It's Social-Profit, Not Non-Profit!

In my quest to determine ROI in a charitable organization environment, I quickly came to the conclusion that applying the standard formulas used in for-profit businesses will not fit. Being a “Non-“ profit automatically means that a return on investment will be “nothing”. Since that is clearly not the case with any charitable organization, the “profit” must lie elsewhere. Reading the Good to Great Non-Profit version by Jim Collins gave me the idea that the profit generated by these agencies is actually social. He describes a social entrepreneur as someone trading in social benefit, rather than monetary benefit. That is, the efforts of so many volunteers and staff all working towards a social goal are generating a strong current of social profit that must be measurable.

It is within this measurement of social profit that I am stuck on. Sure, one easy measurement is the number of clients served. But that is more a function of the money we have, either through government grants or private donations. In almost all cases, if we had more money, we would be able to serve more clients.

Additionally, there are other social forces at work, some of which cannot be measured, although some can. For instance, we know that in the case of GMHC, where we have been fighting HIV/AIDS for over 25 years, the epidemic has changed many times, but one key fact has always remained, prevention (condom use, essentially) has prevented an uncountable number of people from being infected. But we’ll never know what the denominator is, and therefore cannot claim that we have prevented x amount of new infections.

What else can we do? This is again where I get stuck. I know that GMHC is generating social profit with 200 dedicated staff, and several thousand volunteers. So we can certainly total up the person-hours worked and certainly come up with a derivative formula that can measure something. But this would not help me with ROI because I still have the problem that it is money coming in that is driving the number of person-hours.

Perhaps another way to attack this problem is to try to come up with a “stock market” of Social Profit Organizations. The Social Profit Index could have several components:
• Private Funds to Market ratio
• Government Funds to Market ratio
• Volunteer to Market ratio
• Percentage of raising a dollar
• Black “Ink” Measure
• Concrete Social Profit as measured by clients served

Now we are reaching a point where the CIO/IT Director can start to get some numbers to plug into a model. For instance, once we have a Social Profit Index, or SPI, we can take the cost of any other administrative function, plug it into the model, get the return on the investment.

Additionally, we can look at only those areas of interest that we might want to impact, or areas that would be impacted differently with different types of technology. So, for example, we can measure ROI on raising private funds, or requesting government grants on the one hand, but also measure the impact of IT, specifically, on the SPI. We can finally begin to measure the validity of new projects, whether they fit the mission or are an expansion to the mission. In the next section, we’ll explore a way to measure these numbers across organizations in a meaningful way. Also, this might be used to provide an actual stock market Web site, where people could research their favorite charities and decide how best to spend their money. This could then in turn contribute yet another significant piece of information, a “trading value” that would be included on the site.

Technology in the World of Social Profit Organizations

If you're reading this, you've probably read my profile and see that I'm the Director, Information Systems at GMHC, which is a charitable organization. I do not like the sobriquets of "charitable" organization or "non-profit", because essentially, we are neither. We do not provide charity nor do we work for nothing. I prefer to tell people that I work in the Social-Profit sector. GMHC, and other organizations like ours generate a great deal of social profit; not only do our immediate clients benefit, but society in general most definitely profits from our work.

Since coming to GMHC, I have thought a lot about how I can measure the return on investment (ROI) of the work that my team and I contribute, in both human resource terms and purely hardware and software terms. Should I measure what our annual budget says we spend and amortize all of the hardware that was here and look at it in comparison to our revenues? Should I total the cost of running this department and create an index based on a per-hour basis that I can apply to the time saved to the end-user in our organization? I don't like any of those, because even though they have their applications in the For-[money]Profit sector, they don't truly capture what IT does in the Social-Profit sector. Or for that matter, what the true social profit is.

I am going to continue to explore this and will report my findings on this blog. Stay tuned for more Social Profit!