Critical Performance Measurement and the Legitimacy of Blended Value Accounting

1. Critical Performance Measurement and the Legitimacy of Blended Value Accounting Dr Alex Nicholls MBA University Lecturer in Social Entrepreneurship Fellow of Harris Manchester College Alex.Nicholls@sbs.ox.ac.uk

2. Critical Framework • What to measure? • Why measure? • Blended Value Accounting • Who measures? • For whom? • How to measure? • Metrics that embody ‘what’, ‘why’ and ‘who’ 2

3. Critical Framework How Can These Different Strategic Foci Be Reconciled? 3

4. Legitimacy Model • To encompass: • Multiple perspectives • Positivist v interpretive • Multiple values • Which perspectives/values count? • Accounting (‘Audit Society’) v accountability • Who determines this? • What are the consequences? 4

5. What To Measure? • Materiality • Contingency • Social constructs or positivist ‘realities’? • Whose reality? • Dynamic or set? • Referential or absolute? • Culturally contingent? • Sectorally contingent? 5

6. What To Measure? • Direct impacts • Process • Outputs • Outcomes • Indirect externalities • Public goods • Unit of analysis? • Individual: pragmatic • Aggregate/common good: cognitive • ‘Other people’: normative 6

7. What To Measure? • Individual human impacts • Highly personal • Multiple variables • Complex to measure • Timescales unclear • Externalities • Causality • Generating social capital • Bonding/bridging 7

8. Contingency Framework Ebrahim and Rangan (2010) 8

9. Logic Model Ebrahim and Rangan (2010) 9

10. Where Does Impact Lie? Designing Product or Service Producing Product or Service Marketing to Target Procuring Supplies Employing Workers Dis-enfranchised Groups Delivering Education Green Techniques Micro-finance Fair Trade Nicholls (2008) 10

11. Why Measure? • External accountability • Internal decision making • Assessment of broader social impact Mulgan (2010) 11

12. Why Measure? • Measure of mission success/failure • Inform future resource allocation • Reward success • Support initial funding proposals • Attract continuing funds • Add credibility to social ventures • Create models and benchmarks • Best practice 12

13. Theorizing Reporting Positivist Reporting data represents empirical reality (Whittington, 1986) Critical Theorist Reporting data enacts power mechanisms (Chua, 1986; Power and Laughlin, 1996; see also Lukes, 1974) Interpretive Reporting data acts as a symbolic mediator for discussion between organizational practice and stakeholders (Ryan et al, 1992; Gambling et al, 1993) Nicholls (2009) 13

14. SE Incorporation and Reporting • *There is some variation depending on turnover: see Table 2 • # IPSs can also be charities and would then be required to submit a Trustees’ Report as well as financial accounts • + Registered companies can submit unaudited financial accounts if they satisfy two or more of the following: • aggregate turnover must be £5.6 million net (£6.72 million gross) or less; • the aggregate balance sheet total must be £2.8 million net (£3.36 million gross) or less; • the aggregate average number of employees must be 50 or few Nicholls (2009) 14

15. BVA Spectrum Nicholls (2009) 15

16. Who Measures (For Whom)? • Beneficiaries/clients/customers • Funders/shareholders • Employees • Local community • Partners • Government/regulatory agencies • Third parties (civil society/media/competitors) • Society at large Perceptions Of Impact Differ For Different Stakeholders 16

17. Who Is The ‘Customer’? 17

18. Who Measures? The quality of an NGO’s work is primarily determined by the quality of its relationships with its intended beneficiaries Slim (2004) 18

19. 8 Principles Of Accountability • Inclusivity • Comparability • Completeness • Regularity and evolution • Embeddedness • Communication • Externally verified • Continuous improvement Zadek (1998) 19

20. Effective Accountability • Good measures of mission success/failure • Informs future resource allocation • Reward success • Supports initial funding proposals • Attract continuing funds • Creates models and benchmarks • Best practice • Increases legitimacy of social venture 20

21. ‘Listen First’ Jacobs and Wilford (2010) 21

22. How To Measure? GIIRS IRIS Wood and Leighton (2010) 22

23. Measurement Typology Ebrahim and Rangan (2010) 23

24. Measurement Typology Ebrahim and Rangan (2010) 24

25. How To Measure? Mulgan (2010) 25

26. Young Foundation NHS Tool • Likert Scales + data (if available) • Strategic fit • Potential health outcomes • Cost savings and economic effects • Risks associated with implementation Mulgan (2010) 26

27. Fair Trade Impacts Nelson (2009) Nelson and Pound (2009) 27

28. Fair Trade Impacts • Economic impacts • Environmental impacts • Empowerment impacts • Quality of life and well-being impacts • Gender and equity impacts Nelson and Pound (2009) 28

29. IRIS Framework • ORGANIZATION DESCRIPTION • Indicators that focus on the organization’s mission, operational model, and location • PRODUCT DESCRIPTION • Indicators that describe the organization’s products/services and markets • FINANCIAL PERFORMANCE • Commonly reported financial indicators • OPERATIONAL IMPACT • Indicators that describe the organization’s policies, employees, and environmental performance • PRODUCT IMPACT • Indicators that describe the performance and reach of the organization's products and services • GLOSSARY • Definitions for common terms that are referenced in the indicators 29

30. GIIRS 30

31. GIIRS 31

32. SROI OTS (2007) 32

33. Organizational Legitimacy A general perception or assumption that the actions of an entity are proper, appropriate, or values and beliefs desirable within a socially constructed set of norms Suchman (1995) 33

34. Organizational Legitimacy From an institutional perspective, legitimacy is…the means by which organizations obtain and maintain resources…and is the goal behind an organization’s widely observed conformance or isomorphism with the expectations of key stakeholders in the environment Dart (2004) 34

35. Legitimacy Typology Nicholls (2010) 35

36. Critical Legitimacy Framework 36

37. Stakeholder Perceptions Nicholls (2010) 37

38. Performance Legitimacy Performance Legitimacy Impact Metrics Accountability Mechanisms Data Dashboard Regulatory Associational Pragmatic Normative Cognitive Empirical (Hard) Domain Interpretive (Soft) Domain Nicholls (2010) 38

39. Performance Legitimacy? 39