In the world of microfinance there are social returns to be accounted for, in addition to financial accountability. Implementing a social performance framework to conduct such accountability assessment enables organizations to understand whether their activities are indeed aligned with mission, and the extent to which it is so.
In other words, social performance is how well that mission is becoming a reality thanks to the actions of the organization. But it also includes internal factors, taking into account how the organization is run. In this way, stakeholders get a holistic view of the “social” in social enterprise organizations.
Given its comprehensiveness, a wide range of indicators are required in order to fully complete this social canvas. Depending on your organization type, you may want to complement this process using an existing standardized metrics framework. We’ll take a look at this issues but before diving in let’s take a look into the social performance concept itself
The Importance of Social Performance
For the purpose of this blog, we’ll focus on how an MFI (microfinance institution) explores how well it is executing its mission through a social performance lens.
Some of the social aspects an MFI might examine include: the services it’s offering to marginalized communities, the revenue of its clients’ businesses, the greater impact of its lending on local communities, etc.
The importance of social performance assessment can be seen in the wide array of areas covered by such an audit. The process enables an MFI, for example, to not only determine its impacts but also identify and improve lower performing areas of its portfolio or organizational structure.
The Social Performance Task Force, a global membership organization, has developed a wide array of resources to support the execution of a social performance audit. This includes guides which share best practices in social performance management for financial institutions with social missions.
They’ve outlined a five-step process to implementing their Universal Standards successfully. That process can be found here, and includes an in-depth breakdown of the necessary indicators to be thorough in this social accounting.
For a brief glimpse into how implementing social performance management helped an organization better achieve its strategic (both financial and social) goals, check out this video detailing a case study in Uganda. Notice also how, on an internal level, employees are empowered by this process, making social goals a key part of decision-making at all levels.
Indicators for Social Performance
Of course, to determine any level of social performance you need to establish indicators to measure that performance. The SP14 Audit guide defines the importance of social indicators:
Use indicators to measure your progress toward each of your social goals. The indicators you choose should be directly relevant to your social goals and should be useful for internal decision making.
As shown in this table from that same guide, indicators are mapped to the social goals that have been defined by the organization. In this case, you can see that the organization has listed a number of indicators for each goal.
The guide recommends using at least one indicator per goal, although depending on resources available, the context of the beneficiary environment, stakeholder pressure, etc., more than one indicator can be used.
Lastly, and still quite important, the organization has also defined how such indicators (i.e. the results obtained) will be used to inform decision-making. Explicitly defining this aspect of metrics is often overlooked, but is extremely important because it holds these strategies accountable to action, to decision-making, during and after they are implemented.
Aligning Standard Metrics Frameworks With Social Performance
While guides, like the audit document linked and shown above, give organizations a useful starting point to execute these processes, they shouldn’t be considered the end-all solution. Other frameworks can complement these audits, especially existing metrics frameworks which are commonly used across different social sector areas.
To give a specific example, we need look no further than the IRIS metrics. In fact, the Microfinance Information Exchange and the Social Performance Taskforce have created a document which aligns IRIS metrics to the social performance assessment process undertaken by MFIs.
We’ll take a look at an example using the same indicator shown in the image above, “% clients living in rural areas.” Given the nature of the work of MFIS, this will be a commonly used indicator. Framing it within the IRIS metrics language, Client Individuals: Rural (PI1190), enables organizations to report to external stakeholders in a reporting language that is more broadly understood (especially when compared to customized metrics).
Of course, the metrics package you choose will depend on the nuances of your organization, it’s context, impact goals, etc. A useful starting point for any social enterprise in determining indicators is its Theory of Change (TOC). In fact, the TOC-driven approach can inform your entire impact management process, and especially during a social performance audit.
Remember the social goals mentioned above? Those flow into indicator decisions -- choosing a framework like IRIS, for example -- and ultimately help create the final metrics package. The image shown here demonstrates how the TOC-driven process moves through these decisions.
With a TOC-focused approach, the Sopact Impact Cloud can help you grapple with the social performance audit, whether you are an MFI or not, leveraging its comprehensive metrics packages, and end-to-end functionality for impact management.
Read More: Impact Strategy
Written by Alan Pierce
Alan is a social sector consultant and one of the founding directors of Quantica Education, a school of social entrepreneurship in Colombia.