Returning to return on investment

Posted on 12/02/2016 by Ed Hammond. Tags: practice guides, return on investment, social value

Ensuring that public money delivers clear, positive outcomes to those who use public services is at the heart of good decision-making. Unless we have a clear idea of what the projected outcomes are from the decisions we take, and a sense of whether those outcomes are worth the monetary investment needed to make them happen, we can’t know that resources are being spent in the right way on the right things.

This has always been important, but with councils now managing much smaller resource bases, getting it right is more important than ever. Leaders and Chief Executives also need reassurance that every part of the business is contributing effectively to improving outcomes.  We think that strong and effective scrutiny can help with this. Our new report looks in detail at social return on investment, offering a detailed primer on some of the key principles for scrutiny practitioners as well as some practical tips on weaving it into councils’ scrutiny work.

We’ve been interested in the idea of social return on investment, and the concept of social value, for a while now. My colleague Su Turner put it at the centre of work she undertook a few years ago on health inequalities .

We thought the time was right to revisit the topic, and have now published a comprehensive technical guide to its use in local government scrutiny, in the context of major service change and transformation.

This work has been kindly supported by Grant Thornton, the leading financial and business adviser. Grant Thornton has a well-established market in the public sector, and has been working with local authorities for over 30 years. Given that they are the largest auditors of local government, it was only natural that we should want to work together to tackle this critical issue that goes to the heart of local authorities being able to assure themselves that they are spending money well.

We decided to look at it from two angles – the social return on investment of scrutiny itself (what added value does scrutiny bring?) and using the concept of social return on investment as a hook for an investigation into a decision, or prorgramme of work, which involves a major change being made to local services, which is what the rest of this post will talk about.

SROI is informed by the principles of social value. We don’t look in too much depth in the report at social value, on which we have published a briefing before and there are a lot of excellent guides already out there. But it does provoke us to think much more carefully. The essence of SROI for us is the measurement of inputs against the impact, and value, of decisions. Quite apart from the need to undestand what those inputs and outputs are, this requires that there is a mindset within the authority which encourages and embraces SROI as a critical tool which sits at the centre of the decision-making process, rather than an add-on. The amount of research and critical thinking required to underpin the meaningful use of SROI as a too should not be underestimated, but we think that scrutiny can be part of a process to encourage change in local authorities, provoking senior decision-makers to reflect on the fundamental rationale that sits behind those change plans.

An obvious example of this culture change is the need to shift focus from organisation itself onto the experience of users. “Customer insight”, the idea of getting a much more fundamental understanding, through analysis of a wide range of data such as conversations with people, about their needs and how they currently experience the services provided to help them, is not a new idea but is seen as potentially resource-intensive. It is not something that comes naturally to organisations who might prefer to rely on demographic data and information seen as less “anecdotal” to make decisions as to where demand and value lies. But this is one critical area where the scrutiny process can help, by mediating that conversation with local people and bringing to bear councillors’ unique insight and perspectives as local representatives.

The report also has some useful advice for scrutiny practitioners on the use and analysis of options appraisals, risk management and the design and use of performance management systems which reflect SROI principles.

We’ve written it not only for scrutiny practitioners, but with local government Directors of Finance in mind as well. Scrutiny’s ability – with support – to tackle and promote SROI as a way of working could hold benefits for councils that will be significant for s151 officers who are working to develop a more robust and consistent approach to major change. Putting members, and scrutiny, at the heart of this process will only help to raise its profile, cement it within local ways of working, and improve social outcomes for local people.

A range of resources on social value and return on investment are available on the CfGS website. You can contact Ed Hammond for more information on these resources, and to discuss how CfGS can practically assist you to embed these principles within your workplace.