A Bumpy Road – Adventure or Disaster?

Text by Serene Ashley Chen
Photo by Joshua Earle

While the concept of ROI (Return on Investment) has existed for a long time in business lexicon, the term Social Return on Investment (SROI) has only come up in the last decade or so. A search on Google Trends, which maps the search activity of a term over the last 10 years, reveals that ‘SROI’ only started to gain traction in 2007.

In our dialogues with over 80 interviewees for Catalyst Asia, we have found that the motivation to help others is often anchored by a personal philosophy that seeks to restore dignity to a fellow human being and reduce the distance of inequality, provided that the beneficiary in question wishes to be helped.

Beyond Measure

A sizable number of those who get involved in social causes share a genuine desire to help others that is not obscured by the lure of material gain. It follows then that the desire to level the uneven planes of existence must be a reflection of a unique nature that runs contrary to the basic tenet of Adam Smith’s theory that individuals tend to act in their own self-interest.

Every dollar that is given to an individual with no means of paying back certainly means that the giver had accepted that the financial investment and its expected returns would be inversely related. Viewed from the lens of economics, this is a puzzling phenomenon. To understand this, one must accept that the value placed on the life and well-being of a human being far exceeds the confines and need to fulfill a financial metric. This presents another dilemma – can the abstract idea of the value of life and well-being be measured? If so, should it be measured? The range of possible answers will find its resonance and its consequence between Peter Drucker’s maxim “If you can’t measure it, you can’t manage it” and William Edwards Deming’s belief that “The most important things cannot be measured”.

Magnify this individual act of giving and you will have an organised effort that may go by the name of charity, social enterprise or corporate social responsiility depending on where it falls on a continuum that spans social interests and commercial goals. Even if one were to agree that the concept of ROI may not be squarely relevant for social impact organisations given that the impact of outcomes such as “touching lives” and “bettering the quality of lives” may not fit into available methods of measurement, the struggle between the seemingly divergent commercial and social goals begs the question of sustainability.

Balancing A Difficult Scale

Given the scarcity of resources, which end of the social-commercial continuum should founders of social impact organisations prioritise? Unsurprisingly, this was a common issue that came up in our interviews. To lose sight of the social aspects of the organisation is tantamount to losing the soul of the cause. Yet, to neglect the commercial aspects is to gamble with the long-term survival of the organisation.

In addition to dealing with this conundrum, social impact organisations face a number of hurdles that are external to their chosen cause.

In the marketplace, consumer demand ensures that the supply of a product can continue. Resources are propelled by desire and channelled to finance the existence and development of an ever-enlarging economy of goods and services. In essence, individual choices collectively sustain the marketplace.

More Needs Than Hands Are Willing To Give

In the social impact sector, the demand for help is not so straightforward and singular in nature. The study of sociology posits that individual problems are often rooted in problems stemming from aspects of society itself and these interconnections inform the fabric of human societies.[1] Yet, does society intuitively accept this notion of interconnectedness and is it willing to assume responsbility for the perceived ‘personal problems’ of its citizens? In societies that celebrate the idea of self-help and emphasizes tangible returns, social impact organisations may find it hard to raise the necessary resources to deliver help to those who need it. Hence, this presents the problem of asymmetry where demand is always in excess of supply. Unless greater awareness and agreement about the reality of social imagination[2] and shared responsibility is achieved and new ways of measuring social performance are developed, the scales will remain tilted in favour of the status quo.

Yet, not all is lost. Progress is seen in the form of early signs of innovation. According to a 2013 Harvard Business Review article, “within the last two years, government agencies in the U.K., U.S., Australia, Canada and Israel at the national, state, or even county levels have begun exploring the potential of social impact bonds.” [3] If the pace of innovation and political will keeps up, there is optimism that the social impact sector will see major breakthroughs in the next decade.

The Labourers Are Few

Beyond the lack of effective funding models, the social impact sector also faces a lack of talent due to the inability of the sector to match the competitive packages of the private and public sectors. Those who do choose to join the social impact sector may do so to build social and emotional capital at the expense of financial security or comfort. The reason why social impact organisations are unable to offer competitive package is because donors often do not recognise the need to fund overhead. This deeply ingrained behaviour makes it difficult for organisations to scale.

A recommendation proposed in a Stanford Social Innovation Review article is for funders “to shift their focus from costs to outcomes. In the absence of this indicator, many funders try to understand an organisation’s efficiency by monitoring overhead and other easily obtained yet faulty indicators”.

This sentiment is echoed by a recent Asian Philanthropy Forum interview with Ming Wong, co-founder of Asia Community Ventures, a Hong Kong-based nonprofit organisation that promotes social investing and collaboration in Asia. Ming Wong said that he is a “firm believer that if you want something to be sustainable, you cannot rely solely on volunteers. A willingness to pay people for their time is a recognition that that person generates value”.[4]

In spite of these challenging external conditions, founders of social impact organisations continue to press on and contribute to the betterment of lives in communities that are sometimes far away from home and in places that are geographically remote and difficult while being fully aware of the opportunity cost of doing so.

In the economy of the social impact space, it appears that a different currency is dealt and the driving force behind the ‘transaction’ is espoused in Matthew Lieberman’s book Social: Why Our Brains Are Wired To Connect – our need to connect with other people is even more fundamental, more basic, than our need for food or shelter. [5] Perhaps, the desire to reach out to another from a position of ability to fix a situation of inability is what makes us human.

Even so, hope and desire alone cannot put food on the table. It is our view that the social impact organisations that are able to effectively deal with the external hurdles that we have highlighted will be those that have an effective organisational strategy that is characterised by a fierce commitment to keep cost structures sound and a management style that attracts good people who are willing to share in the vision of the founder and keep their eyes on the prize.

For the brave soul who has mustered the courage to take a ride on this bumpy road, the journey could turn into the greatest adventure or the most dreadful disaster – either way, one can be sure that the experience is sure to leave an indelible mark on one’s memory.

[1] Source: http://2012books.lardbucket.org/books/a-primer-on-social-problems/s04-02-sociological-perspectives-on-s.html

[2] Source: Mills, C. W. (1959). The sociological imagination. London, United Kingdom: Oxford University Press

[3] Source: https://hbr.org/2013/01/social-impact-investing-will-b/

[4] Source: http://www.asianphilanthropyforum.org/grow-asian-social-sector-fail-forward-get-overhead/

[5] Source: http://www.amazon.com/Social-Why-Brains-Wired-Connect/dp/0307889092

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Note: Catalyst Asia is a content platform that is produced and owned by the Institute for Societal Leadership (ISL). At Catalyst Asia, we believe that real life can only be captured at a particular moment in time. Everything you read here is accurate at the point in which it was recorded. We do not expect details to stay the same and we hope that they don’t. No part of this publication may be reproduced without written permission from the Institute for Societal Leadership at the Singapore Management University Administration Building located at 81 Victoria Street Singapore 188065. To get in touch, please drop us a line at serenechen@smu.edu.sg.