Measuring Return on Social Investment

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In November 2009 Inyathelo - The South African Institute for Advancement hosted a conference that brought together individuals and organisations from across civil society to discuss the characteristics of the southern African philanthropic landscape. Some of the recurring themes and questions of the conference were around how to measure success in grantmaking. What are the key indicators of social investment success? Do we know that we are measuring what matters? How do grantmakers and grantees communicate their vision of winning grantmaking? These questions are as vital to donors as they are to grantees. How indeed does one measure successful grantmaking?

There is, of course, one answer that is straightforward. If the donor and grantee have together accomplished the goals that they agreed to at the beginning of their relationship, then one could declare conclusive success. However, social investment is rarely that uncomplicated.

We live in a world in which the needs of society change and grow at a pace that often outstrips the resources of its support structures. The needs of the future accelerate into the realities of the present within weeks and months rather than years. It is not unusual for donors to feel overwhelmed by the magnitude of the work to be done. Couple this with the fact that the majority of donors receive more applications for assistance and investment than they could ever support and that most individuals and South African foundations distribute their giving through tiny staff complements - often no more than 1-3 people - and it is understandable that there is an appeal for trying to find a one size fits all calculation of return on investment.

At a session at the 2009 conference on international social investment in Africa, Alice Brown, Representative of the Ford Foundation in Southern Africa remarked: “..there are ways to measure. We have a trust with regard to philanthropic rands and dollars, but we also need to acknowledge that everything that can be measured may not be worth measuring.” [Book : In Conversation]

As we continue to face difficult economic times, it becomes increasingly important for donors and grantees to recognize that the measurement of return on social investment is impact. And impact is not an easy thing to measure, not least of all because it is open to so many levels of interpretation. One aspect that all participants in the sector would agree on is that with philanthropic investment, the currency of assessment is value not money. Money serves primarily as the unit by which we can usefully compare value, but is not the value itself. As a result outcomes frequently shift.

Value should be determined at the outset of a donor/grantee relationship. Both parties should have a strong and accurate sense of what it is that they are investing in or promising to deliver. The misstep occurs when the donor and grantee discover - often because it was never a frank topic of discussion at the beginning of the relationship - that they have immensely different notions of what constitutes successful spending.

Inherent in responsible giving is the notion that there must be some accountability by both donor and grantee of the expenditure of each philanthropic rand. The pure business model of wanting to see concrete production at the end of expended grant money is not entirely feasible in a philanthropic context. At the most fundamental level philanthropy conducts its business with people who for the most part are in some form of distress or disadvantage, and for whom unpredictability is frequently the only constant.

In addition, modern philanthropy is not a top down affair. It requires active participation from all involved - the donor, the beneficiary and the intermediaries. Flexibility and listening on the part of all parties is the hallmark of successful philanthropy in the 21st century. Vinnie McGee, senior adviser to The Atlantic Philanthropies, had this to say: “And the best of philanthropy understands that we do need some measurement. But on the other hand, you (grantees) need to tell us what works and what you are striving for. And we need to listen.” (My emphasis) [Book : In Conversation]

In an article published on moneyweb.co.za in August this year Jerry Schuitema had this to say about the intent of philanthropic investment. “We seldom, if ever know with certainty what we are going to “get” out of any situation. We know with greater certainty what we are capable of giving or contributing to that situation. If we always restrict our giving to the extent that we know what we are going to get, we automatically restrict our giving to that limit. We most likely end up with less than we expected.”

In a study titled A Guide to SROI Analysis published by the New Economics Forum, UK [Click here] a useful set of principles are outlined for effective measurement of return on social investment.

  • Involve stakeholders
  • Understand what changes
  • Value the things that matter
  • Only include what is material
  • Do not over-claim
  • Be transparent
  • Verify the result.

Responsible grantmaking and grant impact assessment invite layered discussions. One-size unfortunately seldom fits all. We need to have all of the participants constantly engaging in the conversation, because it is only through talking and listening that we will come to understand what does matter, and how it is best measured.