WHERE
Chance B is one of the operational partners within DP PSPP – Public Social Private Partnership www.pspp.at. Chance B Hausmasters (housemasters) are a service provider company for people with disabilities and well known as a leading company in the field of work integration of people with disabilities. The Hausmasters as a unit of Chance B were founded in 1999 and have nearly 30 employees at the moment. The financial funding is covered by the province of Styria, Public Employment Service Austria and the “Bundessozialamt” (Federal Social Welfare Office). Beside the public investment the earned revenues are covering some more than 50% of the Hausmasters project costs.
The SROI calculates the cost savings for the public in relation to the money invested
The Hausmasters are offering the following services:
- Cleaning in private households and businesses
- Park/garden maintenance: lawn-cutting, sweeping, trimming of trees, disposal of garden waste
- Commissioned work for companies
- Help with removals and clearing out junk
- Support in several companies to cover peak periods concerning i.e. assistance in production process, loading and uploading of trucks, etc.
- The Hausmasters also have a small carpentry that builds and restores small furniture, accessories for children’s playgrounds and does installation work.
WHY
If we want to determine the value of an enterprise we will quickly end up at “profitability” as measured value. Profitability means the relation of (monetary) inputs to (expected monetary) backflows from an organisation’s business. The challenge within the social sector lies in the definition of basic principles: What can be seen as a “value” in the sense of input and backflow? The problem seems to be insoluble as some of the values in question which can be defined as the major performances of social services are of non-monetary nature.
The concept of Social Return on Investment (SROI) can be seen as an approximation to measure such values.
In the Hausmasters case analysis there was a need for argumentation based on concrete economic figures because of the negotiations with official authorities concerning funding for the next period.
HOW
The SROI model was developed at the beginning of the 1990 by Roberts Enterprise Development Funds (REDF) based on the assumptions of social enterprises as a model of social investment appraisal in the US. Moreover the model represents a corrective to the lack of a well-defined value chain that exists in many non-profit organisations. Social return on investment is based on the idea that value creation is not only an exclusive concept for economic organisations but can also be found within social, socio-economic and economic areas. The starting point of SROI is a relevated calculation of cash flows for a monetary evaluation of the economic, social and social-economic value of social organisations. Non-profit organisations can increase their socio-economic value by utilising resources, invested funds and processes effectively, by maximising value creation and finally by creating cost savings and profits for the public.
The SROI model, however, means a new and powerful tool in the hand of investors for the field of social organisations. Concepts like SROI represent a category of information systems that provide the investor with data concerning the social and economic value creation, the utilisation of resources as well as achievement of objectives. Based on this data investors can analyse social organisations in more depth. The main attention, however, is not the transfer of capital but lies on sustainable value creation.
Basic requirements for the application of SROI
Before starting to apply the SROI concept within a social organisation you should ask yourself several questions about the method. First of all you should take a close look at the appropriateness of SROI for your organisation. Not for every business or part of an organisation is it possible to calculate the SROI. Too many factors and data are not available. In some cases (e.g. youth welfare) the effects of an organisation can only be determined by long-term observation. In other cases the aspect of measuring several effects was not yet considered at all. Another question before the application of SROI is the aim of the process. The SROI model calculates the cost savings for the public in relation to the money invested for. It is not a method to determine the effectiveness of processes (in the sense of evaluation). Therefore take a careful look at what should be the aim of the use of SROI within your organisation and what different interests are involved.
Before you can start calculating the SROI you should also see if you can answer the following questions:
- Does an accounting system exist within your organisation and how long has it already been operating?
Our experience has shown that in many organisations the use of an accounting system has not yet been implemented. Those organisations guide their business by using simple income-expense calculations for determining the organisation’s success (and future direction). Although applying the SROI using data from the accounting system also the income-expense method is possible. - Which socio-economic indicators are available?
It is also seen from our practical application of SROI within organisations that there is little understanding of socio-economic indicators. Most of the organisations measure numbers that are determined by the financing partners and therefore use economic data. There is little experience in generating data from employees or target persons (e.g. satisfaction, employability, self-esteem etc.). Applying the SROI needs to draw your attention also to soft factors and to the question of their measurement. - Is political economic and branch data available?
Socio-economic enterprises can often be found within niche sectors of industrial branches or the service sector. Therefore it is very hard to estimate indicators and data for their specific purpose. In some cases only approximate numbers should be taken. - Are internal and external resources available for the application of SROI?
Implementing the SROI for the first time means a very intensive work because in most of our cases the collection of data took several times. Therefore it would be very helpful to have 1-2 persons responsible for the collection of data within the organisation who also have support from external consulting. - How long has the business been in existence and what are future perspectives?
The application of SROI can only deliver reliable data if there is enough experience from past business periods. The numbers for future perspectives and assumptions can be drawn from estimations out of the past. If it is clear that an organisation will not exist any more the next year, an application of SROI is no more worth for. SROI is a tool for guiding and directing running businesses.
If you can answer those questions mostly positively you should think of starting the application of SROI in detail.
Experiences of SROI application
Applying the SROI in Austria first meant to adapt the American model to Austrian conditions on the labour market, finance market and special situations of social organisations. Mainly this concerned financial and political economic data, interest rates as well as operating figures of business sectors. The lack of data regarding the single social organisations as well as their clients was solved by using data from other studies as well as assumptions from the labour market statistics. Moreover we estimated the data co-operating with the social organisations in question. Due to these estimations we thought that it would be advisable to develop different settings of trends for each social organisation. Due to the insecure availability and reliability of data for each project, four scenarios of SROI were calculated to get a feeling for the changes in the results if economic, socio-economic or political-economic circumstances are changed. Our analysis showed that turnover; personnel costs as well as the attained socio-economic effects (e.g. differences of the situation of the clients before, during and after the intervention or the number of clients concerned by an intervention) had the most influence on SROI. In general we can recommend using careful assumptions and estimations on social impacts and monetarised indicators.
For further and more precise studies and evolutions of the SROI model there is a huge demand for specific data concerning the performance of social organisations, sectors as well as the development of the situation of clients within these organisations. However, the concept of SROI can only be applied under several circumstances and within specific organisations fruitfully. The model is variable for modifications and adoptions for other branches but was developed for social enterprises. All assumptions were based on experiences and research on and within those enterprises.
Evaluating the outcome
Applying the SROI calculation within an organisation means a huge investment in time resources. This is due to matter of changing people’s attitudes and perspectives in looking at the processes within social organisations. The whole process of calculating the SROI, the collection of data, assembling the numbers, interpreting the numbers, estimation of effects etc. leads to a better understanding of the value chain within the organisation. Social organisations do not only receive money from the state but also gain considerable effects with it. Therefore SROI is a good model for the illustration of those socio-economic values, costs and benefits for the public hand. SROI as well as ROI is also useful for strategic decision making within the organisation. As the SROI is not only a number on its own but should also be of interest for future investors, changes in the treatment of the target group or rethinking structures and processes can be triggered. Moreover SROI can be a crucial method for good argumentation in negations for future budgets with governmental bodies and other financiers.
Experiences and results
Resources required for the case analysis
The resources required for the Hausmasters case analysis were a minimum of 200 working hours, including three-days’ in-house workshops with experts and members of the organisation and additional hours for writing reports and summarising facts for the needed argumentation.
Why was the SROI approach chosen for Chance B Hausmasters?
On the one hand because of the need for developing economic and non-economic figures for planning and internal measuring. On the other hand because of the strong need to find additional arguments for continuing the public funding of the unit Hausmasters by the Bundessozialamt (Federal Social Welfare Office). The reason for it was that the Bundessozialamt announced to stop the financial support.
Basic settings used
- SROI period under review: public investments since 1999
- Outlook until 2013 (employees, revenues, public investments)
- 10 year treasury rate (risk free rate) of 3.75% per year
- average revenue growth of + 8% per year
- average employee growth of 4–5 % per year
- average social insurance and tax contributions: 25 % per year
- Unemployment benefit or social welfare: € 620.5 per month
Conclusion: If the Hausmasters project continues, the public authorities will save costs of € 519.000,00. Less the investments and the losses offset there will be a positive monetary effect amounting to € 194.000,00. If the Hausmasters project is closed, the public authorities will have to calculate additional costs of € 159.000,00
For more information:
1. Concerning SROI:
Mag. Wolfgang Laskowski
FH Joanneum
Transferzentrum Sozialarbeit/ Sozialmanagement – Transfer Centre Social- Work and Management
Eggenberger Allee 11
8020 Graz
E-mail: wolfgang.laskowski@fh-joanneum.at
Tel: +43(0)676/830 59 830
LQUADRAT- Loidl-Keil & Laskowski
Sozialforschung, Evaluation und Unternehmensberatung – Social Science, Evaluation and Consulting
Guglberg 12
4501 Neuhofen /Krems
E-mail: wolfgang.laskowski@lquadrat.at
Tel: +43(0)676/830 59 830
2. Information concerning HAUSMASTERS:
Mag. Regina Senarclens de Grancy
Managing Director
Gesellschaft für Arbeit und Bildung der Chance B GmbH
Franz-Josef-Straße 3
8200 Gleisdorf
E-mail: regina.grancy@chanceb.at
3. Information concerning measuring and assessing of social services:
Mag. Evelyne Schneider
Gesellschaft für Arbeit und Bildung der Chance B GmbH
Franz-Josef-Straße 3
8200 Gleisdorf
e-mail: evelyne.schneider@chanceb.at
Tel: +43(0)664/ 604 09 155
4. Information concerning Strategic Management & Knowledge Management within Social Economic Enterprises
Mag. Evelyne Schneider
Knowledgeprofessionals – Network for Applied Knowledge Management
info@knowledgeprofessionals.at
www.knowledgeprofessionals.at
Tel: +43(0)676/4000 973