Today’s social entrepreneurs and impact investors are concerned not only with contributing to creating social impact, but also with making sure the impact created is sizable, measurable.
From an entrepreneurial perspective, measuring output, outcome and impact enables a deeper understanding of the value chain and its components. More importantly, a social entrepreneur needs to be able to assess the amount of input required to produce a desired level of output. S-he wants to know how the obtained output leads to short, medium and long-term change for clients and communities, this is outcome. Finally, a social entrepreneur is motivated by achieving their ultimate mission: making positive impact to the world.
Investors, or impact investors, seek return on their invested capital, but also care about the social impact of that investment. A common measure used for that aim is the Social Return on Investment (SROI). Practically, it is calculated in two steps. First, the social impact generated from the investment is measured and translated into monetary terms. Second, the resulting figure is divided by the initial amount of capital invested. As a measure of social investment effectiveness, the SROI is simple to understand and speaks to investors in a language they naturally comprehend. From a methodical and research perspective though, SROI is criticized for being too simplistic and for not providing a standardized grounding on how to measure social impact, even less on how to translate that social impact into dollars.
Logic models are frameworks that might be useful in that context. They structure the work of a social innovator in terms of measurable objectives through a value chain-like model. Logic models are composed of five elements:
Inputs: the elements needed for the business to work (facilities, material, resources, …)
Activities: the set of actions undertaken by employees to make the product or service
Outputs: the units of production obtained as a result of activities (number of clients, number of children served…)
Outcomes: the change that has been brought to people’s lives and communities as a result of meeting the outputs
Impact: the overarching ultimate results of achieving the organization’s mission.
In social innovation, logic models can be particularly useful. They enable the three key success factors to coalesce: business monitoring (by the entrepreneur); activity and impact reporting (for investors); and competitive advantage creation (in the eye of competitors).
Social innovators can greatly benefit from logic models as a structured framework for continuous improvement and greater societal impact. An example of a logic model is the one used by TOMS to measure and monitor its societal impact. (Figure by Prof. Peter Frumkin, University of Pennsylvania).
waelmo.com 