Wednesday, 3 July 2013

SROI and Value for Money

As public funding gets tighter, there is understandable interest in Social Return on Investment (SROI). It's a way for third sector organisations to demonstrate what they achieve, expressed as a ratio of £x of social value per £1 invested. Where x is – hopefully – a high number.

It's important to understand though that this isn't quite the same as value for money (VfM). Both calculations consider the value of the outcomes achieved, but whilst VfM compares this purely with money invested, SROI takes account of all types of investment. This could for instance include the in-kind value of volunteers’ contributions, based on the time they put in or work they do. It means that for an organisation with many volunteers, the SROI ratio may be fairly modest but the actual amount of money needed may be just a small part of the total investment.

A couple of points follow from this. Firstly, using volunteers rather than paid staff may have little effect on the SROI ratio but might considerably improve VfM. This could be presented (perhaps to funding organisations) as matching modest funding with a substantial in-kind contribution to deliver a large amount of social value.

Of course, I'm not suggesting that volunteers are appropriate in all situations. In many cases, only paid staff have the skills and experience required, and even where volunteers are used they need to be trained and managed. But skilled volunteers can sometimes make an important contribution – many charity board members do exactly this. And there are organisations that seek to facilitate such skills offerings, such as Reach Volunteering (nationally - http://www.reachskills.org.uk) and Skill Will (in Yorkshire - http://www.skillwill.co.uk).

The second point, and very important, is that SROI is not just about the ratio. It's a way to understand how change is achieved, and hence how the organisation's impact might be improved further. So whilst it might not address the ‘economy’ aspect of VfM, SROI could certainly improve efficiency and effectiveness, and hence considerably increase VfM. For example it can help to identify how resources could be prioritised and targeted better, to achieve greater social value.

Underlying all this is a need to understand the purpose of evaluation: what are you trying to show and why? Simply demonstrating VfM, or an SROI ratio, may have a role but should never be the full story. Any evaluation needs a context, one that recognises who the audience is, and where the future potential lies as well as the present position. Without this context and understanding the danger is, as the famous quote goes, "the answer is 42"!