5. Using Performance Measures /

5.4 Expressing indicators in monetary terms

STANDARD:

We have considered performance measures that express the value of our work in monetary terms.

To meet the standard in full, you have examined whether it is helpful to show the financial benefits of your outcomes (using approximate financial values, often called financial ‘proxies’). Where you have chosen to use financial proxies, these are used sparingly, taken from credible sources, and are acceptable to others as showing the cost savings of your work or the value for money your work provides.

There has been a growing interest in ways that social enterprises can express the value of their work in financial terms.

This means assigning a monetary value to the outcomes that arise and is often called ‘monetization’. For example, expressing the costs placed on society from criminal reoffending, or expressing the cost savings to government of reducing homelessness.

This involves designing performance indicators that use financial approximations, or ‘proxy’ indicators. Examples of financial proxies include, savings in time/travel costs, government welfare savings, unit cost savings of state drug treatment places.


If you feel there is a need to produce economic evidence, then a good place to start is usually to go through outcomes you have already identified to see where proxy indicators might be helpful. Think about:

  • Fiscal benefits. These are cost savings to government achieved as a result of your work, e.g. reduced costs to the health service, social services, education system. Ask yourself, “Which parts of government are likely to benefit from the outcome of our work, and what influence on public expenditure do we have?”. For example, if your work helps to reduce drug misuse, you could work out the cost saving per treatment place no longer required./li>
  • Economic benefits. These already come with a monetary value and arise for individuals, companies and the local economy. For example, more income, increased turnover, and greater spending locally. Ask yourself, “Where do people, groups or businesses gain or lose financially as a result of the changes we bring about?”. For example, you could calculate the increase in wages and spending locally through your job creation program.
  • Social benefits. These are the benefits to people, families and communities (such as improved confidence, health, wellbeing). These are usually very difficult to express in monetary terms. Ask yourself, “What consequences for society can we make an economic case for?”. For example, if your work keeps children out of the care system you might draw on academic research that has estimated the long-terms costs of care for young people.

This can get complicated pretty quickly, though. The outcomes you are attempting to measure are likely to be subjective and specific to the context in which they occur. There are also many ways valuing outcomes, using different techniques and financial proxies.

It’s therefore often best to focus on just one or two outcomes that can be credibly be quantified in financial terms. It’s also best to try to use only financial proxies that come from credible sources and are acceptable to the audience you want to communicate this evidence to. You can check out the Global Value Exchange as a starting point.

So if economic evidence is required, consider carefully whether one or two financial proxy indicators will meet your needs. If you need to go further then there are a number of more involved methods you can use, including Social Return on Investment (SROI).

The Impact Practice series from the Social Enterprise Institute examines in more depth how to express your outcomes in economic terms (Course 5) and how to use this economic evidence to exert influence (Course 9).