If you’ve been to any conferences in the third sector over the last year, you’ve probably heard people using the term ‘SROI’, or telling you that their organisation provides £3 of value for every £1 put in. It seems like hardly a day goes by without someone asking me whether I think they should do one.

If you’re not up on your jargon, SROI stands for social return on investment and is a framework for measuring the social value of an organisation’s work from the perspective of those they help (their ‘stakeholders’). For a clearer description of SROI, have a poke around the SROI network or read the Guidance on SROI published by the Cabinet Office.

Some time in January I was finally asked by so many people what I thought of SROI I decided to write a position paper on the subject which finally saw the light of day yesterday. You can read it here.

In theory, SROI sounds great. It fits with the ethos of charities, being user-led and still gives you a sexy number at the end to dazzle funders with—the best of all worlds. But a lot of charities aren’t aware of how much effort is needed to do an SROI well. NPC has seen some SROIs that wouldn’t convince the chief executive’s mother that their charity is making a difference. This is contributing to an air of scepticism about what an SROI can really tell you.

So what’s the problem? Charities simply aren’t measuring enough to make the most of SROI. A key part of SROI is evidencing your impact. You don’t need robust measurement in place before you start an SROI but you will need one by the end. Done properly, SROI can help your charity to develop a measurement system rooted in what all of your stakeholders think is important (rather than just  your biggest funder).

SROI doesn’t tell you how to measure your outcomes (this is not a criticism, it isn’t meant to), it lays out some helpful principles but it won’t tell you how you can measure children’s well-being for example. If the charity sector is going to produce SROIs that are convincing externally and useful internally then more investment is needed in measurement.

Read an article by Lucy Heady on SROI in The Guardian.