Is the private sector putting social enterprises to shame on social value accounting? Think it’s enough for you have a social purpose without checking if you’ve made a difference? Try telling that to anyone who didn’t get a job at the end of your employability project, says Jeremy Nicholls
There’s a growing recognition of the importance of social and environmental value.
Recognition that financial accounts don’t tell us all we need to know about the effects organisations have when they deliver services and sell products. Recognition that we need more consistency in how we account for this non financial value.
In the private sector, with a history of sustainability reporting, this growing interest can be seen in concepts such as ‘shared value’ and in the work of the IIRC. In the public sector the interest is evident from legislation like the Social Value Act in the UK. And in the not for profit and social enterprise sector it is in measuring social impact.
Potentially very bad news. There is a growing tendency to see measurement as a technical issue.
Follow the process, get the answer, move on.
In the not for profit and social enterprise sector, amongst those organisations that support front line organisations (the investors and the advisors), there is still a probably unintended tendency to promote approaches to measurement that are really mainly useful only for reporting, despite evidence that organisations want to use information to improve what they do.
The purpose of measurement is surely to inform decisions. If you aren’t using the information from a measurement process to make decisions, stop now. And I don’t mean decisions to apply for more funding for a brilliant project. I mean making choices between mutually exclusive options. This means that some activities will happen and others won’t. The purpose of measuring non-financial value – let’s stick with calling this social impact where the risks around measurement are highest is to allocate resources. And that’s political (small p?).
All information about human activity is socially constructed. All. But especially information about organisational performance. And all this type of information is a summary of reality. Trying to repeat this reality won’t help you make decisions. Not least because the timescale over which a decision is relevant will be time limited. So it’s going to be a summary. A case study is a summary of someone’s life. A quantity of case studies with a similar characteristic is a summary. A value of a quantity of case studies with one type of characteristic to compare with another is a summary.
If information is to be useful for decision making, it needs to be understood by those making the decision. They need to share the language, to understand and accept how reality is being summarised. Financial information is absolutely brilliant in both summarising and being understood and so is very useful for making decisions about resource allocation. And yet we now realise that it is incomplete, missing very important information.
The purpose of measuring things is to make better decisions
There are techniques involved in measuring social impact, of course, but they will always be mediated by judgements and by the need to communicate a summary. And we can’t forget that the purpose is to make better decisions on allocating resources than we are making now. Which means being able to compare alternative and different options and decide which, on balance, will create more value than the other option. And if we don’t accept we need to do this, the existing approach to making these decisions – the one we agree isn’t good enough – will carry on being used.
But what does better resource allocation mean?
It means a world where decisions do not contribute to growing inequality. A world in which, despite the fact the people without resources are not able to reveal what is important to them through their expenditure, what is of value to them is still recognised and still taken into account in those resource allocation decisions.
An approach to measurement which doesn’t give all those affected by the activities of an organisation the ability to control, own or influence the decisions on what is measured – and how – and the relative importance of different things we are measuring is not and cannot address the purpose of social impact measurement. What will be measured, if there is this involvement, is highly likely to include something around ownership and control of the decisions of the organisation. If not, the approach will support resource allocation decisions made by those who have, on behalf of those that have not. Measurement and control of resources are intertwined. And so measurement is and will always be political (large P).
This is all the more important for social enterprises which have at their heart a social purpose and which – let’s go with part of Social Enterprise UK’s definition – ‘are majority controlled in the interests of the social mission’.
So the next risk, which is related, is not giving power and influence to those affected by an activity. This is common in approaches which focus on measurement of the organisation’s objectives. This is clearly a good start, as anyone who has read Drucker’s Management by Objectives will know. And for many organisations developing a better understanding of how their activities achieve those objectives, that ‘theory of change’, as it has become known as, is also a necessary step.
Theory of change is not the same as being accountable
But it is not the same as being accountable for what you are doing – this needs the willingness to give power and influence to others (which means you, the measurer, now have less power!).
Just like the difficulty in getting politicians to argue for increasing social mobility (as this means some mobility will be downwards), getting organisations to argue for accountability in how to measure as well as what gets measured means measuring more than your objectives. It means waking up to realise that your objectives may be the wrong ones, that what you have been doing hasn’t been making so much of a difference or it has made a difference but it turns out to be negative.
So every time you see an approach to measurement which talks about ‘being clear about the benefits you create’, ‘measure performance against your objectives’, ‘understanding the outcomes you are seeking’, ‘identifying who gains’, or any other language which is solely positive and stops there – step away gently. These approaches may give a passing nod to some unintended outcomes but a recognition of the outcomes of your work, positive and negative, regardless of your objectives, won’t happen. You won’t be as accountable as you need to be to make decisions that increase the social impact of your work. You need an approach that puts accountability and power at its heart. You may want to build out your approach over time, but you’ll know where you want to and need to get to.
Over in the private sector this is all run of the mill. This is because customers who don’t get what they want can go elsewhere; meanwhile, the interests of those who have no money but are still affected are increasingly recognised in sustainability accounting and even stated in, for example, the UK Companies Act. So it is another one for bodies like SEUK to keep an eye on. If the level of rigour and accountability for social value is higher in the private sector than is being suggested is necessary for social enterprises, I wonder how helpful that will be for social enterprises to remain competitive?
And I have many arguments with people in the social impact arena about the difference between managing objectives and managing what happens in pursuing those objectives. This is not so much of an issue in corporate reporting but in social purpose organisations I am told that social purpose and intent is more than enough armour to protect against the need to manage more than intended benefits. Try telling that to anyone who didn’t get a job at the end of your employability project.
But it’s not all gloom and doom and I am heartened by the growing interest in measurement that recognises the importance of accountability and value. Such interest as shown by social enterprises that have entered for the RBS100 social impact award this year, for example – making judging all the harder. The growing interest is also reflected by increases in our membership.
On the ground, mission driven organisations, their boards and managers, are getting better at this. Nonetheless they are very busy keeping the social value going and the sectors representatives, like SEUK, will need to hold up their interests.
In general, boards and managers know they need to consider these wider issues, and want to, but it is hard.
Give organisations a measurement system that means you don’t have to consider wider issues and be accountable to your stakeholders, but an approach that is recognised and supported by people who should know what is best, and then why wouldn’t you use it? Especially when the people whose lives you affect won’t be knocking at the door demanding to be heard.
And so with the Social Impact Analysts Association’s (SIAA) annual conference coming up – Beyond Measurement – I am looking forward to discussions about going from measurement to accountability – and to shifting who has the power in deciding what is measured and how. Oh, and in just how much value has been created.
This article was first published on PioneersPost.com, the online newspaper for social entrepreneurs.