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Evaluation and Effectiveness of Social Enterprises

Evaluation and Effectiveness of Social Enterprises. Outline. Basics of outcomes measurement Fads and buzzwords Effectiveness. Are We Doing a Good Job?. Stakeholders demand accountability . Many enterprises invest in evaluation … …to measure outcomes .

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Evaluation and Effectiveness of Social Enterprises

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  1. Evaluation and Effectivenessof Social Enterprises

  2. Outline • Basics of outcomes measurement • Fads and buzzwords • Effectiveness

  3. Are We Doing a Good Job? • Stakeholders demand accountability. • Many enterprises invest in evaluation… • …to measure outcomes. • This informs stakeholders about the enterprise’s effectiveness.

  4. Groups to Which Social Enterprises are Accountable • Government • The nonprofit sector (peers) • Direct constituents • Clients • Donors • Trustees • Staff and volunteers • General public Mechanisms and standards differ between groups Ref. Brody 2002

  5. Accountability Mechanisms • Institutional mechanisms • Disinterested BoD • Nondistribution constraint • New models • Disclosure and reporting • Government regulation (e.g. IRS, AGs) • Private standards and accreditation (e.g. BBBs, NPO councils, FASB) • Formal evaluation • Private standards and accreditation • Donors (e.g. UW regulations) • Markets • Donors • Member-elected BoDs • Staff willingness to work • Tax payer-dictated laws

  6. The Role of Formal Evaluation • Effective enterprises subject themselves to evaluation • Regular, outside criticism • Benchmarking • Regular reassessment of objectives • Regular assessment of progress in meeting objectives

  7. Evaluation Metrics

  8. Outcomes Measurement • Outcomes • Benefits for participants during or after their involvement with a program • May relate to knowledge, skills, attitudes, values, behavior • Outcome measures • Indicators of the actual impact or effect upon a stated condition • Typically expressed as a percentage, rate or ratio.

  9. Why Measure Outcomes? • External “pull” • Increasing accountability • Competition • Funding • Internal “push” • Adherence to mission • Measure results • Strategic planning • Budgeting

  10. Outcome Levels • Initial outcomes • Most directly related to programs • Example: Children’s nutrition program raises awareness among parents • Intermediate outcomes • Link immediate program effects to ultimately-desired outcomes • Example: Parents feed their kids differently • Long-term outcomes • The ultimate goals of a program • Example: Kids are healthier • Outcome measured depends on timing

  11. Data for Outcome Measurement • Existing data • Proprietary • Secondary—group comparisons for benchmarking • Observations • Generated data • Surveys • Quantitative • Qualitative

  12. Typical Data Problems • Low sample sizes • Random distortion • Certain areas undersampled • Nonresponse • Improper survey design • Results biased • Unrepresentative observation environment

  13. Measurement Tools

  14. Outline • Basics of outcomes measurement • Fads and buzzwords • Effectiveness

  15. Fads and Buzzwords • Double bottom line • Social return on investment • Financial vulnerability • Spending nothing on fundraising

  16. The Double Bottom Line

  17. Social Return on Investment

  18. Calculating Social Return on Investment Enterprise value Value of sales - Cost of good and services sold - Operating expenses Social purpose value + Grants and gifts - Fundraising and grantwriting costs + Social cost savings - Social operating costs + Increases in Taxes Debt - Debt carried by social enterprise ___________________________________________ = Blended value

  19. Financial Vulnerability Measures High equity balance (Assets-liabilities)/Total revenues Low revenue concentration s12+s22+….=RC (s1+s2+…=1) Low administrative costs Admin costs/Total costs High operating margin (Revenues-Costs)/Revenues

  20. The right level of fundraising to demonstrate • NPOs always minimize fundraising • Maximizing revenues to spend on mission means fundraising to the point that the last dollar spent earns a dollar back • Do NPOs spend too much…or too little?

  21. The evidence

  22. Outline • Basics of outcomes measurement • Fads and buzzwords • Effectiveness

  23. Resource acquisition Do we have adequate funding? ENVIRONMENTAL ADAPTATION AND RESPONSIVENESS Client satisfaction Are our constituents satisfied? Efficiency Are we producing our desired output at minimum cost? Goal attainment Are we adhering to our mission? (Do we know our mission?) Effectiveness Must Be Understood Multidimensionally

  24. NP experts Collaborate with outside org’ns Earn income Diversify funding Measure outcomes NP executives Collaborate with outside org’ns Measure outcomes Diversify funding Know clients Earn income Effective Nonprofits:External Characteristics Light 2002

  25. NP experts Exploit technology Give staff authority Work in teams Stay “flat” NP executives Push authority downward Exploit technology Work in teams Save for crises Stay “flat” Maintain a diverse staff Effective Nonprofits:Internal Characteristics Light 2002

  26. NP experts Open communications Motivate employees Focus on fundraising Clear BoD-staff relations Seek input NP executives Open communications Motivate employees Clear BoD-staff relations Focus on fundraising Give staff freedom to take risks Effective Nonprofits:Leadership Characteristics Light 2002

  27. NP experts Use BoD Clear responsibilities Use data in decisionmaking Invest in training NP executives Plan Clear responsibilities Use BoD Track funds Effective Nonprofits: Management System Characteristics Light 2002

  28. What Does an Effective NPO Look Like to Donors? • Has an impact • Follows through on promises in service • Employees “care” about society and supporters

  29. Performance Measures:Client Satisfaction • A legal status and statutory base that meets its needs. • A mission statement that is current, applied, and helps to guide action • Responsiveness to beneficiary needs • Accountability to the community via the governing Board • Involvement of beneficiaries and other stakeholders in program decisions • Dissemination and communication of results and its needs • Building of coalitions, partnerships, and networks • Excellent relationships with principal government departments • Excellent relationships with principal sources of funds • A public image of integrity, cooperation, and capability

  30. Performance Measures:Resource Acquisition • Diversified financial resources, and resource development programs • Human resources to deliver service, attract resources, and promote mission. • Leadership resources who provide vision and strategic direction • Diversity in gender, age, location, and ethnicity consistent with local setting • Adequate physical resources and infrastructure in HQ, branches, sites • Intellectual capital: knowledge, judgment, unique skills and/or individuals • Purchasing and procurement skills to optimize the use of financial resources • Technology and infrastructure resources: IT, logistics, telecom, MIS • Ability to exploit interactions between resources

  31. Performance Measures:Efficiency • Facilitates decision-making, team development, and conflict resolution • Has effective internal communications • Has logistical capability appropriate to serve the vulnerable. • Works to develop staff, volunteer, management, and leadership resources. • Has and uses processes for organizational learning and development. • Has control and reporting via budgeting, planning, reporting, and audit • The Board provides guidance and review • Management is accountable via strategic planning and evaluation of service • Is efficient, with growing productivity and with appropriate capacity. • Uses its resources in an ethical and just manner.

  32. Performance Measures:Goal Attainment • Makes administrative plans (operations, structure, budget, resource use) • Achieves its administrative goals • Has operational planning to deliver services according to strategy • Achieves its operational goals • Evaluates outcomes against goals at strategic, program, administrative, operational levels • Uses long-term, strategic planning to achieve the mission • Achieves its long-term, strategic goals • Has a program development strategy to respond to vulnerability • Achieves its program goals

  33. Performance Measures:Adaptation and Responsiveness • To constituency change (vulnerable, political / social environments) • To resource changes, e.g. economic change • To changes in managerial practice • Adapts goals to changing circumstances • Changes actions in response to evaluations • Learns, implementing new knowledge and innovation from these scans

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