Challenges and boundaries in implementing social return on investment: An inquiry into its situational appropriateness

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Nonprofit organizations (NPOs) and social enterprises are increasingly under pressure to justify their use of resources and report their impact on society. Frameworks that monetize social value such as social return on investment (SROI) have emerged as a response. The existing literature highlights many benefits and technical challenges of SROI, but largely ignores strategic and organizational learning aspects. This paper explores the use of SROI in an NPO conducting cultural heritage preservation. By analyzing the challenges managers face in agreeing on a reliable (“correct”) computation of SROI and in assessing the validity and relevance (“appropriateness”) of SROI, we seek to understand the challenges and boundaries of SROI. Challenges with a reliable computation of SROI are identifying stakeholders, the choice of proxies, the time horizons, and deadweight factors. Challenges with an appropriate SROI calculation are comparability, subjectivity, legitimacy, and resource utility. We argue that SROI calculations might not be reliable or appropriate in organizations with fuzzy purposes, broad value creation goals, broad target groups, very individual or subjective proxies, strongly lagged outcomes, complex or unobservable causality, and with lack of legitimacy among stakeholders. Organizations should not trustingly adopt SROI without being aware of these limitations.
Original languageEnglish
JournalNonprofit Management & Leadership
Volume31
Issue number3
Pages (from-to)413-435
Number of pages23
ISSN1048-6682
DOIs
Publication statusPublished - 01.03.2021

Bibliographical note

Publisher Copyright:
© 2020 The Authors. Nonprofit Management & Leadership published by Wiley Periodicals LLC.

    Research areas

  • Management studies - accounting, management, nonprofit, qualitative, research, sector

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