Research Friday: How to Measure Your Organization's True Impact
Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. This week, we're excited to have Dr. Laurie Mook join us to discuss social accounting.
I love the idea of "collective impact." We spend a lot of time and energy focusing on the impact of individual organizations, but how does that translate to the bigger picture? How might things be different if we start thinking about our collective impact?
An area I have been researching for the past number of years is a fairly new field called social accounting. Social accounting considers a much broader range of criteria than conventional accounting and combines economic, social, and environmental criteria when looking at an organization in relation to its role in the larger community. To do this, it looks at the organization's impact on a number of stakeholder groups, such as employees, volunteers, customers/clients, society-at-large, and the environment.
As a former "conventional" accountant, I found a new, yet related calling after traveling the world. Looking back, I was struck at how ahistorical and acritical my accounting studies had been. It was only when I started reading works by critical accountants (another relatively new sub-field of accounting studies) that I began to really think about how conventional accounting models have been constructed.
It was very interesting to reflect about what was included, and (perhaps even more interesting) what was excluded from accounting statements. For example, although many nonprofits rely significantly on the labor of volunteers, volunteer contributions are not included in the accounting statement, except in a very small number of cases. As a result, when looking at nonprofit accounting statements, a large portion of the picture is missing.
In my doctoral dissertation, I developed a social accounting model called the Expanded Value Added Statement, which captures the economic, social, and environmental value added of not only an organization, but also a group of organizations within a community.
Value added is not a new concept, and has been used in accounting statements in Europe and other parts of the world. It refers to a measure of wealth that is created by adding value to raw materials, products, and services that use labor and capital. For nonprofits, the deficiency of conventional accounting models in capturing value added is especially apparent in volunteer labor, which is not included in the equation, even though in the US over 8 billion hours of volunteer labor are contributed every year. In Arizona, this amounts to over 450 million hours a year. Of course, this does not necessarily have to be so. Accounting models and statements are socially constructed, so there is no reason why we can't create and adopt new models.
In talking with nonprofit organizations in Canada (where I am originally from), nonprofit financial officers were quite vocal about how the accounting statements they prepared did not reflect what their organizations were accomplishing. Yes, their Statements of Revenue and Expenditures showed how much money they raised and how they spent it, but what about the other resources that were heralded towards achieving their mission? What about the volunteer contributions?
Here is an example of the impact of showing the economic value added of volunteer contributions in a large nonprofit literacy organization based in Canada. Frontier College, with a current budget of over $5 million, had systems in place to account for the hours of program volunteers. But the organization had never looked at the value added of all their volunteers until their Director of Finance and Administration attended a workshop a few years ago on social accounting for the contributions of volunteers.
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Part of the exercise was to attribute an economic value to the volunteer contributions and look at that value in relation to the other economic resources going into the organization. It turned out that volunteer contributions amounted to 40 percent of all contributions to the organization, a fact that was of extreme interest to their board (think risk management!). Although the organization was over 100 years old and had always been heavily volunteer-led, the significance of the economic value of their volunteer contributions really hit home.
So, back to the idea of collective impact. Social accounting models offer new opportunities to think about and drive behavior towards collective goals and social change. If we focus on thinking about and measuring the collective economic, social, and environmental differences we are making by transforming raw materials, products, and services with our labor and capital, what might result?
And if you are interested in learning more about collective impact, be sure to join the ASU Lodestar Center at their Annual Nonprofit Conference on Sustainability Strategies, taking place October 13-14.
Laurie Mook is assistant professor of nonprofit studies at ASU, and moved here last year from Toronto, Canada. She would love to connect with anyone interested in further developing social accounting models that are relevant to nonprofits, co-operatives, or social enterprises (also known as the social economy!).
^  Mook, Laurie, Jack Quarter & Betty Jane Richmond (2007). What Counts: Social Accounting for Nonprofit and Cooperatives, 2nd Edition. London: Sigel Press.