[NLA] Social Return on Investment

[Catherine King]

Hello Heidi:

Thank you for your explanation of SROI.  PBS ran a
special on new trends in business thinking some months
back where they focused on this and the broadening of the
definition of business and where many are recognizing
the integrative community influence business has, and
its potential for good--a good that remains only potential 
under many current self-definitions.

Perhaps we could broaden the thought to include PROI,
meaning Political Return on Investment, where education
of all adults means the "return" of a lively, inclusive, and 
dialogal political base and where non-support of adult 
education raises the many-headed hydra of growing 
poverty and ignorance in a (supposedly) freedom- and 
peace-loving culture--a short-term situation at best.

Regards,

Catherine King
.  



----- Original Message ----- 
  From: Heidi Gilman 
  To: nla at lists.literacytent.org 
  Sent: Tuesday, January 08, 2002 8:00 AM
  Subject: [NLA] Social Return on Investment


   
  Within the business community, a new term is emerging that might be useful to the literacy community -- Social Return on Investment (SROI).
   
  Definition of SROI -- Generally speaking, SROI is the measurable return to society on the activities of an organization or company.  It is defined as a "return" because it is a result of resources (financial and human) invested.  SROI differs from the more financially-focused "return on investment" (ROI) in that the units being measured are not revenue or profit, but social and/or environmental impact.  The SROI typically translates social and environmental impact into quantifiable dollars in enable a common language of returns between ROI and SROI.
   
  Acceptance of the SROI measure --  To date, you won't find a quantified SROI within the annual financial reports of most businesses.  You are beginning to find qualitative summaries of social impact and social responsibility.  But, investors are beginning to look at SROI in making their investment decisions, to choose among the new ventures presented to them.
   
  For example, a National Social Venture Competition now invites graduate students of management to create business plans that have a "dual bottom line," or are both financially self-sustaining and have a strong and quantifiable social impact.  In the past year, competition judges included powerful venture capapitalists from the business community with strong interest in funding new social ventures.
   
  My introduction --  I was one of the finalists in last year's National Social Venture Competition with a business plan focused on adult education.  The plan was acquired by LeapFrog, where I now lead the development of inexpensive hand-held technology and curriculum content for adult education.  Although my current email address ends in ".com", my personal experience encompasses non-profit, public, and for-profit organizations.  I have been the computer lab manager for a library literacy program, an elementary school reading specialist, a multimedia curriculum developer, a staff development "expert" in linguistics, and recently completed an MBA.
   
  SROI in action -- I used both financial ROI and SROI to convince LeapFrog and Knowledge Universe management to fund entry into the adult education market.  At LeapFrog, we make decisions about product development based on both greatest social need and greatest potential for sales.  As a for-profit company, we have the resources to invest significant dollars to develop ground-breaking technology.  And, we must both recover our development costs and exhibit a certain level of financial profit through sales.  In order to succeed, we must meet adult educator needs, both with a low-price point and valuable educational tools.  Although balancing social and financial returns is never easy, I feel strongly that working at this intersection has great potential for change in adult education.
   
  SROI for Adult Education -- Within my business plan, I attempted to quantify the social return on every dollar invested by LeapFrog into adult education.  While the specific numbers assigned are highly open to debate, the components of the social return I quantified were in three categories:
   
  (1) Economic Return - Increased income for literate adults; Increased tax revenues for govmt; Increased productivity for businesses; Decreased dependence on public assistance; Decreased numbers within prison population.
  (2) Education Opportunities - Increased number of students served by decreasing dependence on teachers; Increased academic success of children of parents with low literacy skills; Avoidance of expenses involved with generational cycle of low literacy.
  (3) Social Equity - Increased access to voting and civic institutions; Increased self-esteem in relation to EFF roles as parent, individual and worker; Increased access to health and human services, particularly nutrition and illness prevention.
   
  Similar work was completed by A.T. Kearney for Literacy Volunteers of America in 1999.  I will be interested in hearing more about Tom Sticht's paper.  Thanks for the link.
   
  Using SROI -- As educators, we teach students by connecting with their personal experience and interests.  We use language and vocabulary that students understand and resonate with.  As advocates for adult literacy, we must take the same approach with the business, foundation and government communities.  Even if we internally bristle at the capitalist implications of the term "return on investment", we must recognize that it is a measure by which important funding decisions are made.  
   
  Perhaps by adopting the SROI terminology we will have greater access to funds from organizations that value the return on investment concept.  Like you, a business or government agency must decide how to allocate limited funds.  Our challenge is to explain why a potential funder should choose to invest money in adult education as opposed to an alternative project. The most effective argument involves showing how the return on investment in adult education is comparatively higher, hence Tom's multiplier argument.  The logic is: an organization puts in X dollars and gets Y results which is Z% higher than alternative projects.
   
  The message of this email is that using a combination of ROI and SROI terminology worked for me and might be helpful to others in the literacy field when making arguments to businesses and perhaps government.  I was able to convince a for-profit company to begin investment in adult education.  When LeapFrog's first adult education products are released in early 2003, you will be the first judge of their impact on your students and programs.
   
  Heidi Gilman
  Product Manager, Adult Education
  LeapFrog
  Emeryville, CA
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