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 -