How We Do It: Methodology


Photo: Loren Joseph

Intuitively, social initiatives create value and social good —whether it’s from increasing equality and improving well-being to reducing carbon footprints and saving an endangered species.

The ProSocial Valuation Service introduces a consistent and credible accounting of the value created by programs, organizations and partnerships designed to benefit civil society, and delivers information to better inform decisions.

The outcomes, and the values of the outcomes, are specific to the context, activity, and the stakeholders involved with the program being valued. But PSV’s methodology is consistent, proven and aligned with principles underlying social accounting and audit, sustainability reporting, cost benefit analysis, financial accounting and evaluation practice.

When creating the methodology to measure social good, we created a process and an algorithm.

Then we defined a new way of thinking about value.

One that recognizes that investments in good should be based on evidence-backed outcomes.

One that swaps judgments based on instinct or gut feeling for real data and outcomes, so opportunities can be compared like-for-like.

Our mathematical grounding, and use of primary research and transparency around the numbers, resonates equally with C-suite executives, impact investors, strategic philanthropists, foundation decision makers and elected officials.

Heart + Smart in Social Good

We use a seven-step process to get to the heart of value.

We use the same methodology for every Valuation. This allows comparisons across markets, genres and approaches.

Step One: Inputs. The starting point of the ProSocial Valuation is identifying the type(s) of social capital created. These inputs are as varied as the missions behind the world’s five million-plus nonprofits and NGOs.

Step Two: Outputs. This combines primary research and crunching reams of raw data. For example, the social good created by reducing re-offending among prisoners is greater than the mere savings of fewer prison bed days, and may include benefits like safer communities and reunited families.

Step Three: Outcomes. These take many forms such as behavior changes, attitude shifts, capacity building and neighborhood development. For each verifiable outcome we plug in the associated numbers and values. And because not all good efforts lead to good impact, we account for the negative too. For example, Toms Shoes assumed that providing free shoes would improve the overall quality of life for people receiving them. However, in-kind donations replaced local markets and hurt the economy of the community served.

Step Four: Impacts. Outcomes adjusted for the effects that would have happened anyway (baseline), for the percent of the effects caused by the intervention (attribution) and for unintended or negative results (displacement).

Step Five: Intellectual Capital. Because not everything that counts can be counted, and not everything that can be counted counts, we also value intangibles. For example, the difficulty measuring a concept such as innovation tends to favor risk-averse initiatives—which are rarely the most effective route to solving big social problems.

To account for these drivers of substantial social progress and predictors of scalability, we reviewed case studies of nonprofits from more than 40 countries, identifying six intangibles shared by those that outperformed others in their category.

They are:

  • Audacity: Big bold solutions—ones that tackle chronic problems over temporary ones and address underlying causes rather than merely treating symptoms—create more value.
  • Connectivity: Engaging with the communities being served—and creating buy-in among the many constituencies who can affect the outcomes—creates more value than top-down programs.
  • Capacity: Organizations that use data to understand trends, predict behavior and improve can create more social capital than those which operate by gut and instinct.
  • The other three intangibles that drive value are ingenuity (disrupting entrenched approaches with innovative solutions), tenacity (leveraging the time, relationships and resources required to persevere) and diversity (generating revenue from multiple sources).

 

To convert the intangible scores into currency we turned to the financial markets. Analyzing the average share of intangible assets on the balance sheets of publicly-traded companies on the world’s major stock exchanges—New York, London, Tokyo, Shanghai, Bombay, Euronext (Amsterdam), Deutsche Boerse (Frankfurt) and BM&F Bovespa (São Paulo)—each intangible is assigned a pre-defined weight. The weightings for each of the six intangibles vary but a perfect score on each adds up to 100. Our unique ProSocial algorithm also accounts for Velocity. Every city, country and region in the world has a preassigned value based on a weighted index of population, social media influence and soft power—the ability to persuade by attraction and persuasion rather than by coercion or force. Finally, we calculate the value of each intangible by multiplying its pre-assigned weight by its individual score and velocity.

Step Six: Social Capital. We add the outcomes, subtract the impacts, e.g., cost to society, what would have occurred anyway, and add the intellectual capital to arrive at the value of social capital created.

Step Seven: ProSocial ROI. Dividing the social capital created by the budget and all other non-financial costs results in the full-picture assessment of value.

ProSocial Valuation At A Glance:

  • Unlocks the promise of technology and big data to value social ROI;
  • Enables nonprofits and NGOs to demonstrate the value of their work, open up new and better sources of funding;
  • Enables donors, funders and investors to give more effectively, benchmark and forecast.

 

PSV errs on the side of fiscally conservative: 

  • We only count outcomes backed by independently verified research; 
  • We only count primary effects and do not include tertiary outcomes; 
  • We calculate only one-year, rather than lifetime, value;
  • We only count outcomes caused by NWS and do not include what would have occurred otherwise. We refer to this as the attribution percentage. For example, if an outcome generates a one-year value of $10,000 and NWS’s measurable contribution to the outcome is 20 percent, the value attributed to NWS is $2,000.

Frequently Asked Questions about the ProSocial Valuation Service

While the types of social capital created by a community sports hub are different from those created by a refugee resettlement program, our methodology is universally applicable.

To test this, we’ve conducted “beta” valuations with entities as different as the Homeless World Cup, ArtsQuest and the American Bar Association’s Fund for Justice & Education.

Q: What do you value?
A: PSV can measure the social capital (good) generated by an entire organization, or focus on a specific program or aspect of the organization’s work.

We measure across the range of issues including:

  • Social Justice: homelessness, poverty, gender equality, LGBTQ rights, refugee resettlement, diversity, criminal justice, domestic abuse
  • Sustainability: water, land, air, wildlife conservation and preservation, recycling
  • Health and Wellness: addiction, obesity, sanitation
  • Education: literacy, STEM, job skills
  • Corporate Social Responsibility programs

The types of social capital we measure include:

  • Community Capacity Building: volunteer recruitment and training, internships and mentoring
  • Advocacy: Initiatives designed to shift attitudes and behaviors.
  • Fundraising

Q: When is the best time to have a ProSocial Valuation?
A: PSV can be done as a retrospective assessment, measuring actual outcomes that occurred in previous years.

We can also provide forecasts. For example, a client with a program in five states that reduces the amount of time children spend in foster care is using our valuation projections to sell the program to additional states.

Q: From whose perspective do you value social capital?
A: We calculate the value of an initiative on behalf of civil society and the intended beneficiaries.

Q: How can PSV calculate the monetary value of an intangible outcome like increased confidence?
A: We use primary research to measure change as a result of increased confidence, such as higher high school graduation rates or fewer teen pregnancies. The value of each of these to society can be expressed in terms of savings and/or new revenue. We also calculate the additional income that corresponds to increased confidence. For example, a massive dataset such as a Wellbeing Valuation reveals that each percentage gain in increased confidence among 18 to 21-year-old minority males in Alabama is equal to a $500 increase in income.

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