Local Value for Local People

In this article, Tom Levitt, author of The Company Citizen explores the use of social value and the frustration of measuring it. It appears on the City View web site. Tom will be discussing these issues at Commissioning and Procurement for Growth National Conference on the 27th March in London.

 

As a CEO in the social finance sector said recently: ‘More people are measuring social value than creating it.’ I understand that frustration – though there are certainly more of both doers and measurers than there used to be and that’s welcome.

Social value and impact have become part of the vocabulary not just of service delivery but of all activity in the three sectors, public, voluntary and private.

One very good reason for this is that having one eye on social value enables budget holders to deliver more from what, in the public sector, at least, are ever-dwindling budgets.

However, six years after the Social Value Act came into being, and more than a dozen since ‘Impact Investing’ became a thing, we still lack a common, agreed statement of principles, let alone a practical method of measuring and comparing the different ways in which organisations create change in society.

Whether their activity is social or environmental, implemented efficiently or otherwise, delivering outcomes against targets or simply assumed to be ‘good’, the need to measure is getting more imperative.

Commissioners, procurers and procurees, investors, donors, boards and governments, all contributors to the common good, want meaningful, cost effective and measurable outcomes.

Essentially, the Social Value Act allows (but doesn’t require) local authorities to take into account the ‘social value’ a company delivers when considering whether to accept its tender for delivering a service.

This value can justify awarding a contract to a company if it exceeds the difference in value between that bid and the lowest bid by up to a specified proportion of the contract price, normally ten per cent.

There are thresholds and limits to the Act’s scope but those who make the most of it often set their own criteria.

The Act applies to all government agencies, with large councils the most likely to use it, some specifying which types of social value they want to see delivered by which contract.

Private companies such as Fujitsu voluntarily apply the Act’s criteria to their own procurement practices.

Defined by Social Value UK as ‘…the quantification of the relative importance that people place on the changes they experience in their lives’…social value is normally expressed in monetary terms, though the processes by which this is calculated are varied and somewhat arbitrary.

This makes it difficult to offset the value against the ‘bottom line’; hence the frustration. This is less of a problem for impact investors – normally high value, outcome-driven, corporate philanthropists – who tend to invest in large scale development schemes designed to deliver long term outcomes against specific goals with a readily measurable monetary value.

This wish to quantify non-fiscal outcomes is no longer confined to the charity and public sectors. As companies sign up to deliver the UN’s Sustainable Development Goals, or simply become more aware of the commercial imperative to be ‘responsible’ in everything they do, businesses need to take seriously measurement of the social and environmental changes that they cause.

From the global to the local: a number of councils around the country have taken social value to heart and its footprint can be seen in all of their activities.

Few have done this more intensely than Preston, a city both big enough for a policy of local spending for local people to have a real, observable and positive impact and small enough for that focus to generate a sense of local community and purpose.

There are inherent problems in achieving a common approach to recording social value, not least the intellectual challenge of comparing the value of different elements of change, which includes the emotional and intellectual reward gained by the people delivering it (social value is a strong motivator of employee engagement).

There’s a common failure to distinguish between outputs, outcomes and impacts, a shortcoming which too often results in the proxy measurement of inputs posing as outcomes: ‘my company delivered 10,000 hours of volunteering this year’.

Indeed, one recently launched ‘impact measurement tool’ is no such thing, pretending to measure change by combining a handful of quantifiable inputs.

This story illustrates what’s supposed to happen when employee volunteers turn up at a community centre with their paintbrushes: the input includes the hours of labour and the paint, easily quantified.

The output is a pristine wall of a calming colour. An outcome is that users show greater respect for and pride in their facility and the impact is that this contributes, along with many other factors, to reducing community tensions. As the chain grows in complexity the direct link between the hours spent painting (itself dependent upon volunteers’ efficiency) and any reduction in street crime becomes more tenuous.

Different funders and investors may seek different outcomes.

Consider an organisation which helps teenagers at risk of entering gang culture: it provides them with support at school and counselling for their families.

Some of its operations are funded by a council contract, the rest through charitable fundraising. The council wants to see repeat juvenile offending reduced thereby saving money for public services.

A foundation wants to know how many children engage with the organisation and how community perception of young people has changed. A potential donor wants an assurance that the organisation isn’t spending excessively on administration, fundraising and running costs. And a local business has offered to provide work experience for some – though not those at high risk of offending as they pose an unacceptable reputational risk to the company (even though a positive outcome for them would create more social value than for those posing a lower risk).

There are four ways to arrive at a common approach to measuring impact or social value:

  • make it simple, aiding comparability
  • make it complex, maximising transparency, accounting for all outputs
  • compromise, pleasing no one
  • measure impacts in different but appropriate ways for different purposes

All of these approaches present challenges.

As for companies and government agencies, so for countries. GDP is an inadequate but oft-used measure of a nation’s worth, measuring as it does the value of commercial transactions (including, controversially, drug trafficking and prostitution) but excluding investment in education or culture and certainly not including the negative value of environmental damage.

Campaigners within the business world calling for ‘internalisation of externalities’ are growing in their call for negative impacts to be measured as assiduously as the positive, such that the currency of impact measurement (and, indeed, social value) should become a net figure rather than a headline one.

Perhaps the Social Progress Index or a system based on the Sustainable Development Goals should be the norm between nations? Can these myriad measures, this vortex of values, be rationalised or is a common system of assessing social value and the like an impossible dream?

In 2016 the British Standards Institution called together a variety of people interested in social value and asked us what we thought. There were broadly two camps: one believing that monetisation of social value was a goal in itself and the other that the solution was more nuanced, tending towards the fourth of the bullet point alternatives above.

Today, in 2018, BSI has established a committee of the willing to explore the practicality of a common framework and measuring system for social value, or net social change, or impact, call it what you will. We will look at the issue over 18 months and hopefully reach a consensus; part of our work will surely be to assess the different frameworks that already exist.

For example, I know of two procurement guides which allot unskilled volunteering time (an input!) a monetised common value, of £13 or £14 per hour respectively, deemed to be the typical cost to an employer of having the equivalent work done by an employee. But they disagree significantly on the value of pro bono professional advice, with one citing £25 per hour and the other £84.

Unravelling these knots is a challenge to which we must rise.

We need to alert businesses to the benefits of delivering social value in their everyday operations as much as we need charities to better report on what exactly changed as a result of their deployment of donors’ funds.

Meanwhile the public sector, always assumed to be the epitome of social value delivery, will not be reversing its shrinkage of recent years nor meeting society’s future challenges alone. Knowing what we change, for good or ill, and taking responsibility for it is both a start and a challenge for all sectors and organisations.

Tom Levitt, author of The Company Citizen


Find out more on this topic:

Commissioning & Procurement for Growth
Quantifying Social Impact in Business and Public Services
Tuesday 27th March 2018
Mary Ward House Conference & Exhibition Centre, London , WC1H 9SN
Visit the conference website

Should charities pay any tax?

How seriously should we take calls to scrap all taxes on charities? Should we do the same for businesses that do good? (Originally posted on Linked In)

When I see a senior person from charity finance arguing that charities should be exempt from all taxes I’m tempted to reach one of two conclusions: either the Chair of the Charity Tax Group, John Hemming, has forgotten what taxes (and charities) are for or he’s simply setting an Aunt Sally running to see how many salute it, if I may mix my metaphors.

Whilst mansplaining the first option I hope I can do justice to the intellectual challenge of the second.

People and companies pay tax in order to do good. Such ‘good’ comes from funding common action to address common social and other problems: a service to help us when we’re sick, to educate our children or to address poverty and social exclusion through the benefit system, for example. Whilst we can all agree that ‘the defence of the nation’ should be included we may disagree on how that’s best achieved. Meanwhile, no one can sensibly argue that we’re spending too much on social services or elderly care.

Taxation redistributes wealth and few would disagree that the richest should contribute more than those less able to (though to what extent is always good for a pub debate).

Charities enjoy several tax advantages in exchange for delivering ‘public benefit’. There’s controversy over what this means, especially where independent schools are involved. The comedian (and economist) Simon Evans recently drew attention to the absurdity of Gift Aid: the more you give to charity the more the state subsidises your giving – using money that might otherwise be used for ‘doing good’.

This slightly irrational position sees a shift of resources from organised, focused intervention at scale by the public sector and in the public interest towards chaotic, diversified investment in… lots of stuff, delivered by a host of myriad charities. Little wonder some senior people on the left are reported to be sceptical of charities as service providers – in any situation.

But not me. I think it’s right for charities to bring innovation, local expertise, caring values and alternative ways of delivering services into the public domain and right that Government partners with them in that delivery. Whilst charities should never be the vassals of government, should always have access to funding from independent sources too, professional partnerships between charities and the state frequently make great contributions to society.

I’m also in favour of businesses doing good, as I outline in my book ‘The Company Citizen’. Companies have a duty to behave responsibly in respect of community, stakeholders and the environment, and there’s a long term business case for them to be proactive in doing so. In fact, we need them to address climate change, food poverty, resource management on the international scale that only companies can.

Some argue that companies who do good should be rewarded with tax reductions; this idea should get very short shrift. After years of cuts in public spending we can see that we should not be spending taxpayers’ money in ways which aren’t focused on need. Companies that cut their carbon footprint will save money in the long term and gain a business advantage from doing so, they don’t need a tax cut to achieve that.

So we’re left with a rather uncomfortable feeling that maybe taxpayers shouldn’t be subsidising charities as much as they do, let alone singling them out for tax cuts. But charities aren’t companies and they can’t gain from ‘doing good’, which is a cost for them, not a net benefit.

Actually, other than Gift Aid and the VAT issue there’s no wholesale subsidy of charity operations, despite what recent commentators on various Oxfam issues have implied; most taxpayers’ money that goes to charities goes straight into services for those they help, often the poorest and most excluded members of society at home or abroad.

The best thing is to quietly park the ‘scrap the tax on charities’ agenda, Mr Hemming. I suggest you do so!

The ex-Minister and his Trumpian ‘Facts’

As a former MP, Tom responds to the former Charities’ minister’s attack on Oxfam – and on charities generally.

Did Rob Wilson learn nothing as the Charities’ Minister?

I never thought I’d do it. I registered as an online Daily Telegraph reader so that I could absorb the thoughts of Rob Wilson, the former charities minister who lost his Reading seat at the last election. Had the commentators quoted him correctly? Unfortunately, they had. To dismiss Oxfam as he does, as a ‘left wing pressure group’ who therefore cannot have their views taken seriously, not only lacks evidence but is wholly irrational. That he learned so little in his time in office is a poor reflection on my former profession as a Parliamentarian.

Let me first pay tribute to some very sensible Conservative supporters and members, who play key roles in many major charities. They will feel offended by the implications in Wilson’s words that passionate support for a campaign or cause is somehow unworthy. The charity world needs Conservative activists just as much as it needs passionate and conscientious people of other hues. As a serial charity chair myself, and a lifetime Labour Party member, let me assure him that I’m very aware of the need for charities to behave in ways that are not seen to be Party-political. That doesn’t mean we can’t make a case.

Not only are lefties in my position aware of our legal duties but we actually agree that charities should not behave in overtly party political ways. When I chaired the All Party Parliamentary Group on Charities I never expected them to roll over, I expected them to challenge government. In part, that’s what charities are for! We want people of all political views to share charities’ commitment to social and economic justice and join our campaigns and activities. Or perhaps Wilson believes that ‘social and economic justice’ can only be a leftwing idea? Nonsense.

Nor, Mr Wilson, do charities campaign for ‘state handouts’ as if they had a divine right to exist. State handouts, as you may have noticed, are emergency measures which are not sustainable in the long term; there’s nothing charities would like more than to not have to ask for money – not for themselves, but for their beneficiaries. The idea implicit in Wilson’s view, that having more money circulating in their economy cannot be any part of a solution to people’s poverty, is simply bizarre.

This leads to my most serious concern about the former minister’s position: his Trumpian engagement with facts. I used to chair an international development charity (not Oxfam) and I know that no charity is more committed to ‘the market’ in its operations than is Oxfam. A decade ago I watched the journey of the international organisation of which Oxfam UK is a part. They realised – and then committed to the idea – that developing effective and efficient markets is the most sustainable way of helping people with next to nothing become economically viable in places like Africa. They moved away from a focus on ‘aid’, short term alleviation of the symptoms of poverty, towards ‘development’, the honing of processes to help the poorest people help themselves. That is not communism, Rob, it is not a ‘failed left-wing economic model’ as you claim: it is the fair and inclusive operation of a market economy.

Thank goodness the rumours that predicted Rob Wilson’s next career move to be the Charity Commission were wrong. Charities, led by a politically and otherwise diverse group of people, need partnerships and friendships with Government (and political parties) but they must always be critical friends.

That’s a lesson this former minister clearly never learned.

We need to invest in active citizens

Tom’s post – If we want active citizens we need to invest in the skills of citizenship – appeared on the blog page of Civil Society Futures in September 2017.

 

Citizenship’s a wonderful thing. The very word empowers; it places identity on a plane above being a mere consumer of goods and services, a statistic or a ‘subject’ whose will is subjugated to that of some higher rank. It’s also a collective concept – citizens together – which, being inclusive, confers dignity.

But it’s also too often an abstract concept, along with the rights and responsibilities which attend it, absent from the vocabulary of those ‘just about managing’ or downright struggling. In those communities where qualifications, opportunities and confidence are low ‘citizenship values’ are too often not even of academic interest.

As a Member of Parliament I used to represent over 20 local authority wards, of which one was in the 5 per cent most deprived in the land and two more in the bottom ten per cent. In that most deprived ward disability and other benefits were the largest source of household income. Other deprivation-linked metrics – obesity, smoking, failure to breast feed, low educational attainment – were the worst in the county. The social housing estate at the heart of the ward was purpose-built; that purpose being (in the early 60s) to complement inner city slum clearance by hiding the community on a greenfield site away from established centres of population.

When a colleague from a solid working class seat said that there was ‘no tradition’ of advice surgeries in his patch, and his office received far fewer letters than mine, I plotted on a map the addresses of constituents who’d approached me for advice. Those from communities in most need, I saw, were least likely to contact their MP. My first thought was that the ability to describe difficult concepts in written English, a great tool of engaged citizenship, is often lacking in deprived areas.

To this day this isn’t an issue of native language. This community was (and is) mostly white and English-speaking; many of whom, on rare forays into writing paragraphs, would be embarrassed, shamed or let down by their inability to communicate – and they knew it. Needless to say, their understanding of democracy was, let’s say, ‘incomplete’. Their analysis of their community’s problems was perceptive but their ambitions for putting things right were limited. They had little faith in the ‘powers that be’; they weren’t active citizens – other than occasionally collaborating with neighbours where need or common interest and capacity allowed.

On that estate of 1,600 homes public services did exist: a doctor, a community centre, a nursery, primary school and library. The private sector consisted of four small shops and two pubs (one of which has since closed) and many of those employed there lived elsewhere; there was no local employment to speak of, nowhere to build skills, create useful experience, develop team working or create a sense of achievement. Business is largely absent from deprived areas – so too (as IPPR North has pointed out) is voluntary sector infrastructure.

In short, it’s as though citizenship had been designed out of the estate.

After generations of status quo classes C2DE, who live on such estates, are stirring – but not in a good way. Low electoral turnout, reflecting a genuine lack of engagement, is commonplace in such wards. When they do vote they tend to vote Labour. Or do they? The 2017 general election saw a massive 12 per cent swing to the Conservatives amongst C2DEs even though it was they who’d borne the brunt of seven years of austerity, falling buying power, benefit and service cuts. It was an ‘against’ vote, against the party which purported to represent their own interests – and (being in Opposition) had failed to improve them. In 2016 a bare majority of Britain voted for Brexit. Even Brexit supporters acknowledge that many of them voted not for ‘a new role in the world’ but against the establishment generally, officialdom, ‘them’ or just to protest the lot they had been cast in life. ‘Europe’ was a bogeyman. It’s no coincidence that the strongest correlation with voting in the referendum was with educational background: those with fewer qualifications were much more likely to vote ‘leave’.

When we talk of citizens collaborating to complement, extend or even replace public sector provision or private utilities – perhaps as an energy-purchasing consortium or simply for their own fulfilment and enjoyment – we’re generally talking of communities led by the middle class. In such places organisational skills are commonplace and resources are bestowed upon resourceful people. The language spoken has a different cultural context than on the deprived estate: it’s richer, more expressive, a more useful tool. Rational concepts like risk or consequences of actions are freely employed in planning and decision-making, fields in which the middle class have more experience. In short, whilst both working and middle class areas might appear to be dormitories their skills, capacities, confidence and ambitions are poles apart.

Citizenship isn’t just a matter of one’s relationship to a community or a social hierarchy, nor simply a measure of participation – but also of values. It reflects access to social capital, communication skills and the wherewithal, physically and intellectually, to work both collectively and with outsiders to achieve change. Culture and values cannot be imposed from without but do need feeding, nurturing, promoting. Empowerment and engagement cannot be created overnight.

Many today believe that our society must change in a way which is more devolved, more locally provided for than at present, and so it must; the era of ‘big is beautiful’ in public services is over. However, simply passing responsibility down the line assumes levels of citizenship capacity at the grass roots which the most needy communities simply cannot deliver. Three things are needed to create community confidence in such places:

  • Basic skills, especially literacy, need to be prioritised as never before, in both children and adults.
  • Brave decisions from Government and local authorities to share power – even give it away – to local communities; a long term, phased, organic process not driven by some arbitrary timetable.
  • Investment in early intervention in education, health and welfare (when programmes such as Sure Start are cancelled progress is not just ended but reversed).

Even Britons who share a common language are today far from equal in what they are able to achieve. For stability, security and shared prosperity this must be addressed; otherwise those who struggle today will be left even further behind.

What is the future of civil society?

“There are no boundaries”: a response to Julia Unwin’s dilemmas

Julia Unwin, chair of Civil Society Futures, published “three dilemmas” for civil society. Here, Tom Levitt responds.

This isn’t a dilemma: there are no boundaries. Perhaps a generation ago it helped to categorise but today it doesn’t, the approach needs to be inclusive. Whilst I welcome the idea of the ‘for purpose’ company, B Corp is a distraction, not least because it only applies to 100 small companies in UK after a decade of existence. It doesn’t answer this question: “If a ‘for profit’ company commits its entire work force to supporting a charity partner over a period, in innovative ways, producing value to both parties, is it behaving as part of civil society?” I’d say yes, of course. Does the same apply if only half the workforce is involved? Yes… and so on, ad absurdum. Where do you draw the line?

What’s the difference between a profit and a surplus? Does it really matter? The American version of ‘non-profit’ is at least defined (organisations dependent upon external funding for their survival) whereas ours isn’t so concise. The only true ‘not for profits’ are taxpayer-funded services, charities, voluntary groups – and companies that have gone bust. Social enterprises and B Corps are ‘for-profits’ but it’s what they do with their profits that makes them different from companies which exist to drive ‘shareholder value’ only, who take money out of their companies to benefit (principally) ‘the few’. Even CICs are allowed to take some of their surplus/profit out of the system! Shareholder value is very much under scrutiny as more and more business leaders, as at Unilever, argue that environmental sustainability and community engagement are actually the best ways to deliver long term shareholder value. Does that make them part of civil society? (When we say ‘not for profit’ we mean ‘not for dividend’ but that’s not very catchy!)

A well run business will regard its workforce as a community and espouse community values of engagement, representation, activism and sharing; the employee-owned John Lewis Partnership does all of these things. Does that make JLP part of civil society?

We don’t need to spend time and effort excluding people and organisations from our definition of civil society: if it has a bill and it quacks, it’s a duck. Let’s get swimming together…

Dilemma 2. Civil society is one of the places where we express affiliation and associational life is our great, and growing, strength. Many voluntary organisations invest heavily and successfully in developing an active and engaged membership. But trustees are charged with governing for today’s beneficiaries as well as future generations. Does that create impossible conflicts within organisations with growing and more engaged and voluble memberships? Do we risk the engagement of members who quite naturally will have demands and aspirations for now? Are members our stakeholders, or are they are owners?

Those conflicts can and do arise. As Martin Luther King said:

‘Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary’.

In other words, every charity should have the goal of putting itself out of business by conquering the cause of the injustice against which they fight; that’s how you serve the beneficiaries of the future. Whilst this isn’t usually a realistic (lifetime) goal it should, nevertheless, always be reflected in the mission and programme of both individual charities and civil society in general.

You identify two risks here: one, that I call the ‘philanthropist’s risk’ is that s/he may choose to fund a campaign which isn’t a priority, or in a way which is not appropriate, perhaps operating in isolation from others and possibly even undermining those with a more rational approach. Bill Gates is a star not for the quantity of money he donates to good causes but for the fact that he delivers nothing: he uses his wealth to enhance and coordinate proven ways of working by others. The ‘democratic risk’ is that the majority have the right to be wrong. A charity with ‘youth’ in its name had a very democratic structure which, over the years, delivered an elected trustee board with an average age of over 60. The membership had to be told they were wrong – a brave action – but re-organisation was well handled and it worked.

‘Membership’ – an active, engaged, controlling mass membership – is not the flavour of the month in the charity world where today ‘followers’ (in both the ancient and the modern, Facebook sense) and supporters are the most wooed. This helps protect the mission from transient changes in public mood and other influences (given appropriate safeguards) and leaner, slimmer organisations are more agile than those which are constantly looking over their shoulders to judge public or members’ moods. But a compromise is needed: the charity sector is paying a price, literally, for regarding supporters as money-fodder rather than building relationships with them.

Few businesses could be described as democratic but they certainly know how to build brand loyalty…

Dilemma 3. We know that reputation is a hugely valued asset. We gamble with it at our peril. And yet active civil society will always want to empower people to take action. Our risk frameworks and control systems may protect our reputation. But do they also dampen enthusiasm and engagement and make it difficult for people to take initiative? Does our proper desire to be business-like and professional, stop us from allowing people to take action?

The charity sector is notorious for its risk aversion and fear of failure. Whilst the latter is justifiably seen as letting down the beneficiary, the former prevents many (especially mid-sized) charities from maximising their impacts. A balance must be struck.

A good example of this is the way that charities regard business as a resource. Traditionally this is an arm’s length relationship although the charity arm is normally outstretched, palm upwards. A recent report says that in 2012 only 20 per cent of our largest charities agreed with the statement:

‘…by effectively harnessing our corporate partners’ competences and non-cash assets [our organisation] can make much more of an impact on our mission delivery objectives than through cash-based relationships’.

In 2013 it was 34, 48 in 2015 and 60 per cent agreed by 2016. Things are changing. The Dell Foundation has identified a significant shift in corporate philanthropy: given a choice between a $100,000 gift and an equivalent value in counselling, skilled volunteering or access to decision-makers only two fifths of the 700 NGOs they work with, worldwide, would today choose the cash.

I’m interested in what ‘action’ Julia have in mind in the last sentence. Some would argue that the swing from ‘public funded’ to ‘state funded’ charity-run services has both grown charity capacity and stifled innovation as it (usually) pays for reliability of pre-existing services. As state funding dries up (half of government funding to medium sized charities has already gone) that idea will be tested in years to come! One thing that stifles action, of course, is the Lobbying Act, often creating an over-compensation in a community not used to being regulated in this way.

If ‘action’ means ‘taking part in demonstrations’, forget it (useful for cause-building, no good at getting results). If ‘action’ means empowering collective activity to directly serve beneficiaries then that focus will be more important than ever. As the public sector shrinks (for evidence, look no further than care provision in relation to growing demand) the imagination, capacity and determination of civil society will be tested as never before. New forms of collaborative, integrated, collegiate, cross sector working are needed, based more than ever on local initiatives; the state may still need to coordinate but the routes to results are not paved with gold. We’ll never again go back to the halcyon days of even ten years ago…