Understanding a Nonprofit’s Social Return on Investment (SROI)

Typically, calculating ROI for a nonprofit is a strictly dollars and cents discussion. It focuses on how much it costs to raise money and run programs and compares that data to the organization’s offerings to assess effectiveness. Sure, selecting the right Key Performance Indicators (KPIs) to track and calculating returns on fundraising efforts are important. However, they do not always tell the whole story.

 SROI – Social Return on Investment

A traditional analysis looks at inputs like fundraising expenses and operational costs and outputs like the number of people served and geographic area covered. The goal is basically to understand how the organization is using its funds to do something beneficial. This approach works if the output is something with a clear monetary value like scholarships granted or number of meals served. However, that approach seems to fall short when attempting to measure the “unquantifiable” impact a nonprofit has on its community – things like reducing isolation, giving community members a voice, offering mentorship, preventing violence, providing acceptance for marginalized groups, or reducing homelessness. Therefore, a true analysis of a nonprofit’s impact needs to include an evaluation of their Social Return on Investment (SROI) also.  

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