Why don’t you measure the effectiveness of your social investments?

How much money did you spend on social projects in 2015? Thousands or even several millions?

All right. And how effective was the money invested? Was this spending really an investment or just EXPENSES?

None of the Ukrainian companies can precisely answer this question. Despite the fact that every year companies in Ukraine spend hundreds of millions of hryvnias on social projects, up to this day no organization has actually measured the effectiveness of the invested money and how useful the project was in comparison to the investments that have been allocated to it. Meanwhile, there is a method that helps to calculate the value you have created in terms of money.

Any investment, including social projects, should generate results that can be measured

The main principle of social investment is to invest money in something that is of real value to the society. You cannot say that you are doing social investment by simply reporting on the amount of money spent and without providing the evidence of the value created. This would be just social spending to support the current situation. For example, it’s like you’ve invested the money in start-up and instead of the success in your report you just indicated that you have worked for 12 months, hired a staff of 10 people, used 10 thousand kilowatt hours, printed 5000 pages of the text, made 25 speeches and presentations, and so on.

SROI method (Social Return On Investment) allows you to answer the question how successful was the social project you funded, to show the real measurable achievements, to compare the expenses and the value created in terms of money.

Let’s assume that this year your company has invested in road construction. What units will you choose to measure the results? Kilometers? But if you built 100 km of roads in the place where they are not needed, you have not created any value – people from nearby villages still cannot normally use the road – they get stuck in the mud.

SROI method allows you to stay in touch with stakeholders and to decide in advance where you want to build the road, to calculate the number of village residents for whom it will be of real value (how many of them possess cars to ride to the regional center), to calculate to which extend the number of car breakdowns has reduced after the ditches had been replaced with a brand new asphalt, how much money will be saved on gasoline now when there is no need to make a detour to get to the city, etc.

SROI-audit allows to understand how wisely you invest your money

Checking the effectiveness of the company's social investments will answer the question "How does the company help people?" You will be able to realistically assess the value your company generates to the society while investing in different projects.

After measuring the efficiency of investment, you will be able to get an idea of whether you invest your money properly. Social investment, just like any other kind of investment, should have a specific goal – you have to know exactly what and to what extent you want to improve. And it’s impossible to achieve without constant contact with the parties concerned.

SROI assessment will allow you to understand the relevance of the project, to calculate the monetary value of the value created per unit of investment, to compare the monetary equivalent of the value created of different projects, to determine the most effective, necessary and realistic project for the existing amount of investments.

Without assessing the effectiveness of the investment you won’t be able to answer the following questions:

•  How significant is the need of social investment?
•  How useful was the money you invested?
• How significant is your contribution?
• Did you manage to solve the problem or at least changed the situation for the better?

     So what is the need to invest then?

It is important to think how useful your investment is, whether the feeling of satisfaction corresponds to your actions and results you get, whether it is genuine and why others do not appreciate what has been done. Maybe you just pay tribute to fashion rather than make the world better.

It is possible to calculate the efficiency of social investments on your own

Despite the fact that the SROI standard is not the easiest and understandable one, the company is quite able to calculate the efficiency on its own. You can check either the entire annual flow of projects or the most important and complex one. The evaluation is preferably carried out before the decision in favor of a project is made, but you can also evaluate already completed projects. After the investigation, the investor is able to understand which project is better to choose, which one can be completed with a high quality and in a specified period. Sometimes it is better to choose a smaller project and bring it to the end rather than to make a big investment in the project with the end result complex for evaluating and the uncertain termination period.

It is important to remember that the essence of the social investment lies not in the amount of the money spent but in the real value of the project to the society.

You should keep in mind that you can get a biased result if you delegate the measurement of the effectiveness of the money spent to the person who invested it on the behalf of the company. He will have to assess himself, and therefore the report will contain exaggerated benefits and understated minuses.

To ensure objectivity, you can address the external auditor. Only a few Ukrainian companies have specialists who provide services to test the effectiveness of social investment, and Baker Tilly is one of them. The cost of the services depends on the number of the projects financed by your company.

While choosing a project for social investment, never doubt that a small group of people can make a difference. In fact, this is the only way. Let others follow you.

Remember that any social project is good, but you can achieve much more for the same money.