Giving Mechanism 6: Social Impact Assessment
You, as a social investor, want to see whether or not, and how, your support impacts on society. For this purpose, social impact assessment is an effective tool
What is Social Impact?
Social impact means the difference between the outcome for a sample exposed to an organization's services and the outcome that would have occurred without those interventions(The Rockefeller Foundation & The Goldman Sachs Foundation. Social Impact Assessment)
How to Assess Social Impact?
Social impact assessment has been implemented in many areas, such as social science, business, and government, but in recent years, it is increasingly recognized and used in the nonprofit and philanthropic community. Venture philanthropy organizations are the leaders to invent and develop various impact assessment tools. The most notable example if the Social Return on Investment (SROI) developed by REDF.
(1) Social Return on Investment (SROI) by REDF
The idea of SROI is similar to cost-benefit analysis, but with the objective to "calculate social return." Social return is the monetized impact of an organization's programs and services, and calculated in the following steps:
(1) Quantify non-financial impact of operations per unit
(2) Translate into dollar terms per unit to achieve "social cash flows" (REDF has invented a software to do this)
(3) Sum all + discount to present value
(4) Divided by investment to date = SROI
(2) McKinsey and Company Social Impact Assessment Tool
McKinsey and Company and the Foundation Center jointly developed a tool for foundations. This will be customized for each case, but you can see what kinds of questions are asked and what approach is taken.