How One Nonprofit Found Its SROI
by Maria Kim
“Show me the money.”
Though few say it with as much fervor as Cuba Gooding Jr.’s character did in Jerry Maguire, we all in the social purpose sector have heard this theme before. When donors ask about leverage or impact or sustainability of results, they’re subtly asking us to “show them the money” or more likely, the return on their investment.
Of course in our case, our returns are of a different sort. They’re social returns on investment: the positive social cash value that can be created as a result of families being healthier, communities being safer, and moms and dads going back to work.
At The Cara Program — a suite of professional skill-building bootcamps and businesses that help adults affected by poverty get and keep good jobs — we have attempted to articulate, refine, and articulate anew our SROI, which basically boils down to this: for every dollar invested in our programs, we produce about $5.74 in social cash value over a five-year time horizon.
That amount is calculated by looking at a cohort of individuals placed into permanent employment a few years back, and examines two things:
- Contributions made to society in the form of income taxes paid, social security paid, and sales tax dollars spent on stuff that can now be purchased due to an individual having more cash in their pocket
- Savings to society in the form of public supports, food stamps, and unemployment no longer leveraged when an individual is gainfully employed, re-arrest and incarceration costs no longer incurred when an individual doesn’t recidivate, and emergency rooms no longer used when an individual has sustained benefits, etc.
We total both those aggregate amounts and look at that sum over a five-year time horizon and discount to today’s cash value. Then we divide by our operating costs to derive the final calculation. One dollar in equals $5.74 out over five years.
The good news? This process uses real people, with the real supports they were leveraging upon entry into the program, and real depletion of those supports once an individual gets and keeps a good job.
The other news? This methodology took a long time to create. Getting to this product took about 18 months of hard thinking by really smart people to get to right and fair calculations. And there are flies in the ointment. In fact, a few great audience members at the Do Good Data Conference earlier this year pointed out some things we need to evaluate to make a stronger SROI calculation moving forward — up to and including whether our veracity on the use of counterfactuals is strong in all cases, or only in some.
But therein lies the trap. This stuff is rabbit-hole business. And you can very easily let perfect be the enemy of good. What we are really seeking to do is to provoke a conversation with investors and influencers in this work to flip the conversation around “nonprofits.” The reality is that we are not “nonprofits.” (And who does that by the way? Who defines themselves by what they are not?) We are social purpose organizations that do, indeed, have to produce a profit. We just reinvest our dividends in a different way.
So when we talk about social return, we are elevating the notion that we are not an “aw shucks” charity, but an organization providing vital solutions to the persnickety challenges of poverty alleviation. And we are doing so in a way that sticks.
We might be wrong to some degree here and there, but we are right in a good piece of the puzzle. Our arguments are defensible. Most importantly, they create a platform on which to have a meaningful exchange about what we’re actually doing here – inviting those with the power of money to recognize that they’re not just giving a gift, but truly making an investment. An investment in a solution for sticky, positive change.
Show me the money, indeed.