Updated: Jun 30
In the past decade or so there has been exponential growth in the sociality of business.
The rise of the internet and social media has revolutionised the way in which business is conducted, information is so readily and freely available that the transparency of a business is now paramount. This development has also led to a major increase in the number of social enterprises that springing up all over the world.
For a social enterprise it is essential to be able to measure social impact, after all the measurement of social impact is a direct correlation to answering the question ‘What does your enterprise do?’ For a social enterprise, answering that question must go beyond simply achieving a respectable profit margin, as a social enterprise, our social or environmental impact is how we show the value of our organisation.
So how does a social enterprise actually measure social impact? There unfortunately isn’t a simple answer to this that can be applied to all social enterprises. You have to take into account the size of your enterprise, what stage it is at and the mission and goals of your enterprise.
For a small start up social enterprise a common sense approach to measuring social impact can go a long way. This means there is no need to spend money on bringing in external evaluators or get bogged down in rigorous and complex models of impact measurement. For a small company, the best way to measure social impact is to answer these basic questions, what is the mission of my enterprise?, how many people have I reached? If your goals are environmental track the geography and measure the size of the areas that you have reached, the number of people who have benefited from your organisation. Comparing these numbers with the overall goals of your enterprise will give a basic idea of where your company is at and if it is achieving interim goals you should have set. Measuring social impact is just as important for keeping on target for monthly goals or yearly goals it is not just about measuring against the end goal of the enterprise.
As your enterprise grows and data collection and analysis grows more complex, this is where employing a more rigorous system for measuring social impact becomes important. There are two main systems for measuring social impact; Social Audit Network (SAN) and Social Return on Investment (SROI).
A social audit is an external assessment of the process for social accounting. The process for social accounting has four main stages as illustrated in the image below:
The above process is an effective way of monitoring performance, it allows stakeholders to have a say and is effective in having the ability to highlight areas in which improvements can be made, unfortunately it is not without its drawbacks, it is a time consuming process and you have to factor in the cost of social auditors, hence why this method is not recommended for small start up enterprises as they could well be costs that you are not at a stage you can afford. There is also the danger of manipulating stakeholder views, but if you have taken on board the advice of previous articles then you should have stakeholders that you trust implicitly to be honest and professional.
The other method, SROI, measures service outcomes to compare the financial investments made against the benefits created for the stakeholders (added value).
A longer term assessment of the value of outcomes in terms of market values or values to government or other ‘proxies' and putting a sterling value on them. The term proxy is a substitute source of the value of the outcomes but must be a reliable source for example the EU.
Below is a template of an impact map:
Once again we must weigh up the pros and cons of the above method, an advantage of this method is that it is much less time consuming, its step by step process makes it easy to follow and the way in which the data is encapsulated makes it very useful in terms of marketing and selling.
The use of proxies however is where the disadvantages come in, there is an obvious danger of using them to overstate values. Also as a social enterprise you will inevitable have a lot of ‘soft outcomes’ such as ‘quality if life’ it can be very difficult to find a proxy from a reliable source that is able to put a value on that.
This article has given a brief overview of the ways in which social impact can be measured, however the most important thing to take away is just how increasingly important it is to measure social impact whether you are only starting out and are relying on internal members to measure the impact via common sense approach or if you are growing beyond that and are employing more statistical methods.
Measuring social impact is key for a social enterprise, to finish off here are a few reasons why:
Access to finance
Measuring impact is a sign of a well run ship
It helps tell your story to stakeholders
Achieving your purpose
And most importantly impact reporting is here to stay, if your enterprise is to succeed in this increasingly empirical world, then we need the proof. “Show me the money” will become “Show me the impact”.