Proving & Improving

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Proving and improving social value

As part of the Social Enterprise Partnership in EQUAL’s first round, the New Economics Foundation (NEF), a London-based think-tank, has built the capacity of social enterprises to measure their own added value. Slowly but surely, social enterprises are learning how to measure the good they do and put it over to potential clients. But public purchasers are slow to adopt more sensitive procurement procedures.

NEF’s agenda is to create solutions that consider people and the environment as well as financial results of economic activity. Rather than simply trying to find way to increase gross domestic product, it asks what the point of growth is.

It observes that corporations have traditionally viewed the social and economic effects of their activities as ‘externalities’, that is none of their business to deal with. In this view, it is the job of public sector institutions to cope with the fallout from industry. Indeed company law still imposes on companies the duty to maximise ‘shareholder value’ in money terms, so long as they stay within the law. Nowadays however, companies are more conscious of their image, and are paying more attention to their ‘triple bottom line’, and are asking for ways of assessing what social and environmental effects they are having. Social enterprises are at a more advanced stage on this journey. By definition they pursue social objectives through economic activity. By combining these two aspects, they can make an efficient contribution to a number of public policy objectives, such as poverty reduction, social inclusion, entrepreneurship and neighbourhood renewal. The returns to society that result from the activity of social enterprises may take various forms:

  • direct monetary savings: reduction in unemployment and social security benefits paid out
  • increased monetary revenue through e.g. income tax, social insurance and VAT receipts
  • indirect monetary savings: lower drain on public service such as healthcare, social services and crime prevention
  • indirect non-monetary benefits: improved quality of life, improved local development capacity

Thus, measuring the quality and impact of economic activity is of interest to all sorts of enterprises, and exists along a spectrum. In this sense social economy approaches are an extension of the corporate social responsibility (CSR) agenda. NEF sees social enterprises as being interesting because they take a value-driven approach but are nevertheless within the market system. Whilst they are no panacea, they offer ways to address cases of market failure and to reduce poverty and exclusion.


A multiplicity of approaches

In the Social Enterprise Partnership, NEF worked with the key umbrella bodies of different families of organisations, including co-operatives, social firms and development trusts. It examined a wide range of methods of assessing quality and impact that various of them had developed, or which might be of use to them. These fall into four categories:

  • holistic accounting and reporting tools – such as Social Return on Investment (SROI)
  • measures of impact and performance – such as the Key Social and Co-operative Performance Indicators (KSCPIs – see box below) and Local Multiplier 3 (LM3)
  • quality/performance improvement systems – such as the Development Trusts Association (DTA) healthcheck, the European Foundation for Quality Management (EFQM) excellence model, the Eco-Management and Audit Scheme (EMAS), Investors in People (IIP), the ISO 9000 and 14000 series and the Practical Quality Assurance System for Small Organisations (PQASSO)
  • strategic management tools – such as the social enterprise balanced scorecard

In all, NEF analysed and compared 22 methods. Various regional organisations in the SEP partnership, covering some 60 enterprises, piloted different systems. For instance the Valuing the Difference project led by North East Social Enterprise Partnership (NESEP) organised taster days to promote social accounting. Meanwhile the Social enterprise Partnership South East (SESEP) focused on PQASSO, while the balanced scorecard was piloted in Scotland.

The 10 Key Social and Co-operative Performance Indicators (KSCPIs)
1: Member economic involvement
2: Member democratic participation
3: Participation of employees and members in training and education
4: Staff injury and absentee rates
5: Staff profile – gender and ethnicity
6: Customer satisfaction
7: Consideration of ethical issues in procurement and investment decisions
8: Investment in community and co-operative initiatives
9: Net carbon dioxide emissions arising from operations
10: Proportion of waste recycled/reused

The task involved not only research but training. “We started from a state of very low awareness among social enterprise managers as to how they could demonstrate their quality and impact,” says Lisa Sanfilippo, project manager at NEF. ”A lot of tools existed, but people didn’t know how to use them, so we ran a series of awareness-raising seminars for the different families of organisations and local social enterprise development agencies. Social enterprise managers are not social scientists, but we found that learning how to use the tool was very empowering. One of the most important outcomes is that we have raised the capacity of social enterprises to evaluate their own success.

Distilled wisdom

NEF distilled the essence of the 22 most useful tools into its Proving and Improving Toolkit, which has four parts:

  • An Overview section lays out the benefits of choosing and using an approach to ‘proving and improving'.
  • The Knowledge section includes ten essential elements of any proving and improving effort (see box below). This section explores the basics of measuring an organisation's impact and demonstrating its quality.
  • The Tools section holds information on over 20 tools, containing potential benefits to social economy organisations and examples of organisations that have used each approach. This section provides information about a particular tool. This includes the SROI primer, a video introduction to the Social Return on Investment indicator, with associated resources to measure outputs, outcomes and impacts, which help to value social economy impacts in monetary terms.
  • A Resources section helps organisations to define and measure their outcomes and impact, showing practical ways to ask questions and find answers, and including a handy chart on methods for asking questions, how to develop good impact indicators, plus an indicators bank and a do-it-yourself exercise for involving stakeholders.

NEF has so far distributed 3,000 copies of its hard copy Toolkit (downloads are free from Hard copies can be obtained from NEF for £20 - c. €30). It has also created an interactive version hosted on the web. This has been carefully designed so that each user can create their own personalised area that they can use to plan, develop and evaluate their performance. This ‘Advisor’ function creates a digested ‘My Toolkit’ which is tailored to a user’s specific circumstances. The user can add additional tools at a later stage. “This is a truly valuable tool for the time-poor social enterprise manager,” says Ms Sanfilippo.

Cost-benefit analysis too narrow

Local authorities in Norfolk and Northumberland have taken up the ‘LM3’ (local multiplier) model, which calculates the value of money recirculating in the local economy, and Bristol has used Social Return on Investment as part of its asset transfer policy. But why have government bodies in general been so reluctant to take up the idea? The main culprit seems to be the target culture – measuring the outputs of projects – for instance the number of people trained or the number of square metres of housing developed – rather than the outcomes. These measures are necessary to demonstrate a project’s value, but they are not sufficient.

Ten stages for proving and improving
The following ten points outline the elements necessary for any evaluation process.
1. Know why you’re proving and/or improving. Ask why evaluate and who is your
   evaluation for?
2. Know where you’re going. Clarify your key objectives, mission and values.
3. Identify your stakeholders. These are the people you care about and the people 
   who care about what you do.
4. Map out the story (the hypothesis for change) and describe the milestones. 
   This is to determine the scope of an evaluation.
5. Choose your indicators wisely (be challenging but realistic about what you 
   can measure).
6. Make a plan. Choose a methodology – how do we go about measuring these things
   (This is where the rest of the SEP Quality and Impact toolkit can help)
7. Collect the information by analysing existing records and consulting stakeholders.
   You then need to pull together your data.
8. Analyse the information and raw conclusions
9. Share it with others
10. Learn to do it

Moreover, short-term budgetary constraints tend to drown out longer-term considerations, and benefits that accrue to other areas of government tend to be ignored. Even though politicians like to talk in terms of visions, and ordinary people can see the links between different policies, it seems there is something of a broken link in the middle of the chain. The mechanisms govern-ments use to assess costs and benefits only apply to a given intervention. “The British govern-ment relies on the Treasury Green Book, which is thorough – but myopic,” says Ms Sanfilippo. “It sets out how cost-benefit analysis should be done, and the method tends to looks at the cash expenditure for a project and how this affects the government, plus maybe one other stakeholder. In contrast what we have tried to do is take multiple impacts into account, and measure them over a longer period.” She takes an example: “For instance if I am a local government officer in charge of buying pencils, I look chiefly for sufficient quality and low price, and the procedures are designed to ensure fair competition. Meanwhile in the next corridor one of my colleagues may be trying to reduce the costs of supporting unemployed handicapped people who could make and despatch pencils. If we could co-ordinate our decisions, I would be happy to sign a contract to buy two things – both pencils and inclusion – from a social co-operative. But so often there is no mechanism to permit this sort of ‘joined-up thinking’.” NEF has published a book called Public Spending for Public Benefit that goes into these issues. The toolkit’s knowledge and resources sections can be applied internationally, but the way some of the tools are applied does differ from country to country. “At the moment different countries are emphasising different aspects,” says Ms Sanfilippo. “For instance in our transnational partnership we found that our German partners were using the Balanced Scorecard to improve strategy and financial control, whereas our focus was on improving quality and being accountable to external stakeholders.”


DP name: Social Enterprise Partnership
DP ID: UKgb-59
Lisa Sanfilippo, Social Enterprise Quality & Impact Project Manager
New Economics Foundation (NEF)
3 Jonathan Street
London SE11 5NH, UK
Tel: +44 20 7820 6371
Fax: +44 20 7820 6301,