As we have implemented SROI tracking and reporting in our various social enterprises we have uncovered several important implementation challenges. These challenges can be separated into two primary categories.

Methodological challenges

Capturing all elements of social cost: Although some elements of social cost associated with a target employee prior to employment are clear, others are more difficult to quantify. We are able to generate relatively accurate assessments of the hard costs associated with supporting individuals who are unemployed or underemployed. These costs result from items such as government income and housing support.

What remains more difficult to capture are other societal costs related to unemployment and low incomes. These may include increased law enforcement, healthcare and family social service costs. So far we have not attempted to include these less tangible costs in our SROI calculations.

Capturing all elements of social benefit: It is also challenging to determine all the benefits that are associated with providing jobs and improved incomes to marginalized individuals. These benefits include both the alleviation of some of the issues outlined above (law enforcement, health care, family services) but may also include other intangibles such as increased social/community connectedness, improved self esteem and an elevated sense of civic and/or personal responsibility.

In a nutshell, we only account for those social costs and benefits that are known and easy to quantify.

Attributing long term success: Crucial to our methodology is the assumption that employment in a social enterprise today will have a lasting, long term affect on the target employee which can be attributed in some way to the social enterprise. Although this seems intuitively correct, it is unclear what proportion of the long term affects can reasonably be attributed to employment in the social enterprise as opposed to other external factors. The fact that we started out in our first SROI report for Inner City Renovation using the long term multiplier as part of the calculation and after internal debate, chose to exclude it, reflects our own issues concerning the long term attribution of this model.

In absence of a method for attributing societal benefits to the enterprise we cannot be completely confident in our selection of a long term multiplier. Our goal is to continue to produce SROI reports with our portfolio of investments and through this process learn more about the traction of this model from an employment retention point of view. Ideally, this experience will guide us in determining how best to account for the long term benefits associated with employing different target employee groups in social enterprise and mainstream employment settings.

Practical challenges

Time Intensity: Our initial attempts at calculating SROI have required they surveying of employees in a given social enterprise. This process is very time consuming and costly, particularly in the social enterprises with more than fifteen target employees as considerable time, effort and resources are necessary in this kind of primary research.

A few years in, we started using a sample of the target employee group for SROI reporting. As we invested in larger, more established social enterprises this became necessary in order to lessen time and resource intensity. Wherever possible we have also piggybacked on current data collection systems already in place. For example, Renaissance, our investment in Montreal, has significant scale and defined operational systems in place for social tracking and reporting. We worked together to define a representative sample of the approximately 200 people annually who are (transitionally) employed through their network of ‘Fripe-Prix’ stores. The management team shares some of the data they are already collecting that is relevant to SROI reporting. The Renaissance staff do the data collection and then send it to Social Capital Partners for analysis. Both organizations review the final report before we put it up on our website.

The primary trade off in doing this kind of analysis is between how easy it can be done and the quality of data generated. Ultimately, our bias is to lean more towards ease of use because we know that in order for others to get engaged in this process it must not require a lot of time and resources.

Making it relevant to management: We have also found it challenging to make the SROI measurement process relevant to the day-to-day operations of the social enterprise management. A key reason for this is that business mission issues – both ongoing and situation specific – take priority and can be all encompassing. We also believe that the time and effort required to implement the surveys and the complexity of the overall methodology poses challenges from the management perspective. This is why, in future, we look for proxies wherever possible.

Finding appropriate comparables: An ROI calculation is only relevant when compared against a benchmark. In the private sector these benchmarks are generally other companies operating in a similar industry or with similar risk profiles. For example, when determining whether an expected ROI for a particular investment is good or bad a company or investor will compare it with the ROI that can be expected for another, similarly risky investment.

In the case of our SROI framework there are no other social enterprises in Canada using a similar methodology to measure returns. Nor are there appropriate metrics to determine the ROI for programs that are attempting to create similar outcomes to social enterprises (e.g. employment placement programs, sheltered workshops). As such, there are few comparables in the market and it is impossible for us to get a true sense of how “good” our returns are for these investments. As you will see below however, we can still use the SROI calculations as a tool to measure progress within our portfolio.