Measurement Philosophy | Summary of SROI methodology | Data collection and calculation
Key challenges | Performance levers | Next steps | Portfolio reports
SROI presentations | Background
 

 
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  Many different types of employment barriers inhibit or stall people from breaking into the labour market, establishing an employment record and ultimately a career path. One way to think about employment barriers is to try and understand the ‘carrying’ cost to society attributed to various barriers. Being low income, without access to regular personal financial resources often means that people turn to government financial assistance programs to survive. Based on their household make up, people are entitled to provincial and/or federal set rates of monthly financial assistance. These rates are public and therefore accessible to use in quantitative analysis. In our SROI reporting we access these rates and use them as key inputs for our ‘net cost to society before employment’ part of our calculation (see below).

Other types of social costs that we represent in our calculation are shelter costs and use of (government funded) employment and training services. Additional social costs that need to be captured and are not in our analysis are health and incarceration/recidivism costs. Data on these costs are more difficult to access and, due to time and resource issues, SCP has not yet attempted to input these costs – or proxies for these costs - in our calculation. What we do use, however, is the Sustainable Livelihoods framework. The SL framework provides a better understanding of any changes to social costs and other livelihood areas such as the access to social support, community networks and skills development that target employee groups may have.

Our belief – or theory of change – is that once people are taken from a (sole) reliance on government funding and are employed in a social enterprise, they become contributors to society through their income taxes. This factor forms the basis for our ‘net benefit to society after employment’ part of our calculation.

What SROI analysis attempts to do, is to measure the monetary value associated with providing a job to someone who is receiving government assistance. This is defined by the equation below. The numerator represents this societal change and the denominator is the cost to make that change:



Where:

Net Cost to Society Before Employment = The monetary value of government assistance associated with target employees prior to employment in the social enterprise (net of any taxes being paid)

Net Benefit to Society After Employment = The monetary value of the taxes paid by the target employee after being employed by the social enterprise (net of any ongoing government assistance)

Total Investment = The total amount of money invested in the business in order to create the benefits to society. This includes any grants and additional social support infrastructure costs. It also accounts for any operating losses incurred by the business.

What about attribution?

What and how much is appropriate to attribute to employment in a social enterprise over the long term? Can we claim that people with employment barriers will have longer and/or better quality jobs throughout their lifetime because of their employment in a social enterprise? How much does length of employment in a social enterprise influence things? These are among the questions we debate internally regarding whether or not to include a long term multiplier in our calculation.

Where:

Long Term Multiplier = A multiplying factor that attempts to estimate the value that can be attributed to the social enterprise because its employees are more likely to maintain employment over the long term than would otherwise have been the case. In other words, this annuity rate accounts for the fact that the net benefit to society associated with a particular social enterprise employee will continue to accrue throughout the working life of that employee.

With or without the long term multiplier, the result is a ratio that compares the monetary benefits created by the social enterprise against the investment made over a given period of time. This ratio demonstrates whether the investment lost, maintained, or created value. For example, if the numerator in the equation is less than the denominator (i.e. the ratio is less than one to one) value is being lost whereas if the numerator is greater than the denominator (i.e. the ratio is greater than one to one) value is being created.

Depending on the requirements of the audience this equation could be presented in various different forms. For example, one could consider the net cost savings or net benefit to society on a standalone basis from the overall SROI calculation. Moreover, the analysis of this equation could be cast in several different ways. For example, the overall result could be presented as a payback period (i.e. the amount of time it will take for the societal benefits to “pay back” the net investment) or as a return on investment to be compared with other potential projects.

Thus, our essential belief is that, although our calculations and data gathering techniques still need refinement, this methodology offers a flexible and powerful tool for analyzing the performance of social enterprises and other social initiatives.