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4 Apr 2012
Claudia Wood, deputy director of think tank Demos

The missing link: demonstrating social value

The Social Value Act is ground-breaking in its potential to give third sector organisations and social enterprises a fair crack at the whip when it comes to delivering public services.

Claudia WoodFor many years, commissioners have been awarding contracts based on price – which tend to favour larger and commercial organisations that can drive down costs through economies of scale. Only a handful think more widely about the value a third sector organisation might bring.

But now, as a previous post on these pages explained, this forward thinking approach will be embedded in commissioning guidelines – so that all commissioners will have to take into account the “social value” of bidders for service contracts, rather than just their price.

This is, of course, hugely encouraging for third sector providers. They usually have far greater social value than their commercial competitors. But is this a guarantee of getting contracts awarded? Unfortunately not. Because we have missed a vital step between having social value, and winning a contract. And that step is demonstrating that social value to those awarding contracts.

For years, social enterprises and larger charities have been grappling with social value measurement in order to secure government grants, CSR investment and philanthropic donations. Unfortunately, social value is often based on “soft” outcomes, with subjective – perhaps anecdotal – evidence. It is not easily measured, quantified and proven in a way which convinces investors to put their hands in their pockets.

And I fear the same will be true when it comes to commissioners, with tight grasps on local government purse strings.

The fact is, there is no established model for measuring social impact. There are dozens of different tools available, and they all have their limitations. Arguably, the gold standard is the Social Return on Investment (SROI) model, which not only quantifies social impact, but puts a monetary value on it. The drawback of this, however, is that it is a complex and resource intensive exercise – requiring a large amount of data collection and modelling.

Organisations using SROI tend to be the larger, well-resourced national charities and social enterprises, often hiring a dedicated SROI officer to analyse their activities. Those fortunate enough to have SROI evaluations are able to show that for every £1 invested in their organisation, £x is gained in positive social outcomes. This can be a fast track to investment and service delivery contracts.

But who has the time and resources to go to these lengths? In 2010, I took a random sample of thirty charities and social enterprises, and found only five were ready to begin SROI levels of analysis. I found widespread confusion between measuring impact – which requires an organisation to look at the outcomes it achieves – and measuring “outputs”.

For example, one organisation said it delivered 2,000 hours of training to local people, but did not measure the outcomes (the skills or formal qualifications gained, leading to employment). This is not a measure of its impact, just of its size or scale. Not the same thing. Why would a local commissioner award a contract to such an organisation, if there was no evidence that those 2000 hours had any social value in, for example, improving local employment?

Overall, I found no single type of third sector organisations was particularly adept in measuring and communicating their social value. Some very large organisations made no effort to do this, while some very small charities made a valiant attempt in spite of their resource constraints. And social enterprises, although often more acutely aware of the importance of their wider social and environmental impacts, do not all monitor and record these effectively.

So do we risk the Social Value Act being stymied in bringing a wider range of charities into the service delivery fold, due to their inability to prove social value to commissioners?

Well, things may be brighter for those in health and care. Organisations helping vulnerable groups are at an advantage in measuring the impact of their activities compared to campaigning or educating organisations.

They benefit not only from their work being a “concrete” deliverable (as opposed to something more intangible like awareness raising), but also because there is now a considerable amount of public data available on how to measure outcomes among children and social care users, including standardised scales for softer outcomes like mental wellbeing and social skills, as well as studies which demonstrate links between preventative work, outcomes and cost-savings to the state. Such off the peg studies can be referred to by even the smallest charity to help demonstrate their social value.

And SROI is not the only way to make commissioners sit up and listen. If an organisation identifies, measures and communicates outcomes – rather than outputs – then it doesn’t need a pound sign to show value.

For example, social value as an employer might come from recruiting locally, recruiting disabled or older people, or providing volunteering opportunities. Demonstrating social value means not just describing how many hours of volunteering provided – but what it achieved. It means not just counting how many people found a job – but the impact that had on the individual. It means not just describing your car sharing policy, but knowing how much CO2 you saved as a result.

Yes, this can be a challenge – it often requires looking beyond every day delivery to longer term results and following up activities by surveying your clients or employees to find out the impact of what you did. But as disability charities embed personalisation, and focus on achieving the outcomes important to each client, so this way of outcomes thinking will come naturally. It’s just a case of applying this across the entire organisation, not just regarding one’s clients.

Like personalisation, demonstrating impact requires a cultural change less in what you do, but how you do it. Disability charities already have a natural advantage – and thanks to the Act, there are now concrete rewards for those bold enough to grasp the nettle.

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