so. So, I have figured out what I'm going to measure. Now I need to actually collect that data. And the folks who do a lot of this SROI process, they offer an important caution that it's easy to fall into the trap of just using available data. "Hey, we've got this data. Let's use it." That's not a great strategy. Often, the data that we have on hand isn't all that meaningful or insightful, so they really caution us to be careful that our data, the data we're collecting, the outcome measures we're collecting are actually really well aligned with the outcomes we intend to create. Okay. Let's say we've succeed in this process. We also need to calculate how long those outcomes last. The longer your positive outcomes last, the more valuable they are. We want programs that create long-term value. One of the challenges here is, the longer the benefits last from your program or your company, the less clear it is that your company, your program alone is the cause of it. So, the longer the time period these benefits last, the more likely other things contribute to it. So, what I hope you're starting to see as I'm describing all these steps is, wow, there are a lot of judgment calls to be made here. Which outcomes am I going to pay attention to? Can I actually measure them? Do I know how long they last? Can I be certain that were the cause and then other things are not causing them? All of these things are going to determine the dollar value you assign to outcomes. So it's pretty complicated, and as I said, there are a lot of judgment calls. So, once you've understood what your outcomes are, and taken stock of, what are these outcomes? How do I measure them? How long do they last? You got to put a monetary value on the outcomes, a dollar value. The goal here is to put a dollar value on the positive and the negative outcomes of your program. Sometimes, this is relatively easy to do. We just talked about the graduation program, and I talked about how much savings went up for participants in the graduation program that was studied across this six-country replication. That's pretty concrete number of what the benefits are. I can count up the savings for participants. Sometimes, the outcomes of a program are far less tangible and are more difficult to assign a dollar value to. So, suppose that your company makes a new technology, a new device, that allows people who are blind to navigate more effectively. They don't have to use a cane. They've got this new technology that allows them to navigate on their own more effectively in places they haven't been. That sounds like a huge value. But, how do we know that dollar value to these people in terms of their increased confidence, increased freedom, increased independence? Hard to put a dollar value on that. So, how do you put a dollar value on these kinds of outcomes? Clearly, when you have clear, credible indicators like savings in the bank, or hourly pay, or profits, you want to use those. Where you're trying to put a dollar value a financial, monetary value, on more intangible outcomes, you might ask participants what they would pay for this. You might compare what other people pay for similar services and benefits. You might think about, well, if somebody can navigate independently and they didn't used to be able to navigate to go shopping on their own for example, what would it have cost them to have an assistant come with them and neighbor? What was their neighbor's time worth? So, lots of calculations and lots of judgment calls made in step four to come up with the evidence for your outcomes and to give those outcomes a dollar value. Okay. So we're now on to step five in calculating SROI. Step five is establishing impact. We actually talked a lot about this when I talked about RCTs. Let me talk a little bit about a few nuances that folks who do a lot of SROI analyses will pay attention to. So, one of the terms they use is deadweight. They want to calculate or take into account deadweight. Deadweight is defined as the amount of the outcome that would have happened even if the program or activity had not taken place. What would have happened even if you had not delivered your products or services? It's easy to assess this if you've done an RCT because you actually have this comparison group. In the absence of an RCT, it's a lot harder to figure out what is deadweight. You can get some clue to deadweight to this concept of, what would have happened if I hadn't delivered this program or service? By looking at trends in the community. For example, maybe you know that unemployment is falling for everyone, maybe you know that unplanned pregnancies are down. That gives you a clue that even without your program, things might have gotten better because they're getting better in the local community or they're getting worse. So you have some hint of deadweight, but again, it's a judgment call. Another part of this stage in the process is attribution. How much of the change in outcomes is attributable to your organization and how much is attributable to other organizations or people? Again, if you've got an RCT, you got rigorous data going into this, you can pretty clearly make this attribution. On the other hand, if you have not done an RCT, figuring out how much credit to take for your organizations outcomes and impact, it's hard to do. Okay. So, in this step, you are establishing impact. Your figuring out deadweight, how much of this outcome would have happened even if my activity had not taken place? You're figuring out attribution, how much of the change in outcomes is attributable to my organization? You're also figuring out drop off, how long do these outcomes last? Outcomes are likely to decrease over time. Years and years ago I learned French, my knowledge of French has really dropped off. So, things like skills, outcomes, benefits, are likely to drop off over time. You need to take account of that drop off as you think about the dollar value of the outcomes your organization is creating. All right. So, in this stage of the process, we want to calculate your impact in dollar terms. You calculate your impact by taking your total outcomes. The sum of the value of all these outcomes you have created through your organization, minus the deadweight, that is minus what would have happened anyway even without your company or your organization. So now I've got, total outcomes minus deadweight, and then I got to take into account attribution. So I'm going to multiply total outcomes, minus deadweight, times attribution. That is what percentage of the impact was attributable to my organization. Let's do a little simple math in this case. Let's say, I calculate that the total outcomes of my program are worth $750,000, $750,000 in increased profits, increased self-esteem, increased fitness, whatever it is, my total outcomes from my program or company are worth $750,000. Deadweight, I calculate, is $250,000, that's what would have happened anyway. So that leaves me with $500,000 in outcomes. But, I know that there are a lot of other factors that are going on in the community, that's going on for these beneficiaries. So I say, well, we can claim 60 percent of this benefit. I'm responsible, you can attribute 60 percent of the gains to my program. So, in that case, impact is going to equal $500,000 times 0.6, 60 percent of $500,000 that is, and that number is $300,0000 in total outcomes. So step six in this process is calculating the SROI. There are a few more details that I would actually not going to go into about how you do this at this stage of the process, but fundamentally, you've got this dollar value on outcomes, you have a dollar value on inputs, and you look at the ratio of, what's the dollar value of the outcomes I've created? What's the dollar value of the inputs that it takes me to create this value? And that resulting ratio, that number is your SROI, the Social Return On Investments. At this stage in the process, you have an answer to the question, for every dollar of input that I put into this product or service, what's the value of the outcomes created? So an SROI of 3.5 tells you that for every one dollar of input you create output worth three dollars and fifty cents. Finally, step seven in this process is communicating your learnings to your team and your stakeholders. It's important at this point to communicate more than just that number, that SROI ratio. My ratio in this example was 3.5. You got to tell people more than the ratio, you really want to communicate all that you've learned through going through all of these assumptions. And because there are a lot of assumptions and a lot of judgment calls being made, but there's a lot of thinking through, what are the outcomes from my program? What does it cost? What's the dollar value? And how much money am I putting into this? And what are the gains I'm getting out of it? So, a few concluding comments about SROI. This is a complicated process. You may wonder, is it worth it? Or are some people like to put it, is the juice worth the squeeze? Is SROI worth it? My sense is, the fewer the judgment calls you're making, the better. So when you're making lots of assumptions, I get worried about how much the SROI is telling you. And that said, the more committed you are to this process and the more experienced you are in this process, the better you get at conducting an SROI. And when you do this SROI analysis year-over-year, you're going to learn a lot about your organization's impact and its efficiency, and you'll be able to see, is my social return on investment is it increasing or is it decreasing? I've said that calculating SROI is really calculating a cost-benefit analysis. And ultimately, that's how I think about SROI and the value to you of using this technique. I encourage you to think carefully about the costs of doing this kind of analysis, what's the data that you would need, what are the assumptions you need to make and the benefits. What would you learn, and take stock of, what are the costs and benefits of doing this kind of cost-benefit analysis, social return on investment.
