Measuring Social Value

This weeks article focused on measuring social impact created by an investment. Some of the tools prescribed to measure social value were indeed an interesting approach to quantifying something which I otherwise thought to be qualitative.

On reading the paper ‘Calculated Impact’ I realized (apart from the fact that some of the equations had not been printed clearly) that measuring social impact for your venture is essential but should not determine the path that your venture takes. The authors make an interesting statement by saying, '”If ambitious philanthropy is akin to sailing in uncharted waters, expected return is no GPS. But it’s a lot better that dead reckoning”. I guess this statement sums up the use of measuring social impact and its applications to my venture.

So I decided to apply these principles to my venture and see how I could measure the social impact of selling solar lamps. Now as I have said before (in my earlier presentations), the social impact for my organization is along three dimensions. The graphic given below illustrates these dimensions

.The challenge now is to figure out what are the measurable metrics along each of these dimensions.

1. Increased student learning –> Measured in hours

2. Income Generation –> Measured in Rs. ($)

3. Health and Environment –> Harder to measure. In terms of averted greenhouse gas emissions and average life expectancy.

Among the three parameters, I decided to discard the measurement of this dimension for the time being based on three factors:1. Hardest to measure 3.Uncertainty involved in measuring human health impact. 3. Time (and money) involved in measuring these impacts during the start-up phase of my venture may not be prudent.

However, I might measure this once my venture stabilizes and evolves over time.

There were certain points which did not bode too well with my quantitative, engineering mind. I list some of the ‘issues’ I had with this technique.

• Assigning a probability of outcome: How does one assign this? The article does mention that A to Z and Robin Hood (The Robin Hood factor) assigned probabilities of outcome but do not talk about why they assigned these numbers. Is it arbitrary? Or is it based on experience. If it is the latter, then what does a start-up go with? These are question I hope will be answered during this week’s lectures.
• Assigning a Philanthropic contribution: I might as well assign a factor of 1 since all the funds would go into the distribution of solar lamps. But the larger question really is a philosophical one. Does it mean that the social impact generated by my organization would be attributed in whole to the investment/philanthropic contribution? Does it discard the efforts of my employees and the board? How do we communicate this fact to the members of the organization? Would it be a demotivating factor? Interesting questions!

Metric	Social Impact Units
Increased Study Time	Increased Hours / $ invested
Income Generation	Increased $ / $ Invested

Having clearly stated what I will measure and how I shall measure it, it remains to actually measure these parameters. Since my venture has no previous data for measuring the social impact, it would be prudent to conduct an experiment ( See last week’s readings – Disciplined Entrepreneurship) and use that as a base case scenario, and improve on this as the venture expands.

To conclude, measuring social impact is highly subjective (in my view) and can be measured in a way to suite desired outcomes. One must refrain from such a measurement, keeping in mind that these metrics are like props on a stage, to only help guide and better the play. The props cannot substitute great acting and a good script.  In the end, we must be honest to ourselves -  for an honest entrepreneur wants tangible social impacts. And metrics or not, we have something else -  a tool - far more superior to any of the above ones – its called common sense. Lets use it.