Challenges and boundaries in implementing social return on investment: An inquiry into its situational appropriateness
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In: Nonprofit Management & Leadership, Vol. 31, No. 3, 01.03.2021, p. 413-435.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Challenges and boundaries in implementing social return on investment
T2 - An inquiry into its situational appropriateness
AU - Nielsen, Janni Grouleff
AU - Lueg, Rainer
AU - van Liempd, Dennis
N1 - Publisher Copyright: © 2020 The Authors. Nonprofit Management & Leadership published by Wiley Periodicals LLC.
PY - 2021/3/1
Y1 - 2021/3/1
N2 - 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.
AB - 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.
KW - Management studies
KW - accounting
KW - management
KW - nonprofit
KW - qualitative
KW - research
KW - sector
UR - http://www.scopus.com/inward/record.url?scp=85089568467&partnerID=8YFLogxK
U2 - 10.1002/nml.21439
DO - 10.1002/nml.21439
M3 - Journal articles
VL - 31
SP - 413
EP - 435
JO - Nonprofit Management & Leadership
JF - Nonprofit Management & Leadership
SN - 1048-6682
IS - 3
ER -