Caught in a spin – can impact unlock a contract?

Anne Lythgoe, from the Social Audit Network shares her experiences of the roles that social accounting and impact management can play in ensuring ventures secure social investment and contracts.

I have recently had the honour of being involved in the Investment and Commissioning Panel for the Impact Management Programme (IMP). Examining a range of exciting submissions from across the country, I have read how enterprising organisations are seeking funding from the Impact for Growth strand of the IMP to raise investment for their work or write successful tenders, and in many cases to seek contracts with the Public Sector.

A healthy number of these organisations have also secured previous ‘social investment’ to help with their contract readiness.

But experience leads me to query why an ability to manage their impact will make these charities, social enterprises and ‘ventures’ more likely to secure a contract with the Public Sector?

As Adrian Hornsby wrote in an article for the same programme in October 2017:

“ventures and commissioners ‘pass like ships in the night’; and with commissioners showing hesitancy around impact, and social investors inevitably following revenues back to commissioners, the question arises as to where the essential driver for impact management can be found.”

Adrian’s article added to my questioning; what would be the motivation for managing and explaining your social impact if social investors and commissioners pass the buck back and forth between them?

Having been involved in commissioning services from voluntary, community and social enterprise (VCSE) providers for many years, I wonder if the problem for commissioners goes deeper than just a ‘hesitancy around impact’…

Perhaps, it is a wilful misunderstanding caused by austerity and the need to make financial savings and efficiencies caused by pressures on the public purse?

In their desperation to raise income to replace lost government money, public agencies are courting partners who they think will bring in additional funds, and not necessarily giving social impact the proper consideration that it should be given.

Essentially, they see social impact as a means to draw in money without fully understanding what social impact means.

Furthermore, we could be heading for a situation where the Public Sector descends into simply becoming a ‘regulator’, diminishing their commissioning role completely. With the reduced strategic contracting capacity of a local and independent organisation with responsibility for public benefit, who will encourage social impact when we have to expect all society’s ills to be addressed purely by free markets?

Caught in a spin

Back in the days of plenty when I worked for Salford’s New Deal for Communities programme, we could afford to work with our providers to understand their impact and the outcomes that they were generating for us. We could even afford to provide training in the tools and techniques which are now part of the IMP.

Now we live in a vastly different world. With the increasing squeeze on public budgets, I am witnessing an appeal from the Public Sector to charities, social enterprises and ventures to bring in other money – grant funding and social investment, for services and activities which were previously fully funded by the Public Sector.  But why would people with money invest in these services – unless there is something for them in it?

In Salford, the amount of money flowing from the Council to the VCSE sector through contracts and grants has reduced by over 40% in the last 5 years. Our research shows that the middle is falling out of the sector – small community groups which rely on volunteers continue to thrive, their members driven by a shared interest in tackling unfairness, poverty and inequality in today’s society; and the larger ‘enterprises’, many of whom are national organisations or Public Sector spin outs, continue to succeed in contracting.

This leaves small and medium sized ‘ventures’ caught in a spin between the Public Sector pushing them towards grants and ‘social investment’ as means of enhancing dwindling budgets; and social investment providers offering support for them to be ready to contract with the Public Sector.

I believe that the Public Sector doesn’t really understand that ‘social investment’ must get a return, just like any other form of borrowing, and social investors don’t really understand the state of panic in the Public Sector.

So, should this be where impact management fits in?

Where does impact management come in?

Public Sector commissioners want services, and they want outcomes. They want people to have better wellbeing, better lives; and ultimately, they need people not to need public services so much.

Social investors want many of the same things, but these outcomes must be measurable and accountable. They need to understand the financial and the social return, they may need to see financial growth, but ultimately the investment should be repayable in both social, and often also financial, impact one way or another.

So, a better understanding and management of the impact that a charity, social enterprise or venture is creating will help bridge the gap between their investors and commissioners.

And, I believe that it is also essential for their survival.

Social Accounting in practice

The Neuro Muscular Centre (NMC) in Cheshire has been part of the GSK Impact programme for several years. Over a 10-year period, NMC has kept social accounts, covering both the impact that the Centre is having for service users, their families and other stakeholders, and how it is managing the organisation in financial terms to maximise that impact.

NMC has a greater understanding of outcomes and impact; continuous dialogue with service users, funders and commissioners which takes places to prepare the social accounts; and the ability to accurately describe their impact in tenders, funding bids and publicity. All this has helped this organisation triple its turnover and move from a position of uncertainty to one of a secure and rosy future.

By embedding social accounting and audit as a means of impact management, NMC has broadened its financial base, grown in size, and secured its position as the leading provider of services for people with neuro-muscular disease in the country.

And who should pay for this impact management? I believe that if commissioners or social investors want evidence of ‘impact’ they should also have to pay for the work evidencing the impact…

In conclusion, there will always be a need for social and community organisations to take the heat out of the public purse – social accounting and impact management are probably the best ways for them to achieve this.  Social investors and Public Sector budgets will come and go, but the people who need support from charities, social enterprises and other community based organisations will always be there!

Ultimately, I believe that the essential driver for impact management should therefore be to achieve the best possible outcomes for the people (or the environment) that an organisation supports, and in doing so making it relevant, investible and successful for the long term