By Jim McLoughlin, Jaime Kaminski, Babak Sodagar Cubist Research & Consultancy Group,

1. By Jim McLoughlin, Jaime Kaminski, Babak Sodagar Cubist Research & Consultancy Group, Social Enterprise & Socio- Economic Impact Research The Business School, University of Brighton Applying the SIMPLE method of impact measurement {SIMPLE= SocialImpact forLocal Economies} Making the invisible visible conference, University of Brighton, December 2010 The Quadruple Bottom Line (4BL) and holistic perspectives on sustainability – lessons from the social enterprise sector regarding values, strategies & social impact measurement

2. Summary • Introduction • Social Enterprises in context • Research objectives and methodology • The SIMPLE Measurement model & the Quadruple Bottom Line (4BL) • Case example of applying the methodology • Linking micro impact measurement to macro measures and sustainable systems. • Warnings re measurement & some conclusions

3. Defining social enterprises “…businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.” Office of the Third Sector, 6th March 2007

4. Positioning Social Enterprises: Pearce’s Three Systems of the Economy First System Private Profit oriented Second System Public service Planned provision Third System Self Help, Mutual, Social purpose Pearce, J. (2003) Social enterprise in any town, Calouste Gulkenkian Foundation: London

5. The political context and the social enterprise sector UK Government’s vision: “To Promote dynamic and sustainable social enterprises, contributing to a stronger economy and fairer society. This is critical to the successful economic and social regeneration of many communities.” Cabinet Office & HM Treasury(2006)The future role of the third sector in social and economic regeneration: interim report,, HMSO (December 2006) Social enterprise is an idea “whose time has come.” Support for an “aggressive growth strategy” in the sector. Byrne,L (2009a) Cabinet Office Minister, Voice 09 Conference, February 2009 “ SEs are well placed to provide a blueprint for the kind of ethical and sustainable businesses that will help build a new, more balanced economy” Liam Byrne (2009b), Cabinet Office Minister, Social Enterprise Summit , May 12th, 2009 “Social enterprise is at the heart of a deep and serious reform of public services as part of the Big Society agenda”. David Cameron, Prime Minister, as quoted in www.socialenterpriselive.com 18th May 2010.

6. A business model for the future? Social enterprises could form part of a “business revolution” where social enterprises “become the business model of the future blending profit and social benefit.” Clark, M. (2009) The Social Entrepreneur Revolution: doing good by making money, making money by doing good, Marshall Cavendish Key challenges How to build capabilities in the sector to compete effectively? How to measure impact robustly, credibly and cost effectively?

7. Impact measurement: the research challenge “While many third sector organisations have a powerful story to tell, the social and environmental value of the impact is often underplayed. As we face tough economic times, It is now more important than ever that we allow for better recognition of those who create social and environmental value” Byrne, L (2009c) Cabinet Office Minister, Social Enterprise Summit , May 12th, 2009 “Whilst it is possible to measure the amount of money that social enterprises generate … it is far more difficult to measure the wider civic or social impact that social enterprises have and the benefit gained (financial or otherwise) by a community.” Haugh, H. (2006) A research agenda for Social Entrepreneurship. Social Enterprise Journal (1),1-12.

8. Research objective To develop an impact measurement model and methodology for Social Enterprises Exploring linkages between micro impact measurement and macro measures & systemic change – moving to more sustainable societies Specific Considerations of the SIMPLE project: To design and implement a social impact training programme for social enterprises Practitioner focused Build social enterprise management capabilities and contribute to improved performance of social enterprise

9. Methodology Action Research Approach Problem centred, client centred and action oriented (Lewin, K. (1946) Bryman, A. and Bell, E. (2007), Argyris, C., (1985) Reflective and experiential learning review processes (Kolb, D.A. 1984) Case Study Method Over 60 social enterprise cases Applied SIMPLE (Social Impact for Local Economies) Model A strategic approach to impact measurement (McLoughlin et al, 2009) Develop tailored impact measures

10. The SIMPLE Model: a 5 step approach McLoughlin,J. Kaminski,J, Sodagar,B et al (2008,2009)

11. The SIMPLE Model and the Quadruple Bottom Line (4BL): deep version Scope It EMBED IT Process change Process change Process change Process change McLoughlin,J. Kaminski,J, Sodagar,B et al (2008,2009)

12. The SIMPLE Impact Model & The quadruple bottom line (4BL) - Summary version TRACK IT SCOPE IT MAP IT TELL IT EMBED IT Outputs Outcomes Metrics Impacts External Drivers Financial Financial Process change Social Social Process change Mission/ Values Drivers Internal Drivers Activities Economic Economic Process change Stake holders Environmental Environmental Process change Source: McLoughlin, Kaminski, Sodagar, et al (2009)

13. Case example:Applying the 4BL & SIMPLE methodologyto the UK Community Development Finance Sector Key characteristics All are Social Enterprises – but different legal forms All are Social mission driven - different points of focus (EG: lending to financially (and often socially) excluded, local community development, local economic regeneration, social enterprise lending, Entrepreneurship). Different business models but nearly all UK CDFIs dependent on public sector subsidies or external grant funding All share “lender of last resort” role –mainstream banks reject (people, businesses and areas excluded) Target markets – 3 main Enterprise lending (often with training/mentoring support) Social Enterprises Personal Lending

14. Macro finance context: the global crisis & the unethical nature of banking “I think some of it (banking) is socially useless activity,” The financial sector had “swollen beyond its socially useful size” and seemed to make excessively large profits. (Lord Turner, UK Financial Services Authority chairman, Prospect magazine, August 2009)

15. CBS Outcomes/impact Map MAP IT: Capitalise Business Services Three of the 4BL prioritised for measurement in this SE

16. CBS: Emerging Impact Measures – A Blended value approach • Businesses created • Businesses safeguarded • Jobs created • Jobs safeguarded • Business survival rates Turnover created (Gross/ Net) Turnover safeguarded Benefits Saved Social Return on Lending Recycling of loans • Sustainability ratios: • Operating costs • Operational Self Sufficiency • Loan fund Self Sufficiency • Loan portfolio performance indicators: • Portfolio growth • Portfolio at Risk • Write off rates • Socio- economic profile of beneficiaries • – gender, IMD, age, ethnicity, area etc • Business skills development • Personal development & confidence • Social capital & connectivity • Entrepreneurship and business acumen • Financial inclusion • Stories/reflections

17. The SIMPLE Model & 4BL as a Strategic Sustainability Management tool – Measure It to Improve It TRACK IT SCOPE IT MAP IT TELL IT EMBED IT Outputs Outcomes Metrics Impacts External Drivers Financial Financial Process change Social Social Process change Mission/ Values Drivers Internal Drivers Activities Economic Economic Process change Stake holders Environmental Environmental Process change Strategic Review Source: McLoughlin, Kaminski, Sodagar, et al (2009)

18. The Times- they are a changing?- Linking micro (4BL) impact measurement to macro measures and systemic challenges “Once the credit crisis is firmly consigned to corporate history, not only will it have sent some mighty business names to the wall, it will also have been responsible for fundamentally changing the way the business world operates” “One such example may be in the way that corporate value is determined; will financial measures still be used in isolation as the measure of business value? This approach will soon be challenged” (Rodger Hill, Head of Financial Management Advisory at KPMG in the U.K.,http://www.kpmg.com/Global/en/Pages/default.aspx , accessed Oct 4th, 2010 ,

19. Marquand’s Triple Crises – Global Economy; The State; Moral economy What about the system’s ethical assumptions? Moral Crisis: Neo-liberalism casino capitalism - Now “ bankrupt” philosophy But its vision has gone unchallenged: “The unhindered, rationally calculated, pursuit of self interest in free, competitive markets was not just economically efficient but morally right.” Real culprit in this crisis “Hyper-individualistic, materialistic hedonism of the entire culture” Deep change needed – economic, constitutional & new moral culture. Prof. Marquand, D (2009) The moral economy can’t be righted until we accept our own culpability, Guardian, May 27, 2009.

20. What system for the future? Traditional Capitalism V Social & Sustainable EconomyCase for changing micro and macro-economic performance measures Profits before principles Principles before profits GDP Unconstrained Growth Social Sustainable Product MACRO Systems Profit maximisation Social Impact Max Min Environ. Damage Shareholder value Stakeholder Value MICRO Business Strategies Conventional Business Models Social Enterprise Business Models

21. Sustainable communities – multi dimensional perspectives Enabling all people …to satisfy their basic needs and enjoy a better quality of life, without compromising the quality of life of future generations. Securing the future (2005), HMG Cabinet Office, TSO

22. The (Economic)Times - they are a changing?( Bob Dylan , January 1964 Columbia Records.)http://www.last.fm/music/Bob+Dylan/_/The+Times+They+Are+A-Changin “There’s a battle outside and it is ragin’, It’ll soon shake your windows and rattle your walls. For the times they are a-changin’ ( Bob Dylan , January 1964) ‘ “I did something that challenged the banking world. Conventional banks look for the rich; we look for the absolutely poor. All people are entrepreneurs, but many don't have the opportunity to find that out.”Muhammad Yunus Grameen Bank The Chinese MEANING OF CRISIS – “be aware of the danger-but recognize the opportunity”

23. Scope to Grow the Social Economy? First System Private Profit oriented Second System Public service Planned provision Pearce, J. (2003) Social enterprise in any town, Calouste Gulkenkian Foundation: London Third System- Social Economy Mutual, Social & Environmental Purpose

24. Some Conclusions :- SIMPLE impact methodology enables organisations to report on the 4BL- Case for quadruple bottom line measurement- Sustainable systems need robust holistic measurement systems- Measurement frameworks influence behaviour change- To make micro measures underpin the macro measures.- Be careful about what we choose to measure – heed Kennedy’s warning Quadruple Bottom Line Environmental Social Economic Financial SROL Monetisation SROI picture ref: http://www.carnoc.com/

25. 42 yrs Ago-Robert F. Kennedy’s warning on using GDP measures & our unsustainable system "We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missles and nuclear warheads.... It includes... the broadcasting of television programs which glorify violence to sell goods to our children. "And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials... the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America -- except whether we are proud to be Americans." Sen. Robert F. Kennedy on March 18, 1968, speech at the University of Kansas

26. References Argyris, C., Putnam, R. and Smith, M. (1985) Action Science: concepts, methods and skills for research and intervention, San Francisco: Jossey-Bass. Bryman, A. and Bell, E. (2007) Business Research methods, Oxford: Oxford University Press. Byrne,L (2009a) Cabinet Office Minister, Speech ( press release),Voice 09 Conference, February 2009 Byrne,L ( 2009b) Cabinet Office Minister, Social Enterprise Summit Press release, Cabinet Office, May 12th, 2009 Byrne, L (2009c) Social Enterprise Summit Press release, Cabinet Office , May 12th, 2009 Cabinet Office & HM Treasury,(2006) The future role of the third sector in social and economic regeneration: interim report, Cabinet Office & HM Treasury, HMSO (December) Clark, M. (2009) The Social Entrepreneur Revolution: doing good by making money, making money by doing good, Marshall Cavendish Coffey, P. (2006) Social Impact Measurement: Methodology Assessment, Initiation Report for the SIMPLE project, SEL/University of Brighton: Brighton. Haugh, H. (2006) A research agenda for Social Entrepreneurship. Social Enterprise Journal (1),1-12. Lewin, K. (1946) Action research and minority problems. J Soc. Issues 2(4), 34-46. Lewin, K. (1947) “Group Decision and Social Change." In T. H. Newcomb and E. L, Hartley (eds.), Readings in Social Psychology. New York: Henry Holt. Maxwell,O (2007), Social Enterprise in Brighton and Hove: A profile of the sector with implications for future support and development, Brighton and Hove Business Community Partnership, In collaboration with the University of Brighton, Marquand, D (2009) The moral economy can’t be righted until we accept our own culpability, Guardian, May 27, 2009. McLoughlin,J.,Kaminski,J, Sodagar,B,Khan,S,Harris R and Arnaudo,G. Mc Brearty,S.(2008) Measuring the Impact of Social Enterprise:a Holistic Modeling Approach, Social Enterprise Research Conference, SERC) Proceedings, London, June. McLoughlin,J.,Kaminski,J, Sodagar,B,Khan,S,Harris R and Arnaudo,G. Mc Brearty,S.(2009) A Strategic Approach to Social Impact Measurement of Social Enterprises: The SIMPLE Methodology, Social Enterprise Journal , submitted May 2009) Pearce, J. (2003) Social enterprise in any town, Calouste Gulkenkian Foundation: London

27. R Kennedy’s anti GDP speech http://www.youtube.com/watch?v=77IdKFqXbUY Sen. Robert F. Kennedy on March 18, 1968, speech at the University of Kansas on the presidential campaign trail Assassinated less than 3 months later in California.