So many organizations are still challenged to measure outcomes. Despite much interest, activity and outputs-based evaluation remains the norm. Knowing this, does encouraging the next step, i.e. valuing outcomes in financial terms, really seem like the right thing to do?
To the first point, many colleagues speak of the challenge of writing a digestible, measurable, outcome report that reflects desired change. Not to mention the design of evaluation tools that effectively measure whether an outcome has been achieved. If laying the foundation to value outcomes in financial terms (i.e. writing a clear outcome statement, designing outcome-based evaluation tools) remains such a challenge, is even thinking about assign financial value to outcomes worth the effort?
Well…yes and no.
Your stakeholder’s voice matters
On the “No” side, if the approach taken only reflects certain stakeholder perspectives, and therefore has the potential to be one-sided or missing material value1, then valuing outcomes in financial terms may not be the most effective next step. Often, material value is missing when the experience or voice of a key stakeholder has not been included in the analysis.
The absence of the “voice” of a key stakeholder will simply reproduce results that have been seen before, i.e. present value in relation to the investor’s perspective only. An end result that is similarly one-sided will be less likely to contribute to effectiveness or increased effectiveness, which is a missed opportunity for the investor. Why? Because value that includes all material perspectives ensures that the value each recipient needs to experience in order for the investment to produce results, is understood, and therefore, more achievable and routinely delivered.
Valuing outcomes in financial terms is simply a bad idea when there is too much emphasis upon financial value and too little focus on the whole value story. For example, if an investment results in a move into employment, one element of financial value would be the wage earned. But that investment could also be contributing to other things, for example the confidence to seek employment. In the absence of confidence, the employment would not happen. Without confidence, there is no value creation.
Telling the whole value story
If the value story is told without that key ingredient, only half of the context behind the investment result is provided. Bottom line, there will always be outcomes that are more easily assigned a financial proxy than others. But the whole value story must be told, otherwise the overall value expressed will remain incomplete.
Assigning financial value to outcomes is also a bad idea when the goal is to ferret out the most “valuable” programs. How does valuing outcomes inform a choice between investment in health care or justice, in youth or seniors? Answer: with great difficulty. Focusing on the most “valuable” programs, without considering community need, social or cultural context, operating infrastructure, language, existing complementary services, or the difficulty in valuing intangibles (among a long list of potential other factors), runs the risk of becoming a pointless exercise.
First, the value presented runs a huge risk of being one-sided or incomplete. Second, unless the factors between investments are directly comparable, the exercise starts off imbalanced and becomes increasingly so over time. Third, and finally, unless the material stakeholders involved have an equal opportunity to share the value of their experience, the end result will be a narrow view of the value of results, which has led to some of the current challenges regarding how to express the value of outcomes to a variety of audiences.
That takes us back to the beginning. So when is a good time to value outcomes and then to express that value in financial terms? In short,
1) When the investor and investee have an outcomes-based approach, either in practice or in the planning stage. While using existing evaluation results can certainly be an advantage, forecasting the value planned is a powerful way to identify opportunities to create value and to think through how to capture value created in the design of evaluation tools and an overall approach.
2) When what is valued is the whole story, whether or not the proxy exists to illustrate value in financial terms. Investors need context in order to understand how value is created, how it might be replicated and hopefully, grown over time. The story of value creation in a social context is more than just the financial representation of results, it is the why, where, when, who, what, and how.
3) When valuing outcomes is not about creating more or less value than someone else, but is about creating maximum value from your key stakeholders’ perspectives, including your investor’s. This is the goal to be striving for and is a fantastic reason to start valuing outcomes in financial terms, today.
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Stephanie Robertson founded SiMPACT Strategy Group in 2004 and launched LBG Canada in 2005. As the first accredited SROI practitioner in North America, Stephanie is a leading professional in the area of social impact management and measurement.