Measuring the Social Returns of Nonprofits and Social Enterprises: The Promise and Perils of the SROI

Social Return on Investment (SROI) metrics are a new tool available to nonprofit and social enterprise organizations to demonstrate the effectiveness and efficiency of their programs. After a short overview of three dominant methods for calculating the SROI, a case examining the implementation of an SROI study at a nationally recognized Boston-based nonprofit operating workforce development programs is presented to illuminate the methodological dilemmas across the arc of an SROI study. The case analysis centers on four key decision points in the implementation of the SROI study: identification of stakeholders, development of a method for estimating social value creation, determination of the time horizons, and selection of the discount rates. Next, to highlight the challenges in making comparisons across organizations, the second source of data is presented—a set of Yale SOM MBA student assignments conducting an SROI on a written case study found in the literature on workforce development. The student project results showcase how even when conducting SROI assessments on the same focal organization, the SROI calculation can vary widely depending on the outcome of the four decision points delineated above. The paper consequently offers two levels of analysis. First, it provides a detailed methodological overview of the reigning approaches to conducting an SROI. Second, it provides an assessment of the challenges to using SROI as a performance metric at this stage of the field’s development. Implications for use of the SROI are discussed from both the perspective of funders and the perspective of nonprofit organizations.