[NLA] Social Return on Investment

[Heidi Gilman]

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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