Here’s an overview of steps involves in the methodology:
- Define the Scope and Identify Stakeholders:
- Decide what you’ll analyse (activities, timeframe, and purpose).
- Identify everyone affected by the activity, including those who benefit and those who may not.
- Map the Outcomes:
- Create a story of how activities lead to changes for stakeholders (positive and negative).
- Use stakeholder input to ensure all important changes are captured.
- Prove the Outcomes and Assign Value:
- Gather evidence (e.g., surveys or data) to show the changes happened.
- Attach financial values to the outcomes, using research, stakeholder input, or market values.
- Measure the Impact:
- Adjust for what might have happened without the activity (deadweight).
- Account for other factors, like contributions from others (attribution) or outcomes replacing something else (displacement).
- Factor in how long the value lasts and decreases over time (drop-off).
- Calculate the SROI Ratio:
- Add up the financial value of all outcomes.
- Divide this by the total investment to show the social value created for each dollar spent.
- Share and Apply the Results:
- Write a report explaining the findings, methods, and limitations.
- Share the results with stakeholders for transparency.
- Use the insights to improve decisions, programmes, and stakeholder engagement.
Key principles for SROI good practice include actively involving stakeholders to ensure their perspectives shape the analysis, focusing on understanding and measuring meaningful changes (outcomes), and valuing what truly matters to those impacted. SROI emphasises including only material outcomes—those significant and relevant—while avoiding overclaiming contributions by accounting for other factors and influences. Transparency about methods, assumptions, and limitations is essential, as is verifying findings through stakeholder validation or assurance processes. Lastly, SROI should contribute to learning and improving, using feedback to refine activities and maximise impact.
While this process can be valuable in gaining clarity about organisations’ contribution, outcomes and change strategies, assigning financial values to complex outcomes is an abstraction and needs to be considered and used as such.
The appeal of SROI for decision-makers
SROI’s strength lies in its ability to make complexity more navigable. Just as a map helps us navigate a landscape without showing every tree and hill, SROI offers a useful abstraction of reality. But like a map, it’s important to remember that SROI is not the full picture—it’s a tool to aid decision-making, not a definitive account of value.
The abstraction becomes even more pronounced when financial proxies are applied. Assigning a dollar value to outcomes like “improved hope” or “greater sense of belonging” is not just simplifying reality—it’s abstracting an abstraction. This raises critical questions about whether these proxies can truly capture the depth and nuance of human experiences.
When SROI works—and when it needs to be used with caution
SROI works well in contexts where stakeholders can clearly define and quantify the value of changes they experience. Think about a cohort of adults who have suffered a spinal injury and are in a physiotherapy programme that leads to recovery. Participants can confidently and accurately see and report tangible benefits, such as reduced medical expenses or increased earnings from returning to work.
However, many social change contexts are far less straightforward. For example some stakeholders may not be in a position to articulate or define value authentically (e.g. severe mental health patients, young children). The same goes for interventions with long term outcomes (e.g. early childhood programmes that lead to increased literacy) often produce benefits that take years to materialise, making it difficult to assign immediate financial value.
Areas to Tread Carefully
As pressure on change-makers to complete SROI processes grows, here are some areas where I think we should all tread carefully:
Long-term, sustainable change is expensive:
SROI calculates value in relation to the cost of running the initiative. This can frame interventions where long-term investment is required for sustainable change (e.g. education, early childhood) as “inefficient”, especially when immediate returns aren’t easily measurable or relevant.
It is important to avoid stakeholder blame
SROI must be used carefully to avoid framing stakeholders as liabilities, or as “costs to the system.” This can dehumanise the very individuals the interventions aim to support and empower.
Looking beyond the bottom line
The final SROI number is a simplified measure of value. While useful, it should be considered alongside other evidence to provide a more complete picture of the impact of social services and interventions.
Driving improvement, not just proving impact
SROI is resource-intensive, and its value should extend beyond producing funder-focused reports. There is a great opportunity to use the momentum SROI creates to embed evidence and improvement systems into organisations, but this won’t always happen unless done by design.
Summing up
SROI offers a powerful way to articulate social impact, but it’s not a one-size-fits-all solution. Its simplicity is both its strength and its limitation. Used thoughtfully, it can help organisations demonstrate and improve their work. Misused, it risks oversimplifying or misrepresenting the complex realities of social change and sidelining impactful interventions that are complex to measure, or have a long-term impact. Ultimately, SROI is most valuable when it complements, rather than replaces, a complex understanding of the value social change initiatives bring to their stakeholders.