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A New Approach to Gauging Long-Term Impact in the Social Sector

A new methodology gives nonprofits a better way to measure the long-term impact of their programs.

Nonprofits have long struggled to accurately measure the long-term results of their efforts. Yet a deep understanding of long-term impact is becoming increasingly important for donors, government agencies, and social-sector organizations.

Recently, SOS Children’s Villages—a leading international NGO focused on children who are at risk of losing, or who have already lost, parental care—partnered with BCG to develop a highly effective approach for assessing impact. The new approach comprehensively measures the long-term effects of the efforts by SOS Children’s Villages, and it provides valuable insight into how the organization can improve. Much of this methodology is applicable to other organizations in the social sector.

The new assessment methodology evaluates two elements of the impact achieved by SOS Children’s Villages: the nonfinancial (or all-around) impact on individual program participants and the community, and the financial impact on society, or social return on investment (SROI).

To determine the long-term impact of programs on individual participants, the approach gleans information from external researchers' interviews with former participants of those programs. It supplements this information with qualitative research conducted through focus group discussions with former child participants and their caregivers.

The outcomes of the participants are then assessed along eight dimensions:

Each program's long-term financial impact on society is gauged by SROI, a comparison of the program's total costs with its total benefits to society. SROI is calculated using directly quantifiable elements:

  • The present value of the projected lifetime incomes of former program participants
  • The present value of projected long-term financial benefits to the children of former program participants
  • The programs’ direct financial benefits to the community, including the local spending of SOS Children’s Villages
  • The savings in government social spending that result from the ability of former program participants to support themselves and their families financially.

The SROI calculation is supplemented by a number of sensitivity tests to ensure that the picture that emerges is realistic.

Social Impact
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