Measuring Social

Impact

Paul Miesing
School of Business
UAlbany-SUNY
Albany, New York
Learning Objectives

• To gain an understanding of the value of measuring a

venture’s social impact
• To understand the multiple benefits in learning how to
measure social impact
• To examine the steps involved in measuring, quantifying, and
monetizing impact for a venture’s stakeholders (investors,
management team, employees, etc.)
• To demonstrate examples of how to measure and quantify a
new venture’s social impact

Paul Miesing, “Measuring Social Impact”

Measuring Social Impact
• Why is it so Difficult to • Why Bother Doing it Right?
Measure “Doing Good”? – Demand for greater
– Really hard to define “good” accountability requires
– Challenge of relating “good” to measurable results
financial values – Better allocation of scarce
– Tough to identify cause and resources by increasing
effect of “doing good” awareness of which programs
are working and which are not
– General lack of maturity in
social program data collection – Make a stronger case to your
and performance evaluation stakeholders – especially
funders – that your organization
– Diversity and overlapping is achieving its mission
nature of social enterprise
domains – Identify the organization with
cutting-edge approaches in its
– Variety of purposes that outcomes and impact
organizations have for
conducting these analyses

Paul Miesing, “Measuring Social Impact”

Social Value Proposition (SVP):
“Logic model”
Resources, Decisions,
Organization, Partnerships, Direct Indirect Systemic
etc. etc. Results Results Change
• M#tri¢$ • M#tri¢$ • M#tri¢$ • M#tri¢$ • M#tri¢$

Complete control Little control

Impact
Outputs Outcomes
Inputs Activities Individuals
Targets Stakeholders
& Society(s)

Immediate Short-term Intermediate- Long-term

term

Efficiency Effectiveness Mission

Constituency Satisfaction?

Paul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):
SEED example
Small Enterprise Economic Development
• Resources? • Economic Outcome?
– Provide training, research, – Average salary, wage, benefits
peer network, interns, etc. per job created
– Eligible for $35,000 – Increased local taxes paid
– Amount spent to purchase
• Targets? various supplies from local
– Number of clients vendors
– Successful businesses • Social Impact?
• Immediate Tangible – Changes in welfare recipients,
alcohol and drug abuse,
Measures? arrests, etc.
– Jobs created/$ loan – Changes in neighborhood self-
– Loan re-payments esteem

Paul Miesing, “Measuring Social Impact”

 Social Value Proposition (Cont’d.):
= Numerator ÷ Denominator

Source: http://www.gbfund.org/sites/default/files/Synthesis_Document__FINAL.pdf

Paul Miesing, “Measuring Social Impact”

 Social Value Proposition (Cont’d.):
Social Return on Investment (SROI)

• Attempts to quantify both economic and social impacts

of social enterprises
Enterprise Value Social Purpose Value
Financial return on Costs and savings of
investment social mission
Value of sales - Cost of good and Impact of the enterprise on people’s
services sold - Operating expenses: lives:
• Typically negative for social • Can be measured in lower welfare
enterprises costs, higher tax revenues, cost
Blended Value savings/gains to government, etc.
Economic + socio-economic • Costs of obtaining grants and gifts
enterprise value are “social operating costs”

Combines Enterprise and Social Purpose Values

Paul Miesing, “Measuring Social Impact”

 Social Value Proposition (Cont’d.):
Social ROI (cont’d.)

• Economic Value – Financial ROI:

o Demonstrates profit creation that applies in the regular capital
markets (i.e., stock markets, private sector accounting methods)
o Includes detailed financial statements equivalent to those
produced by publicly-traded companies in the for-profit sector

Enterprise
Financials Last Year This Year Next Year (proj.)
Sales $233,004 $537,789 $708,967
Gross Margin 70% 69% 65%
Operating Margin 5% -4% -4%

Paul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):
Social ROI (cont’d.)

• Socio-economic Value – “Monetizes” social outcomes

wherever possible
o For example, increased employment opportunity is expressed in
part by the increased taxes paid by those employed as well as by
reductions in welfare costs

Social Purpose Results (per target employee) This Year

Public Savings $16,644
New Taxes $1,816
Wage Improvement $12,097
Other Financial Improvement $9,849

Paul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):
Social ROI (cont’d.)

• Measuring Value:
o Calculate enterprise value using standard accounting measures
– Calculate enterprise index of return
o Calculate social purpose value (assign monetary values to
social outcomes) – Calculate social purpose index of return
o Calculate blended value – Calculate blended index of return
Index of
SROI Metrics Return
Enterprise Value $411,906 0.93
Social Purpose Value $20,861,066 47.14
Blended Value $21,222,960 47.96
Investment to Date $442,643

Paul Miesing, “Measuring Social Impact”

Social Value Proposition (Cont’d.):
Social ROI (cont’d.)

• The SROI Report:

o Viewed as a non-profit organization stock report
• Include descriptions of the social enterprise’s mission, business
data, target client population, financial analyses, key social impact
findings and analysis, etc.
o Provides a standardized way of estimating value and presenting
return calculations in a clear and accessible manner
This Year into
Projected Values Perpetuity
Total Projected Investment $575,775
Total Projected Social Savings and New Taxes $22,434,361
Total Projected Social Expenses $1,573,306

Paul Miesing, “Measuring Social Impact”

 Social Value Proposition (Cont’d.):
SROI and Systems Thinking
Identify Issue/Problem
Done for project
What is the social cause?
Has it been solved?

Data Management &

Evaluation
Determine SROI
Solution
Today’s focus Product/service that will Done for project
help solve the problem
Desired Outcome
For client, social enterprise,
stakeholders/funders

Done for project (more or less)

Investment Required
Total resources needed to Done for project
fund the venture

Paul Miesing, “Measuring Social Impact”

Systems Thinking

• Overall effectiveness includes:

o Satisfaction of constituents
o Adequacy of funding
o Efficiency of operations
o Attainment of enterprise goals
o Ability to adapt to a changing environment

• Each of these dimensions affects the others in a system

o … and each one can be measured in several different ways

Paul Miesing, “Measuring Social Impact”

Systems Thinking (Cont’d.)
• A Primer on Systems: • Counter-Intuitive Results:
– Structure – Determines – Law of Unintended
behavior Consequences – Well-meaning
– Sub-systems – Parts contribute policies can backfire
to whole through mutual – Change Occurs Precipitously
influences and Non-Linearly – Threshold
– Synergy – Operate through effects can be dramatic,
joint interaction to achieve resulting in sudden crashes and
something none of the parts system shocks
could – Erroneous Forecasts – Long
– Equifinality – Many different delays for information
means to achieve identical ends – … but Small Act → Big Impact –
– Entropy – Natural tendency to Abundant opportunities to solve
deteriorate over time systemic social problems
– Homeostasis – Seek steady state
via feedback

Paul Miesing, “Measuring Social Impact”

Systems Thinking (Cont’d.)
• “The Butterfly Effect” – Also popularized
(sensitive dependence on (erroneously) as Albert
Einstein’s famous
initial conditions): prediction: “If the bee
– Coined by meteorologist disappeared off the surface
Edward Lorenz in his 1972 of the globe then man
paper “Predictability: Does would only have four years
the Flap of a Butterfly’s of life left. No more bees,
Wings in Brazil set off a no more pollination, no
Tornado in Texas?” more plants, no more
animals, no more man.”

Paul Miesing, “Measuring Social Impact”

Shared Value Creation

• Value is benefits relative to costs, not just benefits alone

o Externalities are ignored in conventional economics

• Companies have an outdated approach to value creation by

overlooking:
o Customer well-being
o Depleting natural resources vital to business
o Viability of key suppliers
o Economic distress of the communities in which they produce and sell

• Expand the pie instead of sharing a fixed pie!

Paul Miesing, “Measuring Social Impact”

 Shared Value Creation (Cont’d.)

• “Shared Value” creates economic value in a way that also creates

value for society by addressing its needs and challenges:
o Enhances company competitiveness while simultaneously advancing the
social and economic conditions in the communities in which it operates
oIdentifies and expands the links between economic and social progress
• Shared value is: • Shared value is not:
o Creating economic value by creating o Personal values or social responsibility
social value o Balancing stakeholder interests
o Using capitalism to address social o Philanthropy, sharing value already
problems created
o Solutions to social problems that are o The same as environmental
scalable and self-sustaining sustainability

Same as “Social Entrepreneurship”?

Paul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.)

• Policies and practices that enhance the competitiveness of a

company while simultaneously advancing economic and social
conditions in the communities in which it operates:
1. Rethinking products, customers, needs, and markets
• Meeting societal needs and reaching unserved or underserved
customers
2. Redefining productivity in the value chain
• How the organization better uses resources in value chain to improve
fundamental productivity
3. Enabling local cluster development
• Improving available skills, suppliers, and supporting institutions in the
geographic region

Paul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.):
Integrating company and community

• There is an inevitable link between business and society:

o … with long-term synergy between economic and social objectives
o Find points of convergence between economic and social
objectives, not assumed tradeoffs or the need for redistribution

Company Social
A healthy business Competitiveness Development A healthy society depends
depends on a healthy on competitive companies
community to create that can create jobs,
demand for its products support high wages, build
and provide a supportive wealth, buy local goods,
business environment and pay taxes

Paul Miesing, “Measuring Social Impact”

Shared Value Creation (Cont’d.):
Strategic positioning
• Requires fundamentally new ways of thinking about the business,
technologies, and management approaches
• The broader sense of purpose motivates and attracts employees,
business partners, shareholders, and the public

Traditional Positioning New Positioning

• Food • Nestlé: Nutrition

• Shoes • Nike: Health and Wellness
• Computing/Technology • IBM: Smarter Planet/Cities
• Car Rental • Zip Car: Urban Mobility

Paul Miesing, “Measuring Social Impact”

 Shared Value Creation (Cont’d.):
Measuring impact
Traditional Measurement Approach Emerging Measurement Approach
• Companies measure business performance • Companies measure the linkages between
and social value creation separately social value creation and business value
Business Value
Shared Value Measurement
Measurement
• Revenue
• Margin Social Business
• Market Share Value Value
• ROI

• The link between new products,

customers, revenue and profits
Social Value • The productivity and cost
consequences of new value chain
Measurement
practices (e.g., energy, logistics,
• Compliance resource usage)
• Sustainability • How community and cluster
• Impact Assessment improvements enhance productivity
• Reputation and growth

Paul Miesing, “Measuring Social Impact”

Conclusions

• Measuring, reporting, and monitoring social impact remain a significant

challenge – Social entrepreneurs often have difficulty coming up with a
precise and transparent indicator that can accurately represent the
amount of social return generated by their ventures
• Increasingly, organizations are feeling pressure from funders to account
for their social returns
• “Social value proposition,” “social ROI,” and “shared value creation” are
ways to maximize organizational effectiveness and value to key
stakeholders
• For more information and sources, see
https://pinterest.com/mgt460/assessments/

Paul Miesing, “Measuring Social Impact”

Course Purpose

• Summarize key principles of social entrepreneurship

• Identify the challenges and opportunities of social
entrepreneurship
• Use evidence to analyze, evaluate, and exploit a social
opportunity for an entrepreneurial venture
• Apply business functions to create and sustain a social
venture
• Prepare a business plan for a social enterprise

Paul Miesing, “Measuring Social Impact”

Questions?

Paul Miesing, “Measuring Social Impact”