Measuring charities' impact through the social return on investment method can be unreliable and has limited uses, according to a new report by the Third Sector Research Centre.
The SROI framework puts a financial value on work performed and results achieved, and calculates a ratio to show how effective a charity is.
In its report The Ambitions and Challenges of SROI, the centre says the tool is being used increasingly by organisations that are competing for contracts or philanthropic funds, despite the fact that it has numerous problems.
"Although aiming for rigour, the method used leaves ample room for not only judgement that makes it possible to inflate the value created when there is no assurance system used, but also for misunderstandings regarding how to interpret and use the SROI ratios," the report says.
It can be particularly unreliable to use SROI to compare organisations, it adds.
"The SROI ratio, and the way by which it has been produced, is specific for each organisation and hence does not lend itself to cross-organisational comparison, particularly when the methods used, and judgements made, have not been identical," it says.
Dr Marlin Arvidson, one of the report's authors, said the method was likely to be increasingly used to measure the performance of voluntary organisations because it is supported by the public sector.
"But we need to pay attention to how results are used, especially as there is a tendency to adopt it as a comparative tool," she said.
"Furthermore, if it doesn't help us to understand why change happens then it may not help organisations to improve or replicate interventions."