Note how I use the old journalistic trick of using "six hundred percent" rather than just saying "six times". Doesn't it sound more dramatic with the word "hundred" in it? A six times return on investment is pretty darned good even without trying to hype it up, but hardly unheard of. This particular ROI is rather special though - it's a "Social ROI".

The Social ROI Network is an ambitious Scottish Government project to put metrics on the results achieved with investment in social projects and enterprises. This is an important goal as resources are scarce and public bodies are subject to an increasing level of public scrutiny. Being able to justify spending, grants and investments of public money is vital but is also extremely difficult to measure results, especially in the social enterprise space. Unlike conventional businesses which can measure health and success through well established financial metrics (not least profit and cash flow), social enterprises can contribute to the economy and to wellbeing in many other ways that are not so tangible.  In fact, for social enterprises it is these other benefits that are the very purpose of their existence.  The Social ROI Network addresses a very real need for measurement of investment impact.

At the moment I'm looking at a report on "Forth Sector", leading Scottish social enterprise, and specifically a guest house they run called "Six Mary's Place" in Edinburgh. Over three years they received grants from public bodies totalling nearly £200,000 to support them in their mission of employing and training people with mental health problems.

Thanks to the methodology created by the Social ROI Network there is now a means of calculating the impact of these grants, which shows that for every £1 spent , £6 of value is created. That’s a total of over £1.3 million of benefit from the taxpayers £200,000. I'll let you read the report yourself if you want to get into the detail, but here are just some of the components used in calculating the return:

• Direct savings to other mental health services
• Savings to other mental health services resulting from improved mental health of participants
• Welfare payment savings and income tax received (from direct employment, and from trainees who find further employment)
• Corrections to the above for things that could or would have happened anyway, to ensure the measured ROI is all down to the investment

This sounds pretty good. I'm sure you could challenge many of the details but as the report and methodology are completely open and the assumptions clearly stated the figures seem pretty credible. Furthermore standardisation of the methodology (whether you agree with the exact numbers or not) enables comparison of the effectiveness of different investments and prioritisation of those that work.

The one danger I see in the monetisation of value delivery is that it makes it easy for the numerically oriented amongst us to miss the most important point. This programme not only makes financial sense, it is also changing the lives of people who suffering from serious illness for the better.

We talk a lot about metrics in business, and my current project at Sun is about the use of metrics in driving marketing activity. One of the things we seem to be hearing from (potential - deal not final yet) purchasers Oracle is "If you can't measure it, don't do it". Very often we find measurement hard, but I think we should take heart from the innovative approach of the Social ROI Network, and dig just a little bit deeper next time we're asked to measure results...

P.S. I know that I have recently posted on "Doing Good by Doing Well" and "Entrepreneurship and Need" and thus a bit of a social theme appears to be emerging. I will try to make my next post appropriately capitalist to compensate!