The one class I’m taking this semester is managerial accounting. While I wasn’t so much a fan of financial accounting I found it an invaluable source of knowledge. Managerial accounting is much more my speed, but offers a unique challenge – a level of ambiguity in a realm of much gray and cost accounting methods that are all relative within reason.

Though it is within this space between the black and white that the accounting for social media occurs. As more and more companies look towards social media as a valid form of branding, marketing and development the question of ROI for such activities is being asked. So how do companies make the financial case for social media when so much of social media cannot be financially accounted for.

Beth Kanter has a great post entitled, Should You Quantify Love? Redux 2, that addresses a layer of this unique challenge.

I am just back from Legal Services Corporation and a keynote on ROI and Nonprofits. Stephen Downes pointed to a post by Jay Cross called “The Income Statement It Isn’t”

Jay Cross is exactly right. “It never ceases to amaze me how many people assess the cost and benefit of projects with accounting approaches developed in Venice in the five hundred years ago.” And, of course, such metrics are useless. “Organizations that make decisions based solely on things that are sufficiently tangible to be counted might as well consult a Ouija board to set their goals.”

In my keynote, I spoke about the importance of intangibles for a couple of reasons.

1.) Intangibles often come in the form of stories or anecdotes about the technology value and if used along with numbers can help make the case.

2.) The discussion around trying to quantify it – can lead to productive conversation about why the technology is important to mission. If the conversations focuses on the results, not the measurement unit.

I tried to make the point by raising the question, “Can you quantify the intangible?” Of course you can’t. But intangibles are important to note and often inform decisions.

The notion of intangibles in accounting seems almost contradictory, but as Beth states “intangibles are important to note and often inform decisions.” It’s critical to assess all the moving pieces, determine the risk associated with each and assemble a strategy that takes everything into account – not just the numbers, but intangibles and their impact on solidifying the desired outcome.

So then the other question is how does one begins to determine what activities would be valuable to the strategic picture – and therefore be leveraged to make a compelling case for resources, support and implementation. Nick Stamoulis’s post entitled, Social Networking: Are You Measuring ROI?, offers some valuable insight.

When it comes to social networking, there are a myriad of activities that involve time. Some of those activities may translate into additional business for your company, but many do not. For instance, finding and approving friends could lead to earned income if one of those friends becomes a customer, but how often does that happen?

One of the many challenges for full adoption of social media into corporations and other institutions is going to be this ambiguity of financial return. Companies are striving to attain their desired bottom-line and decisions are based on the numbers. This isn’t a new concept and has been driven into me throughout my academic and professional life.

But social media offers creative, sustainable solutions that live beyond such stringent monetary boundaries. Social media is valuable. That much has been established, but what makes it a compelling strategic direction is that the impact is not only on an organization’s bottom-line, but rather cultivates strength via relationships, confidence and loyalty – establishing a presence within a global context with an infinite reach.