Friday, 7 August 2015

Social Value Accounting doesn't always add up

I want to tell you a story about Doris and Dave.  Doris wanted to grab some bargains down the shops but she knew she wasn't that good at driving a hard bargain.  She usually got around £80 off the bill but she thought if she asked her friend Dave he'd do a better job.

Dave came with her and netted a £100 saving.

Dave was happy with his work and told everyone his personal input to help her with the shopping had generated a £100 saving.  Doris also told people that she'd saved £100 from the day too. 

If they'd both saved £100, that would be £200 - but clearly that would be double counting.  So who had generated what saving?

My view on it is as follows:

Doris was the person making the purchases.  Dave was her agent.  She would have saved £80 anyway.  Therefore the added value Dave had created was £20.

What is the importance of the above and how does it relate to social value accounting?

Well, it defines the commissioner / agent relationship - and how it should be accounted for.

Take an example where a service commissioner wants its agent to provide a service like day care.

At a naïve level you could say the agent is providing the service so it should be able to claim the social benefits for itself.

However, the commissioner is paying for the service so the social benefits should be scored against them.  The service provider is just the agent, what is really generating the social benefit ultimately is the investment being made by the commissioner.  The commissioner has every right to talk about this as the benefits generated by its investment.

If the agent is providing an element of social value it is like Dave's element not like Doris's.  In other words, if the agent is doing the job cheaper than the alternative provider then the social benefit is the cash value of the saving the commissioner is making that can be used on other things to create other social benefits.  Alternatively, if the commissioner maintains its spending overall the extra social benefit from the agent is the value of the extra units of care etc. that it is providing.

Ultimately for it to be credible social value accounting has to be sound accounting.  If everyone in the social supply chain is claiming the full social value of the service rather that simply the added value they add themselves have added, the result is just pure nonsense.

Although social value accounting is theoretical we need to be clear about what social value we are really adding from our involvement in the process.

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