The Social Return on Investment: Key Reasons to Measure Your Impact 

social return on investment

The Social Return on Investment: Key Reasons to Measure Your Impact 

Investing in anything, whether it’s your time, money, or resources, always begs the question: will the investment pay off? We have one that will. It is the time-tested, research-verified investment of measuring your impact. Nonprofits that invest in this strategy experience:

  • Larger and more consistent donations
  • Organizational growth.
  • More engagement from donors, volunteers, and staff. 
  • Higher rates of impact in the communities they serve.

What Is Social Return on Investment (SROI)

Social Return on Investment (SROI) is a measurement framework that helps nonprofits evaluate the extent of the social impact they create in relation to the investment of resources they receive. Unlike traditional financial ROI, which focuses on the monetary returns, SROI considers the broader social and environmental benefits generated by a nonprofit’s programs or initiatives. It involves assigning a monetary value to the significant social and environmental outcomes and comparing this with the investment required to achieve them.

How To Approach Social Return on Investment:

For a nonprofit audience, understanding SROI is crucial for several reasons:

  1. Demonstrating Impact: It helps you demonstrate to donors, funders, and other stakeholders the value of the work you do beyond just financial metrics.
  2. Improving Programs: It provides insights into how effectively your organization uses its resources to create positive social change, which can help you improve your programs.
  3. Attracting Funding: A strong SROI can be compelling evidence for potential funders that investing in your organization will yield significant social value.
  4. Strategic Planning: It aids in making informed decisions about where to allocate resources to maximize impact.
  5. Transparency and Accountability: It fosters greater transparency and accountability by quantifying and reporting on the social value created.

In essence, SROI helps nonprofits articulate the value of their work in a language that is often understood by funders and the community at large, demonstrating the broader ripple effect of their interventions on society.

Impact Data Collection Basics

What should you track?

  • Where you started with a particular mission.
  • What you provided.
  • What changed in the short term (6-8 months down the road).
  • What changed in the long-term (1-3 years down the road).

In the “Responsive Nonprofit” podcast hosted by Brian Funk, vice president of marketing for Virtuous Software, Funk says this data “is critical in being able to not only meet our donors where they are, but also to help invite our donors closer  into our mission so they can see the impact of the gifts they make.” Companies like Virtuous provide customer relationship management (CRM) tools to help nonprofits employ responsive fundraising. This strategy puts donors at the center of your organization’s mission which ultimately results in larger and more consistent donations.  

Funk’s point is spot on. Studies show social impact is the number one reason donors give. In fact, 97 percent of major donors want to see data that quantifies an organization’s impact. The biggest trend now in the nonprofit sector is donors who see themselves as changemakers, not just an ATM. They are looking for nonprofit partners that can create the kind of change they aspire to see in our broken world. 

social return on investment
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Unlock Giving: Give Stakeholders What They Really Want

You’ve got donors who want to fund impact and staff and volunteers who yearn to be part of something worthwhile – something that makes the world a better place. Measuring social impact meets all those needs. It is the perfect way to align donor interest with a nonprofit’s mission, which fosters greater giving. Conversely, it’s common for donors to stop funding if an organization doesn’t have impact data to justify their gift. Donors are looking for three things: 

  • The social and economic impact that your organization creates.
  • Stories of transformation.
  • Seeing where they fit into the ecosystem your nonprofit occupies and the world you’re trying to create. 

The challenge: how to track the impact your organization creates, measure it, and communicate it to all the stakeholders in your organization. It takes some work and commitment, but ultimately, this is the key to unlock giving. So how do you go from measurement to marketing? 

What’s Changed? Donors Want to Know

Begin with gathering impact data. This information occurs inside your programs and is gathered by your operations department. It is all part of a logic model called the Theory of Change which illustrates how and why a desired change is expected to happen. If you want to create and measure change, reverse engineer all the activities leading to those goals. In other words, start at the end. What outcomes do you want to see? From there, go backward and figure out the steps that will get you there. These include:

  • Baseline assessment – The current status of the mission. (Example: high percentage of malnourished children in a community.)
  • Input – What resources your mission needs in order to make a difference. (Example: a consistent distribution of food to the children.)
  • Activities –  What needs to be done. (Example: Arrange for partnerships in that community, purchase food, arrange for delivery.)
  • Outputs – How many people received your products or services. (Examples: 75% of the malnourished children received food.)
  • Outcomes – What happened as a result of your efforts? (Example: 100% of the children gained weight, 85% received better grades in school, 92% had fewer health problems.)

Funders Want To See Outcomes

Your outcomes are the social impact you made on that community and the information donors want to have. Be sure to measure those outcomes regularly – 6 months down the road, 1 year, 2 years, etc. –  so you can keep reporting on the progress to your donors, staff, volunteers, and board members. In theory, the quality of life for that community should keep getting better, Donors will be inspired because their funds fueled that impact, and the other stakeholders will be motivated because their efforts are making a difference.

Many large organizations make the mistake of measuring output and stopping there. They’ll say they delivered 5,000 meals this year. Period. No data or stories illustrating how that made a difference. But donors have moved from transactional giving to transformational giving. Instead of saying you have an urgent need now, let them know your nonprofit is invested in achieving long term transformation. 

Take it to the Next Level

There’s a fear in the nonprofit world regarding measurements that are not significant or positive. Organizations hesitate to disclose such data because it’s not significantly positive. The reality is, donors only care that you’re trying. They don’t expect you to have all the answers; they just want to see your organization is making a good effort.

Maybe you have outputs, but don’t have any outcomes yet. Start now by collecting whatever data and stories you can get. The University of Utah’s Sorenson Impact Institute (part of their business school) developed a “Spectrum of Impact” that provides an easy-to-implement strategy.

  • Level 1-  Begin with the theory of change. What social or economic impact are you trying to accomplish? 
  • Level 2 –  Measure the actual outputs your organization is creating. This is known as key performance indicators.
  • Level 3 –  Start to track outcomes by collecting data to measure the key performance indicators from level 2. You can do this using pre and post surveys. What has changed? How has the quality of life improved?
  • Level 4 – Start getting into the academic part of the conversation. Use focus groups and the data you’ve collected to show the social and economic impact that has transpired.
  • Level 5 – Conduct randomized control trials. You may or may not get this far, and if you don’t, that’s OK. This usually involves partnering with an academic institution that conducts a thorough analysis of your nonprofit’s work. This level is generally used by large organizations that can afford to pay for this degree of research. 

Impact Numbers + Stories = Increased Funding

To this point, we’ve focused on measurements. But make no mistake, stories of transformation are equally important. Donors want you to humanize those numbers, which you can do in two ways: 

  • Data-driven storytelling.
  • Personal stories of individuals, families, and communities. 

Effective stories give a heart and soul to your numbers, captivate donor interest, and inspire them to care and give. Stories also build trust, a critical element to cultivate giving. And this part is essential: make sure you position your donors as the heroes of these stories. They need to know it is their funds that are responsible for the transformations taking place. 

Data Storytelling Is A Powerful Tool

Data storytelling offers a clear message about what your organization is for and against, what it wants to achieve, what it’s done, and its vision for the future. All of the previously discussed measurements can be woven into this narrative. Organizations can also use charts, photos, and infographics to enhance the story.

Personal stories come straight from the field. Talk to some of the people your nonprofit serves. What was life like before your nonprofit stepped in and did something?  How have their lives changed? How did that change affect their family members and others in the community? 

Put it all Together and Wrap it with a Bow

To sum it all up, people want short and long term impact data and stories of transformation so they can feel engaged and informed. They want to know the problem, what you’re doing to resolve it, and where they fit into the equation. Invite them in. Let them know they are valued members of your ecosystem who play a pivotal role in advancing the cause. Do this, and watch the magic happen! 

But don’t stop there, because there is one more critical element: gratitude. A heartfelt thank you goes a long way in retaining donors. It’s the fancy bow that makes the whole package desirable.

Where are You in the Impact Continuum? 

It’s a lot to take in, but do it right, and you’ll see disproportionate returns on your investment. Do you know where your organization is excelling in these strategies and where changes are needed? Maybe you need to start from square one, or you’re further down the spectrum and just need some tweaking. Either way, Social Impact Solutions can help. Our quick Fundraising Quiz will provide an assessment of your marketing and communication strategies and show where you may be leaving money on the table. Take it today. You’ll get results within minutes that will help you expedite your fundraising goals.

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