Measurement Process

SMI aims to help organizations measure and value the actual results of their established human assistance programs (i.e., ex post SROIs).  We also promote the use of estimated likely or projected SROIs because they can guide efforts to collect information about benefits and costs of existing and proposed programs and may help funders and service suppliers better understand the process by which value is created and might be improved.

Ex Ante SROI Framing and Estimation

We work with experts to develop an SROI framework with working hypotheses of program benefits and costs.  We begin by having experts help us estimate what probably would happen to all prospective beneficiaries absent the proposed intervention.  Using this as a baseline, estimates are developed of all major relevant benefits, costs, and non-success risks from each funding amount requested.  The value of results for namable beneficiaries is emphasized. All other intermediate products and inputs that do not result in results are included along with lists of other not-readily-quantified benefits.  In addition, we ensure that all costs and inputs of all varieties are recognized.  All estimates are adjusted for risks using techniques similar to approaches used in financial markets to recognize, address, and price likely risks of non-success.

Once the framework is developed, it is populated with estimates obtained from program officers, experts and/or beneficiaries and revised as needed to obtain an appropriately credible estimate of expected SROIs given decision needs and the costs of obtaining information.  The framework is used to identify opportunities to increase program productivity, the likely impacts of which are themselves quantified.

SMI invites and offers to assist donors insert their values and preferences into the standardized SROI information and frameworks we and others provide. This includes concerns about program success risks, and multipliers for specific results (e.g., real income increases to people earning less than $1 per day).  This is a standard practice in commercial financial investment and commodity purchase arenas. This practice should be done in philanthropy too.

The Use of Real Incomes as a Proxy of Value

Real incomes are a widely used way of showing the quality of life beneficiaries have or can purchase.  Purchasing power parity methods are widely used to facilitate reasonable international comparisons.  We add lists of other results that are not reasonably covered by real income measures, valuing them in terms of their real income or consumption value to beneficiaries – what they would or should pay for the results.

At present, we champion the use of 10 year real income and consumption increases resulting from the evaluated program as a standard benchmark.  Ten years is enough time for beneficiaries to realize solid results, like those from high school graduation from provided services and short enough to avoid the heavy discounts of longer term future benefits that present discounted values require.

Use of Third Party Studies and Controversial Valuations

SMI often will reference thoroughly researched benefits studies in the SROI analyses we do. For example, there are respected nation-wide studies of the value of graduating from high school to students as well as of the average benefits to society.  Among the studies we reference are studies of the statistical value of life and limbs, which are widely used among policymakers in evaluating the costs and benefits of policies that, for instance, may reduce vehicular injuries or bodily harm due to environmental pollution.  We use these studies to assign values to health-related benefits, such as reduced risk of violence or illness and longer life expectancy.

We recognize that assigning a value to a human life and making policy decisions based on that valuation cannot be done without controversy.  However, these valuations are inevitably a part of decisions made not only by public policy makers but by virtually any funder of human assistance efforts when deciding to fund one effort but not another.  Our hope is that these decisions are well informed, using economists’ best estimates of costs and benefits of likely results.

Ex Post SROI Measurement

Ex post SROIs examine the benefits and costs of established programs.  SMI works with organizations and funders to validate ex ante SROI estimates by designing and, in certain cases, helping to implement cost effective monitoring and evaluation (M&E) plans. Established programs that are new to SMI are evaluated through a benefits audit, which obtains benefits and costs data from an appropriate sampling of program officers, clients, and other beneficiaries and experts.  M&E findings and audit results are evaluated to identify productivity enhancements and risk reduction measures for clients’ consideration.

SMI’s primary core competency is the valuation and measurement of charitable results. Our other competencies and activities all follow from this service. Learn more about our valuation and measurement expertise by visiting our Expertise page and about the principles underlying our approach to measuring SROIs on our Vision/Strategy page.