Abstract
AbstractNonprofit organizations (NPOs) and social enterprises are increasingly under pressure to justify their use of resources and report their impact on society. Frameworks that monetize social value such as social return on investment (SROI) have emerged as a response. The existing literature highlights many benefits and technical challenges of SROI, but largely ignores strategic and organizational learning aspects. This paper explores the use of SROI in an NPO conducting cultural heritage preservation. By analyzing the challenges managers face in agreeing on a reliable (“correct”) computation of SROI and in assessing the validity and relevance (“appropriateness”) of SROI, we seek to understand the challenges and boundaries of SROI. Challenges with a reliable computation of SROI are identifying stakeholders, the choice of proxies, the time horizons, and deadweight factors. Challenges with an appropriate SROI calculation are comparability, subjectivity, legitimacy, and resource utility. We argue that SROI calculations might not be reliable or appropriate in organizations with fuzzy purposes, broad value creation goals, broad target groups, very individual or subjective proxies, strongly lagged outcomes, complex or unobservable causality, and with lack of legitimacy among stakeholders. Organizations should not trustingly adopt SROI without being aware of these limitations.
Highlights
Nonprofit organizations (NPOs) and social enterprises are increasingly becoming aware of the need to measure and report their impact on society (Nicholls, Lawlor, Neitzert, & Goodspeed, 2012; Nielsen, Lueg, & van Liempd, 2019)
This paper explores the use of social return on investment (SROI) in an NPO conducting cultural heritage preservation
We argue that SROI calculations might not be reliable or appropriate in organizations with fuzzy purposes, broad value creation goals, broad target groups, very individual or subjective
Summary
Nonprofit organizations (NPOs) and social enterprises are increasingly becoming aware of the need to measure and report their impact on society (Nicholls, Lawlor, Neitzert, & Goodspeed, 2012; Nielsen, Lueg, & van Liempd, 2019). These organizations face external pressures for transparency and accountability toward stakeholders (Kroeger & Weber, 2014; Lueg, Lueg, Andersen, & Dancianu, 2016; Luke, Barraket, & Eversole, 2013; Polonsky & Grau, 2011) and an internal need for data and performance measurement for resource allocation (Arvidson, Lyon, Mckay, & Moro, 2010; Emerson & Cabaj, 2000; Lueg & Radlach, 2016). SROI can be used as a strategic tool to ensure the effective and efficient use of organizational resources (Maier et al, 2015; Millar & Hall, 2013), to measure social value (Olsen & Lingane, 2003), to foster organizational learning (Lingane & Olsen, 2004; Manetti, 2014), and to create legitimacy toward stakeholders (Cooney, 2017; Luke et al, 2013; Manetti, 2014)
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