Exploring the Potentials of Development Indexing for Social Enterprises


As an evolving field in management education, social entrepreneurship may be characterized as the art of managing enterprises with multiple objectives or bottom lines. The art of managing business enterprises is about innovation to maximize profits for its shareholders. In contrast, the art of managing multiple bottom lines is about innovation to achieve development outcomes while ensuring financial sustainability for the enterprise (Dacanay, 2004). Depending on the nature of the social enterprises, their development outcomes may vary. Among the social enterprises studied by the author, many of these intended development outcomes are about enabling and/or improving the quality of life of marginalized sectors. These marginalized sectors include farmers, agricultural workers, fishers, indigenous communities, the entrepreneurial poor, artisans, rural women, the disabled, indigent children with cancer and persons living with HIV-AIDS. These intended outcomes may also include enhancing organizational capacities of community institutions, improving the state of the environment or protecting cultural integrity (Dacanay, 2006).

A key problem facing social enterprises and social entrepreneurs is how to measure these development outcomes (Dacanay, 2004). The author’s ongoing research on development indexing is a response to this search for appropriate measures.

What is Development Indexing?

One may define development indexing as a tool for quantifying qualitative outcomes of development interventions. Its evolution is best understood in the context of the search for appropriate indicators to measure development outcomes.

Probably the most widely known of these indices is the Human Development Index (HDI) first evolved by the United Nations Development Program in 1990 (UNDP, 2006). Its evolution may be traced to the critique of the Gross National Product (GNP) as a measure of development at the country level. The HDI is a composite development index based on the state of health, education and real Gross Domestic Product (GDP) per capita of a country. A formula for computing the index using the aforementioned factors allows each country to have a score for its level of human development on a scale of zero to one (0-1). The closer the score is to one (1), the higher the country’s level of human development. For 2005, Norway topped the HDI ranking with a score of 0.963. At the bottom is Niger (177th), with an HDI of 0.281. (Watkins et al, 2005).

Other development indices that have been evolved include the Human Poverty Index (UNDP, 2006), the Quality of Life Index (Action for Economic Reforms-Social Watch Philippines, 2006), the Calvert-Henderson Quality of Life Indicators (Calvert Group, 2006), the Civil Society Index (CIVICUS, 2006), the Basic Capabilities Index (Social Watch, 2006), the Gender-related Development Index (UNDP, 2006) and the Gender Equity Index (Social Watch, 2006).

Exploring Development Indexing Among Social Enterprises: Five Cases

While development indexing has already gained wide acceptance and use to measure various aspects of human development or deprivation at the level of countries or societies, the author has noted that its use has not been optimized by social enterprises (SEs) and social enterprise resource organizations (SERIs) to measure their outcomes. The author has observed that while SEs and SERIs are able to monitor outreach by counting how many individuals, groups or communities they reach or provide services to, their qualitative outcomes are usually described in anecdotal narratives or illustrative cases. A number do periodic impact studies, some with and some without the assistance of external consultants. Among the thirteen (13) cases of SEs and SERIs studied by the author in 2004 across four Asian countries, eight (8) defined their qualitative development outcomes through descriptive narratives or illustrative cases while five (5) employed impact assessments. Among the five (5), one evolved and used what may be considered a development index.[1] One of the conclusions drawn by the author from the study was the importance of research to assist social entrepreneurs define appropriate performance indicators of development outcomes (Dacanay, 2004)

This paper is an initial exploration into the potentials of development indexing as a tool for measuring social enterprise outcomes. It studies the evolving practice of development indexing among five social enterprises (SEs) and social entrepreneurship resource institutions (SERIs) in the Philippines with the end in view of showing the potentials of evolving a Development Indexing Methodology for SEs and SERIs.

The five cases show various levels of evolution and use of a form of development index. The five cases are:

  • The Center for Community Transformation (CCT) and its Microfinance Partners’ Level of Development Index (MPLDI);
  • The Community Crafts Association of the Philippines (CCAP) and its Producers’ Organizational Performance (POP);
  • The Philippine Rural Reconstruction Movement (PRRM) and its partners’ Organizational Capability Index (OCI);
  • The Cancer Warriors Foundation, Inc. (CWFI) and its Quality of Life Index of Kids with Cancer (QLI of KWCs); and,
  • The Foundation for a Sustainable Society, Inc. (FSSI) and its Eco-Enterprise Index.

CCT and its Microfinance Partners’ Level of Development Index (Callanta, 2006; De Jesus, 2003)

CCT is a faith-based organization providing microfinance and other services to the entrepreneurial poor. The Microfinance Partners’ Level of Development Index was evolved as a framework for segmenting their microfinance partners and defining the qualitative outcome of their intervention (See Box 1). The MPLDI serves as a tool for determining CCT’s impact in transforming the lives of their partners from being self-employed Investor-Borrowers (Level 1), to becoming Investor-Employers as their microenterprises grow (Level 2), and finally to becoming Social Investors in the community (Level 3). All partners are considered investors of CCT as their savings are treated as investments in their microfinance program.

While CCT still has to develop rating instruments to guide its staff and partners on the use of the tool, CCT’s President Ruth Callanta pointed to a number of processes and activities where the framework as described was particularly useful.

During their planning sessions, the usefulness of the evolving tool for financial product planning as well as training needs analysis and module development became evident. Ms. Callanta pointed out, “It became clear to us that different segments of partners would have different loan requirements. For example, first time partners coming in as Investor-Employers (Level 2) would immediately need bigger loan amounts so should not be required to start with Php 4,000 like those who come in as Investor-Borrowers (Level 1). It became clear as well that our Level 2 partners should be the ones targeted for entrepreneurship modules while our Level 3 partners should be targeted for our servant leadership modules.”

As CCT has set up a cooperative to better manage its microfinance program, Ms. Callanta also pointed out the usefulness of the evolving tool as basis for defining who among their microfinance partners would be eligible for regular cooperative membership: “The proposed policy is for our regular members to come from the ranks of our Level 3 partners.”

Microfinance Partners’ Level of Development Index

  • Level 1 (Investor-Borrowers) – CCT partners who were self-employed through livelihood projects financed by loans from CCT
  • Level 2 (Investor-Employers) – CCT partners who had grown their micro-enterprises to a scale where they are able to hire a workforce, thus the term “employers.”
  • Level 3 (Social Investors) – CCT partners from Level 2 who had developed the capacity and are consciously contributing to development projects and initiatives in their communities.

Source: Callanta, 2006; De Jesus, 2003

CCAP and its Producers’ Organizational Performance (Sadorra, 2006; Gomez, 2002; CCAP, 2006)

CCAP is an intermediary marketing organization providing marginalized producers of handicraft access to export markets using the principles of fair trade. Its Producers’ Organizational Performance Rating Instrument (POPRI) was evolved by CCAP to measure the relative performance of the producers it directly organized and assisted (See Box 2). The instrument assesses four areas of performance: entrepreneurial skills, resource management skills, organizational management and functional leadership skills, and community networking skills.

All four areas are given equal weight. Aspects considered in the area of entrepreneurial skills include, among others, the ability to cope with orders, knowledge and skill in product costing, timely delivery of products, quality of products, and expanded market for products (See Exhibit 1 for the complete version of the POPRI). [2]

CCAP staff and the partner producers jointly make the assessment. The result of the assessment is used as basis for planning interventions. It is likewise used as basis for determining the relative share of producers in terms of incentive bonus. Since 1996, it has also been used as criteria for their partners’ membership to CCAP and their eligibility for election to the CCAP Board of Trustees. Since 1998, eligible partner producers have been elected to the CCAP Board of Trustees.

Producers’ Organizational Performance Rating Instrument

Four Areas of Performance (with equal weights of 100 points each):

  1. Entrepreneurial Skills
  • Formulates production plan before actual production = 15
  • On-time delivery of products = 9
  • Ability to produce good quality products. Quality control system in place = 9
  • Ability to cope with quantity of orders on time = 9
  • Regular participation in product development seminars = 9
  • System in organizing product documentation = 15
  • Knowledge and skill in product costing = 7
  • Trades with other markets other than CCAP-provided markets = 7
  • Presence of safe workplace for all producers\’ group members = 20
  1. Resource Management Skills
  • Annual sales generated = 36
  • Total worth of assets = 18
  • Complete and transparent financial records = 17
  • Check-and-balance system in processing financial transactions = 9
  • Instituted system of capital buildup for production and operations = 6
  • Judicious use of CCAP-provided funds = 4
  • Professionalism in trading relationship with producers\’ group members = 4
  • Collective decision-making on financial matters = 3
  • Has supplementary livelihood projects in place = 3
  1. Organizational Management / Functional Leadership Skills
  • Funds/policies in place for group members\’ benefits = 21
  • Annual conduct of general assembly with year-end reports ready/clean and orderly elections held = 16
  • Office systems and infrastructure in place = 13
  • Annual plans formulated in consultation with all group members = 10
  • Program operations and problem-solving processes in accordance with organizations’ By-Laws = 10
  • Regular meetings of producers\’ groups with proper attendance and documentation = 9
  • Producers’ group members abide by organizational rules and policies = 6
  • Attendance in leadership/organizational management trainings sponsored by CCAP and other alternative trading organizations = 6
  • Producers’ group officers fulfill their duties and responsibilities = 5
  • Annual compliance with legal requirements of government agencies = 4
  1. Community Networking Skills
  • Formed networks/linkages with relevant government and non-government agencies = 37
  • Participates as an organization in community activities, e.g. health, agricultural, handicraft projects = 28
  • Has received recognition for exemplary work as an organization at the village and municipal levels = 20
  • Invited to community meetings and trainings involving the craft industry =15

(Source: CCAP, 2006)

PRRM and its Organizational Capability Index (Duran, 1994; Duran, 2006)

PRRM is an NGO engaged in sustainable area development model building and advocacy. As part of its local economic development program component, PRRM seeks to empower the rural poor to set up, own, and manage cooperatives and other social enterprises. PRRM developed the Organizational Capability Index (OCI) as a proxy measure for empowerment of the people’s organizations and cooperatives they assist (See Box 3).

The OCI evaluates four main areas of organizational capability: orientation and basis of unity, sustainable area development management, organizational development, and development cooperation and advocacy. All four major components are given equal weights for a perfect score of 100 (See Exhibit 2 for the complete version of the OCI).

The second component, sustainable area development management, has five subcomponents, each with a perfect score of “5.” For the subcomponent of economic enterprise management, the organization or cooperative is given a score of “1,” “2,” “3,” “4” or “5” depending on its assessed capability. For example, it is given a score of “5” if the cooperative has self-sustaining, scaled up projects with industry and/or ecosystem linkages, benefits or contributions, but is given a score of “1” if the cooperative is still just at the level of being able to plan and set up projects.

PRRM had evolved a full blown instrument and guidelines for the use of the OCI at all levels of its organization and had fully integrated such in its planning monitoring and evaluation system. At the level of the communities served, PRRM staff engage their partners in a process of self-assessment using the tool as guide. Strengths and weaknesses of each partner are noted and tabulated to become the basis for planning capability building interventions at various levels.

Since the 90’s when the instrument was first developed, PRRM has had a continuing process of improving the instrument and practice of using such. To do this, it conducted seminars and assessment workshops among its community development officers, technical staff and managers as well as convened conferential meetings across branches to evaluate and enhance the tool and the guidelines for its use.[3]

Organizational Capability Index (OCI)

The OCI has a perfect score of 100 with equal weights given to its four main components:

  1. Group Orientation and Basis of Unity: Range of orientation covers the breadth and depth of comprehensive sustainable development, community development, sectoral awareness/consciousness, all the way down to personal benefit/self-help.
  2. Sustainable Area Development Management: Organizing, education/training, economic enterprise management, health program management, natural resource management
  3. Organizational Development: Research and analysis, PME, organizational structure and systems, member-participation, local leadership development, financial self-reliance
  4. Development Cooperation and Advocacy: Networking, claim-making, bargaining, negotiation, campaign management

OCI Rating Scale: Subcomponent on economic enterprise management (rating from 1-5, with 5 as highest)

1 – Able to plan (inclusive of feasibility evaluation and resource mobilization) and set up projects