Measuring Social Impact - Albany.edu

Measuring SocialImpactPaul MiesingSchool of BusinessUAlbany-SUNYAlbany, New York

Learning Objectives To gain an understanding of the value of measuring aventure’s social impact To understand the multiple benefits in learning how tomeasure social impact To examine the steps involved in measuring, quantifying, andmonetizing impact for a venture’s stakeholders (investors,management team, employees, etc.) To demonstrate examples of how to measure and quantify anew venture’s social impactPaul Miesing, “Measuring Social Impact”

Measuring Social Impact Why is it so Difficult toMeasure “Doing Good”?– Really hard to define “good”– Challenge of relating “good” tofinancial values– Tough to identify cause andeffect of “doing good”– General lack of maturity insocial program data collectionand performance evaluation– Diversity and overlappingnature of social enterprisedomains– Variety of purposes thatorganizations have forconducting these analysesPaul Miesing, “Measuring Social Impact” Why Bother Doing it Right?– Demand for greateraccountability requiresmeasurable results– Better allocation of scarceresources by increasingawareness of which programsare working and which are not– Make a stronger case to yourstakeholders – especiallyfunders – that your organizationis achieving its mission– Identify the organization withcutting-edge approaches in itsoutcomes and impact

Social Value Proposition (SVP):“Logic model”Resources,Decisions,Organization, Partnerships,etc.etc. M#tri M#tri DirectResults M#tri IndirectResults M#tri Complete controlInputsSystemicChange M#tri Little getsStakeholdersIndividuals& iencyEffectivenessConstituency Satisfaction?Paul Miesing, “Measuring Social Impact”Mission

Social Value Proposition (Cont’d.):SEED exampleSmall Enterprise Resources?– Provide training, research,peer network, interns, etc.– Eligible for 35,000 Targets?– Number of clients– Successful businesses Immediate TangibleMeasures?– Jobs created/ loan– Loan re-paymentsPaul Miesing, “Measuring Social Impact”Economic Development Economic Outcome?– Average salary, wage, benefitsper job created– Increased local taxes paid– Amount spent to purchasevarious supplies from localvendors Social Impact?– Changes in welfare recipients,alcohol and drug abuse,arrests, etc.– Changes in neighborhood selfesteem

Social Value Proposition (Cont’d.): Numerator DenominatorSource: s Document FINAL.pdfPaul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):Social Return on Investment (SROI) Attempts to quantify both economic and social impactsof social enterprisesEnterprise ValueFinancial return oninvestmentValue of sales - Cost of good andservices sold - Operating expenses: Typically negative for socialenterprisesSocial Purpose ValueCosts and savings ofsocial missionBlended ValueEconomic socio-economicenterprise valueImpact of the enterprise on people’slives: Can be measured in lower welfarecosts, higher tax revenues, costsavings/gains to government, etc. Costs of obtaining grants and giftsare “social operating costs”Combines Enterprise and Social Purpose ValuesPaul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):Social ROI (cont’d.) Economic Value – Financial ROI:oDemonstrates profit creation that applies in the regular capitalmarkets (i.e., stock markets, private sector accounting methods)oIncludes detailed financial statements equivalent to thoseproduced by publicly-traded companies in the for-profit sectorEnterpriseFinancialsSalesGross MarginOperating MarginLast Year 233,00470%5%Paul Miesing, “Measuring Social Impact”This Year 537,78969%-4%Next Year (proj.) 708,96765%-4%

Social Value Proposition (Cont’d.):Social ROI (cont’d.) Socio-economic Value – “Monetizes” social outcomeswherever possibleoFor example, increased employment opportunity is expressed inpart by the increased taxes paid by those employed as well as byreductions in welfare costsSocial Purpose Results (per target employee)Public SavingsNew TaxesWage ImprovementOther Financial ImprovementPaul Miesing, “Measuring Social Impact”This Year 16,644 1,816 12,097 9,849

Social Value Proposition (Cont’d.):Social ROI (cont’d.) Measuring Value:oCalculate enterprise value using standard accounting measures– Calculate enterprise index of returnoCalculate social purpose value (assign monetary values tosocial outcomes) – Calculate social purpose index of returnoCalculate blended value – Calculate blended index of returnSROI MetricsEnterprise ValueSocial Purpose ValueBlended ValueInvestment to DatePaul Miesing, “Measuring Social Impact” 411,906 20,861,066 21,222,960 442,643Index ofReturn0.9347.1447.96

Social Value Proposition (Cont’d.):Social ROI (cont’d.) The SROI Report:oViewed as a non-profit organization stock report Include descriptions of the social enterprise’s mission, businessdata, target client population, financial analyses, key social impactfindings and analysis, etc.oProvides a standardized way of estimating value and presentingreturn calculations in a clear and accessible mannerProjected ValuesTotal Projected InvestmentTotal Projected Social Savings and New TaxesTotal Projected Social ExpensesPaul Miesing, “Measuring Social Impact”This Year intoPerpetuity 575,775 22,434,361 1,573,306

Social Value Proposition (Cont’d.):SROI and Systems ThinkingIdentify Issue/ProblemWhat is the social cause?Has it been solved?Done for projectData Management &EvaluationDetermine SROISolutionProduct/service that willhelp solve the problemToday’s focusDone for projectDesired OutcomeFor client, social enterprise,stakeholders/fundersDone for project (more or less)Investment RequiredTotal resources needed tofund the venturePaul Miesing, “Measuring Social Impact”Done for project

Systems Thinking Overall effectiveness includes:oSatisfaction of constituentsoAdequacy of fundingoEfficiency of operationsoAttainment of enterprise goalsoAbility to adapt to a changing environmentEach of these dimensions affects the others in a systemo and each one can be measured in several different waysPaul Miesing, “Measuring Social Impact”

Systems Thinking (Cont’d.) A Primer on Systems:– Structure – Determinesbehavior– Sub-systems – Parts contributeto whole through mutualinfluences– Synergy – Operate throughjoint interaction to achievesomething none of the partscould– Equifinality – Many differentmeans to achieve identical ends– Entropy – Natural tendency todeteriorate over time– Homeostasis – Seek steady statevia feedbackPaul Miesing, “Measuring Social Impact” Counter-Intuitive Results:– Law of UnintendedConsequences – Well-meaningpolicies can backfire– Change Occurs Precipitouslyand Non-Linearly – Thresholdeffects can be dramatic,resulting in sudden crashes andsystem shocks– Erroneous Forecasts – Longdelays for information– but Small Act Big Impact –Abundant opportunities to solvesystemic social problems

Systems Thinking (Cont’d.) “The Butterfly Effect”(sensitive dependence oninitial conditions):– Coined by meteorologistEdward Lorenz in his 1972paper “Predictability: Doesthe Flap of a Butterfly’sWings in Brazil set off aTornado in Texas?”Paul Miesing, “Measuring Social Impact”– Also popularized(erroneously) as AlbertEinstein’s famousprediction: “If the beedisappeared off the surfaceof the globe then manwould only have four yearsof life left. No more bees,no more pollination, nomore plants, no moreanimals, no more man.”

Shared Value Creation Value is benefits relative to costs, not just benefits aloneo Externalities are ignored in conventional economicsCompanies have an outdated approach to value creation byoverlooking: oCustomer well-beingoDepleting natural resources vital to businessoViability of key suppliersoEconomic distress of the communities in which they produce and sellExpand the pie instead of sharing a fixed pie!Paul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.) “Shared Value” creates economic value in a way that also createsvalue for society by addressing its needs and challenges:oEnhances company competitiveness while simultaneously advancing thesocial and economic conditions in the communities in which it operatesIdentifies and expands the links between economic and social progress Shared value is: Shared value is not:oo Creating economic value by creatingsocial valueo Using capitalism to address socialproblemso Solutions to social problems that arescalable and self-sustainingo Personal values or social responsibilityo Balancing stakeholder interestso Philanthropy, sharing value alreadycreatedo The same as environmentalsustainabilitySame as “Social Entrepreneurship”?Paul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.) Policies and practices that enhance the competitiveness of acompany while simultaneously advancing economic and socialconditions in the communities in which it operates:1.Rethinking products, customers, needs, and markets Meeting societal needs and reaching unserved or underservedcustomers2.Redefining productivity in the value chain How the organization better uses resources in value chain to improvefundamental productivity3.Enabling local cluster development Improving available skills, suppliers, and supporting institutions in thegeographic regionPaul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.):Integrating company and community There is an inevitable link between business and society:o with long-term synergy between economic and social objectivesoFind points of convergence between economic and socialobjectives, not assumed tradeoffs or the need for redistributionCompanyCompetitivenessA healthy businessdepends on a healthycommunity to createdemand for its productsand provide a supportivebusiness environmentPaul Miesing, “Measuring Social Impact”SocialDevelopmentA healthy society dependson competitive companiesthat can create jobs,support high wages, buildwealth, buy local goods,and pay taxes

Shared Value Creation (Cont’d.):Strategic positioning Requires fundamentally new ways of thinking about the business,technologies, and management approaches The broader sense of purpose motivates and attracts employees,business partners, shareholders, and the publicTraditional Positioning Food Shoes Computing/Technology Car RentalPaul Miesing, “Measuring Social Impact”New Positioning Nestlé: Nutrition Nike: Health and Wellness IBM: Smarter Planet/Cities Zip Car: Urban Mobility

Shared Value Creation (Cont’d.):Measuring impactTraditional Measurement Approach Companies measure business performanceand social value creation separatelyEmerging Measurement Approach Companies measure the linkages betweensocial value creation and business valueBusiness ValueMeasurement Shared Value MeasurementRevenueMarginMarket ShareROISocialValue Social ValueMeasurement ComplianceSustainabilityImpact AssessmentReputationPaul Miesing, “Measuring Social Impact” BusinessValueThe link between new products,customers, revenue and profitsThe productivity and costconsequences of new value chainpractices (e.g., energy, logistics,resource usage)How community and clusterimprovements enhance productivityand growth

Conclusions Measuring, reporting, and monitoring social impact remain a significantchallenge – Social entrepreneurs often have difficulty coming up with aprecise and transparent indicator that can accurately represent theamount of social return generated by their ventures Increasingly, organizations are feeling pressure from funders to accountfor their social returns “Social value proposition,” “social ROI,” and “shared value creation” areways to maximize organizational effectiveness and value to keystakeholders For more information and sources, seehttps://pinterest.com/mgt460/assessments/Paul Miesing, “Measuring Social Impact”