Social ROI Analysis (Cost-Benefit Analysis)

Compare the social, economic and environmental returns from each $ spent

Government and philanthropic interventions typically create many different types of benefits. School feeding for example, improves child cognition, increases learning and has an important social protection benefit. How can we systematically measure and compare this to another intervention that delivers entirely different benefits? And may have different costs?

 

Social return on investment analysis or cost-benefit analysis, is a well-known economic technique that allows an organization to measure and calculate the benefits for every $ invested. For example, Mettalytics conducted an ROI analysis on rebuilding schools destroyed in the Lombok earthquakes using recycled plastic eco-blocks. There we showed that for every $ invested, the government would return almost $15 in learning and environmental benefits.

Conducting Social ROI can help with:

  • Getting everyone on the same page about the value your organization provides: The process of conducting an ROI analysis compels everyone in your organization to clearly articulate the value of a given intervention, highlight costs and potential unintended consequences, and uncover areas where further investigation or data may be required.

  • Setting programming for increased impact: ROI analysis allows comparison between different interventions, highlighting which ones deliver more value for the level of funding available. This is especially useful for organizational programming, and can lead to increasing your expected impact by 100-fold!

  • Providing donors with compelling evidence of value-for-money: Donors are becoming ever more conscious about value-for-money. Conducting an ROI analysis allows you to demonstrate the size of benefits for every dollar spent. In our experience, communicating a return, e.g. “for every $ spent on our programs returns $10 in benefits”, is a compelling pitch, distilling all the impacts of your programs, into one easy-to-remember number.

For an interesting case study on how cost-benefit analysis can help maximize impact check out this article about how the President of Haiti was convinced to implement a highly effective program after seeing the results of social ROI analyses.

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