Should you fund an SROI?

By Lucy Heady 29 September 2010

What do you get when you mix cuts, demands for evidence and charities? Answer: confusion.

In their desperate search for ways to demonstrate their worth to statutory funders, many charities have fixated on the latest craze in the world of measurement, Social Return on Investment (SROI). And with their coffers empty, they are asking their independent funders (trusts and foundations) to foot the bill. But should they?

Back in May NPC published a position paper on Social Return on Investment (SROI), in part to try to clear up some of the confusion around what SROI is and who it works for best. The paper was aimed at charities that were considering embarking on what is often a time-consuming, expensive but potentially highly rewarding process. Last week we published the sequel—SROI for funders. This paper looks at SROI from the perspective of a funder wondering whether or not to fund its grantees to undertake SROIs.

The core message of both papers is the same: charities that are best suited to SROI are those with good measurement systems and outcomes that are straightforward to express in financial terms.

But for funders there are additional things to consider. Often, funders want to be able to look across their grantees to see what is being achieved for their whole portfolio or compare organisations. But I have never seen an SROI that was accurate enough to be able to say ‘Organisation A has an SROI ratio of 2.8 and organisation B has an SROI ratio of 3.5, therefore organisation B is more effective’.  If this is what funders are after, SROI is not the answer.

Funders that want to compare interventions and share lessons between their grantees are probably better off encouraging more collaborative approaches to measuring results among the charities they support. NPC believes that collective measurement approaches are the best way of improving levels of measurement in the charity sector. You can read more here about one such project we are doing with charities working to improve ties between prisoners and their families.

What has surprised me over the last year is that the rising popularity of SROI amongst charities has not been met by a similar interest by funders. In fact, I haven’t spoken to more than two or three funders that are actively interested in this approach. If you are a funder and have funded grantees to perform SROIs or are thinking about doing so, I would love to hear your views.