How to demystify ROI: This road map measures business impact

How to demystify ROI: This road map measures business impact

road map to measure business ROI
ShutterstockSergei Drozd
Measuring the return on investment for corporate social responsibility requires a clear sense of direction.

This is part three of a three-part series on developing, communicating and measuring effective corporate social responsibility programs. Read part one here and part two here.

The first rule of ROI is that there aren’t any rules of ROI. At least not any widely accepted standards or rules that aren’t meant to be broken. 

Just as your signature CSR program should be unique to your business brand, strategy and culture, so should your measurement strategy.

There is no one right way to measure ROI, but here is a road map to get you on the right path, whether this is your first time measuring your CSR program or you need to course-correct.

Charting your course

Here are the five key principles of CSR measurement:

1. Involve others: Don’t go it alone. Ask internal and external stakeholders to help along the way.

2. Start with your objectives: Identify your social and business objectives first. Use those objectives to help make decisions about what you measure.

3. Focus on what you can truly affect: Don’t spread your program too thin.

4. Be transparent: Transparency brings credibility. If you’re not seeing the impact you expect, be upfront, find out why and change course.

5. Have others substantiate: Ensure partners and/or independent third parties validate your results. 

Feeling overwhelmed? Think about it as a clear, step-by-step process:

Societal objectives can be environmental or community focused.

Laser-focusing efforts on a single societal objective can be very powerful. But having several objectives, especially if the program is backed by significant resources, works as well. 

Examples can be as straightforward and high-level as improving education, job skills, nutrition or even water quality for a certain population or geographic area.

Tying targets to returns

Identifying and aligning business objectives as part of your ROI is critical. 

For example, Fortune recently announced its inaugural “Change the World” list. The 51 companies named were recognized not based on their overall “goodness,” but for “doing good as part of their profit-making strategy.” 

In other words, companies are no longer expected to “do good” just because it’s the right thing to do. Today, people recognize that doing good is good for business.

Where do you start to make your business case? According to a KPMG survey (PDF) of 4,100 companies around the world, the top five opportunities most often cited for engaging in CSR are to:

• Innovate new products and services
• Strengthen brands and corporate reputation
• Improve market position/growing market share
• Drive cost savings
• Improve employee motivation

Applying these opportunities to your business needs is a good place to start. 

Once you have your societal and business objectives, it’s time to integrate your goals into your measurement strategy. 

Too often, goals are created apart from ROI. By integrating goal setting with ROI, you ensure your goals are measurable and that what you’re measuring is aligned with what you set out to accomplish.

Lastly, identify metrics that will help track your progress. I suggest using an impact framework that includes the following categories:

• Inputs: Money, time and in-kind giving you bring to the table.

• Outputs: Direct result from an activity; usually answers the question “how many?”

• Outcomes: Changes that result from an activity; often in numbers or percentage increase/decrease.

• Impacts: Determine both societal and business impacts using third party data and research.

Success should be measured by the impact your CSR program has, not by the amount of money you give away. 

Using an impact framework will help you identify and track the data points you’ll need to tell an impact story.

In its recent corporate responsibility report, Nike summed up this strategy nicely: “We recognize that lasting change requires more than investment. It requires results. That's why we aim to measure the social impact of our community investments. We aim to move away from measuring inputs and outputs alone.”

By using the measurement principles and steps listed here, you too can develop, track and report more meaningful CSR results.