Recently, I’ve been interviewed by several podcasters as well as several authors about why I created the ProSocial Valuation Service. Here’s the gist of my answers.
I started the ProSocial Valuation Service to right the systemic wrongs embedded in philanthropy.
While the last three decades has seen huge advancements in new technologies and big data, these were not being applied to the third sector.
- Nonprofits create all kinds of important public goods but because they are not “traded” on a commercial marketplace, there are no price tags attached to these goods.
- Decisions on what to fund based on things such as outputs rather than outcomes.
- Lack of summary measure of value made it impossible to compare effectiveness of grant A to grant B.
- As a result, things that can be bought and sold take on a greater significance and many important things get left out.
- Decisions are based on incomplete information about full impacts.
- Impossible for a donor to determine if the increase in public welfare is sufficient to justify the investment. Can’t answer the question: What’s the most effective way to accomplish philanthropic goals?
- Nonprofits with the best grant writers and the biggest marketing budgets attract the most funding.
- We are not able to ensure money, time and effort are going to where they can do the most good.
PSV is a framework for and accounting for this much broader concept of value. We measure social capital, a term we used broadly to refer to any public goods that benefit people and planet. We measure the social capital created by an organization, project, partnership, event or program.
We use primary research to establish causal relationships for a specific intervention.
Rather than mere inputs (resources devoted to a program) and outputs (things the program produces), PSV measures the outcomes (things that are different because that program exists) and subtracts what would have occurred without the intervention as well as any negative results, unintended consequences, etc.
We use monetary values to represent outcomes. This enables a ratio of benefits to costs to be calculated. This can be used to compare programs that have different outcomes. For example, a ratio of 3:1 indicates that an investment of $1 delivers $3 of social value. PSV is about value, rather than money. Money is simply a common unit and as such is a useful and widely accepted way of conveying value.
PSV fulfills a range of purposes. It can be used as a tool for strategic planning and improving, for communicating impact and attracting investment, or for making investment decisions. It can help guide choices that managers face when deciding where they should spend time and money.
Benefitting the entire ecosystem
For Nonprofits – measuring and communicating value in a way all stakeholders understand is crucial.
While many third sector organizations have a powerful story to tell, the social and environmental value of the impact being made 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, leading to more efficient movement of resources to the right people, in the right place, at the right time.
The age of increasing donor sophistication requires that nonprofits do more than simply share heartwarming stories about their clients. Similarly, volunteers, staff, board members, legislators and clients all want assurances that their time, money and influence are being well spent.
For Foundations – PSV enables you to do the most good for the most people most effectively.
For Corporations – PSV brings the “S” to ESG reports.
While we did not set out to value the prosocial activities of companies, brands are increasingly catalysts for social progress, grounding value creation in purpose.
To attract the best customers, talent, investors and partners, it is no longer enough to be the best in the world, we now want companies to be best for the world.
Investments in purpose take many forms such as supporting STEM education in under-served communities, providing paid time off for employee volunteer programs and leveraging brand channels to raise money for a cause.
However, the value created by such investments does not show up in standard financial reports.
And, unlike CSR reporting which is siloed, PSV assesses businesses contributions holistically.
For customers – investors, employees and community organizers, PSV answers the question of how much good is being created by Company A and how does it compare to Company B and/or its peers on the S&P 500?
For Impact Investors – PSV replaces the assumption of good with the reality. Just because you’re investing in a social enterprise does not guarantee positive impact is being created.