Keeping in mind the underlying value of plurality in philanthropy, each funder will find his or her own mix of strategies to support the causes they care about and each nonprofit organization will find their own strategies for effective impact – and each group will define impact in their own way. Some may call that a weakness of the sector, I see it as a strength. Social investors have a place, but I am not sure their’s is the only or best approach for all.

I am guessing Sean would agree that he thinks social investing is one effective form of philanthropy, with its own strengths and weaknesses, but its not the only and best form for all (Sean correct me if I am wrong). It is the form of philanthropy on which he is focused on promoting and improving and hats off to him and others for exploring the whys and wherefores of social investing.

I think the “binary” approach you reference may be what is leading to some of our disagreements here – it seems a little oversimplified and over “Darwinian”.

The beauty of philanthropy is there is room for all methods and all approaches. If we lose that value and say there is only one best way of funding and only one best way of operating nonprofit organizations then I think we lose what makes our sector powerful.

What I was, and still am saying, is that there is a role for social investors who wish to only fund high performing and/or high-impact organizations, and at the same exact time, there is a role for donors who wishes to fund what you are calling “inputs” like meals and shelter, and what I might call individual outcomes, like feeding a hungry person, or providing methadone to a heroin addict. Are those long-term changes for the individual? Maybe, who knows? As we know, measuring outcomes for homeless people who live on the streets is one of the most difficult things to do. If so, then there is not only a condition change for those folks (more than just counting a meal, but an actual outcome for that person), and society has one less hungry person and one less dope addict, so I’d argue that there’s societal impact, too, albeit not on a grand scale.

To go back to Sean’s original questions: “Is social investing needed? Will it lead to a more effective nonprofit sector?” Maybe, but we don’t yet have any real data to see what impact it could make on the sector if widely adopted. In isolation, though, I believe it could and would be harmful.

As soon as I hear anyone saying, we can “fix” a sector by shifting resources toward only highly performing or highly effective organizations, my radar goes up. It’s the response that I had to David Hunter’s article, it’s the response that I had to the “only two-path course” that you proposed, and it’s the same response I’m having to Sean’s new response to Aaron.

As you’ve noted, we need those non-highly performing, non-highly effective, output-generating nonprofits to continue to provide their services, at least in the short-term. As Sean said in his most recent blog post, we don’t live in Lake Wobegon where most people are above average, but again his conclusion is also binary. He concludes that as a result, “social investing must be selective, so low performing organizations will lose out.” And, if that’s the way that “social investors” wish to approach philanthropy – in its most raw and Darwinian form- fine. But my question is “Why is that necessary?” Why can’t we construct a “win/win” for the sector instead of a “win/lose”?

Asserting that if we all were social investors, we could “fix” the sector is simply wrong. Flip on a switch like that, and you’d simply devastate the sector, and the people who rely on the sector for support. We would be left with an elite few well-funded organizations that couldn’t possibly handle the multitude of needs that the sector has.

So, instead I argue a rational non-binary approach. Urge funders to look in their communities and the communities they wish to support. Find the high-performing organizations, yes, and give to them if they need your funding. Then look at the ones that are “on their way” but need a little nudge. Give them some resources and guidance to help them build capacity. And, then look at the struggling nonprofits that are targeting real issues and not doing it well. Instead of encouraging donors to shift away from those nonprofits, instead let’s encourage donors to keep them in their diversified portfolio of giving, and use their resources to help them build their capacity instead of shunning them completely. As you so eloquently stated earlier, we need to be focused on “the people who are expecting – and often desperately needing – services that will help them.” This applies to the struggling nonprofits in our sector as well as the people who need the benefit of a healthy and vibrant sector overall.

While we’re at it, let’s urge donors to fund cross-sector leadership initiatives, outcomes and performance training, intra-sector sharing of effective practices, mentorship models for new leaders or new organizations, and more. I spend my days in the trenches with these low-performing organizations, and I can tell you that they’d snap up anything that actually looked and felt like real professional development or capacity-building in a heartbeat.

What we needn’t do, and what I believe we “mustn’t” do, is believe for a moment that one strategy such as social investing is enough to “fix” this sector, especially if it has as its core premise a survival-of-the-fittest “win/lose” model. We can do better than that. We can take the committed volunteers and staff in low-performing organizations and work with them to build in effectiveness and evaluation and become higher performing. But we can’t do it if we’ve already shifted every resource we have away from them. That might feel like “charity” right now, and it can (and WILL, if human nature tells us anything) absolutely survive quite nicely alongside “social investing.”

It’s been rather difficult, taking 13 years in fact to get across to the nonprofit world how this is a work in progress. Today I discovered that some in the nonprofit arena are beginning to see things this way too.

I describe a model which derives among many influences, from Carl R Rogers and person centered counselling, a people-centered approach which takes as a fundamental predicate that people are not disposable.

http://www.ecademy.com/node.php?id=137144

Jeff

2. Should funders drive any part of nonprofits?

I must stay Aaron’s post definitely stuck with me because I feel the point of measuring impact, especially when it comes to dealing with humans. For example, in my field we deal with juvenile offenders. I have had clients come in with 10 arrest in one year, smoking marijuana, and not going to school. In one quarter/ 3 months (which is normally the reporting requirement) you may get that client into substance abuse treatment and even enrolled in school and he may not re-offend and certainly we celebrate that and we could report out the number of clients we were able to enroll into substance abuse treatment and/or school but what about the client still smoking marijuana? What if he never stops smoking but stays in school? We’ve also have found that getting someone substance abuse treatment/education doesn’t necessarily stop the negative behaviors. For example, we had a client who was employed, taking GED classes, and visiting his worker daily who got arrested for a double homicide. Did we or did we not have an impact? Maybe short term with a few success but what about long term? Or should our organization state that only short term impacts are our mission? I don’t raise these points to obtain answers on how are organization can answers these questions; we’ve been future to partner with Johns Hopkins research to fund research around some of these questions; however, I would say the majority of nonprofits aren’t in the position to hire people to fund someone to help answer those questions. I do raise the point to raise it is not necessarily as easy of a task as presented. I do thing educating/reeducating funders would help and I agree that funders should expect to dictate programming as much as to be knowledgeable in supporting organizations that our higher performance organizations. I also feel that part of that education includes the struggles that can arise in trying to measure impact.

Furthermore, I think it would be dangerous to try to apply the business world model to the nonprofit sector. Considering that most nonprofits operate in the human service sector you can never break down human life/impact in the same manner you do products. It just doesn’t equate out to dollar and cents in the same manner.

A lot of this comes down to education (or re-education) of funders. Most funders THINK they are asking for outcomes/performance management/impact, when in reality they are only asking for outputs.

I agree with David when he says that the funding organizations/individuals will likely have to drive the change.

But we in the nonprofit sector should not assume that those funders know what they are doing in this realm. In most cases they don’t. And we collectively need to figure out a way to communicate these important points AND make it more attractive to funders.

I would not exclude organizations that produce outputs such as food and shelter in the short term – they can also manage performance to ensure that they are providing quality services, even if they do not produce outcomes. They are much needed.

I also agree that we must try to lift the sector by investing in building performance management capacity. This is investment organizations often struggle to secure; making such funds (and expertise) readily available would be a significant advancement.

Do I understand you correctly that you believe organizations that never manage performance should also be funded in the long term? If so, you are right that we differ. Even small organizations can do basic performance management, and not doing so is to the detriment of clients – services may be ineffective or harmful and the organization would never know. On behalf of the people who are expecting – and often desperately needing – services that will help them, can we in good conscience accept that?

In my experience – and I have worked with many, many nonprofits of various sizes – the fact that an organization has federal or foundation funding means that they can count certain outputs and often certain outcomes, but it does not mean that they manage performance well or at all.

When David Hunter writes that “there is virtually no credible evidence that most nonprofit organizations actually produce any social value,” I believe he is referring to the fact that the vast majority of organizations have neither been through rigorous evaluation nor have in place meaningful performance management systems that resemble anything close to what Bridget so eloquently described. That jives with my experience – on the ground. I also know that David would be the last to recommend that all nonprofits go through rigorous evaluation; he operates with a continuum of evidence of effectiveness which you can see in question 18 of the Social Investment Risk Assessment we are currently testing (http://www.alleffective.org/docs/Social-Services-Nonprofit-Social-Investment-Risk-Assessment.pdf).

The larger point here is that if we – funders, donors, social investors, nonprofits – want to help the vulnerable populations nonprofits exist to serve, excellent systems for performance management must be in place. I believe that social investors and good nonprofits alike agree that this is all about people – we owe them services that have the highest likelihood possible of improving their lives. Our primary responsibility is to them, not to the nonprofits.

That means that social investors should choose one of two paths, depending on their preference: 1) invest in organizations that have rigorous evidence of effectiveness and/or are high performing; or 2) invest in building the performance management capacity of organizations that are not yet there, in which case improvement must be a pre-condition for continued funding and high performance must be expected in due course.

There is no doubt in my mind that social investing is greatly needed, and nonprofits who are willing to ask the tough questions of themselves, manage performance and do whatever it takes to serve their clients in the best possible ways are the ones that will attract investments and thrive.

I think the difference is when non-profits provide you with their logic model, inputs, outcomes, etc; they are basing this on what they believe and say their non-profit is doing. However, the reality is many non-profits are saying one thing and doing another. Performance Management stops this from happening because non-profits are forced to track daily, weekly, monthly progress towards their outcomes and can easily identify when they stray away from their intended path.

Scenario 1: A non-profit runs several tutoring centers which match 1 trained tutor with 5 children and tutoring takes place 3 times a week. (Inputs and activities)

One of their outcomes is each child will improve standardized test scores by 15 points within one year.

A year ends and children only improve scores by 12 points. The non-profit chalks this up at being close to the outcome and begins another year of tutoring.

Scenario 2: That same non-profit manages their performance and discover that only 50% of their tutors are attending the required amount of training, some centers are allowing 7 children to participate and there were 2 weeks during the first month that tutoring only occurred twice a week.

These problems are taken care of ASAP. And if their theory is correct, the children improve their scores by at least 15 points. However, if the scores are not improved by 15 points, they go back to the drawing board and design their program to meet the outcomes they have set.

In Scenario 1, the program is not operating like it intends to but nobody knows and therefore they do not know why they fall short of their outcome.

In Scenario 2, the program operates exactly as described in the Logic Model/Theory of Change created by the organization. They are putting their best product out there. If their best product is not working, they adjust, modify, test and make changes they believe will work.

Social Investors need to fund the non-profit that manages performance because when they reach their outcomes, they are going to know exactly what they did to reach them. They can then design a product (program) that can be replicated.

I agree that measuring true impact is very, very difficult and so I’ve stated in the past that focusing on high performing organizations (those that are well run and seek to track and maximize the outcomes they achieve) is the best approach for social investors.

While I think that nonprofits are best positioned to decide which programs to offer and how to offer them, I think that social investors are best positioned to decide proactively which nonprofits to fund. I believe (and I think that David would agree with me, but I won’t speak for him) that the social investor who wants to “push” nonprofits should not “come in and tell them” how to design their programs, but instead provide funding to nonprofits that do a good job of tracking and accomplishing outcomes and withholding funding from nonprofits who don’t.

In the for-profit field, investors provide capital to organizations that appear to them to have the most potential (and/or track record) of producing profit. That doesn’t mean they “come in the tell them how to do it”, it means they invest in high performing organizations and do not invest in low performing orgs.

I don’t see the role of social investor as a “superior” role to nonprofits. Not in the least! Investors should strive to (and take pride in) having the intelligence to source great organizations and invest in orgs offering good risk adjusted outcomes. But this doesn’t mean they are better than the entrepreneurs who run nonprofits. The world needs both investors and entrepreneurs. The system doesn’t work without both.

I guess I lost my larger point. And that is, I don’t know what social investors think is missing in nonprofit organizations that social investors can come in and fix.

Almost all the medium to large nonprofit organizations I know can easily tell you the logic model on which they base their programming. They know the change they want to make and what it takes to get to that change. They can tell you how the activities you fund help them get to that change. If they receive any kind of gov’t or foundation funding, they are already measuring and tracking inputs, activities, outputs and indicators towards outcomes.

So when I read, “there is virtually no credible evidence that most nonprofit organizations actually produce any social value”, I think he must be talking about rigorous scientific research.

Because if what he means is, “nonprofit organizations cannot tell me how what they do leads to improvement on indicators for success” then he hasn’t been asking nonprofit organizations I know.

Sean lists this in his philosophies, “We believe it is often the nonprofit management teams – those with decades of experience in their chosen fields – that are best positioned to figure out what works.” I guess I don’t see that value in the post above. What I see in the post above is “nonprofits can’t prove their work has impact and they need us social investors to come in and tell them how to do that.” I disagree.

That said, I would ask Aaron a question in response to his assertion that it is too hard to measure impact: How can you justify your organization’s existence if you cannot show that you are likely making a difference? Many programs make no difference at all, and some do harm. The assumption that all nonprofits, by their nature, must necessarily do good is simply dangerous.

It is true that you cannot show beyond any scientific doubt that the people you served are better off because of your program. But unless your organization is incredibly sophisticated, you should not be worrying about that kind of rigorous evaluation at this point.

Instead, you should be worrying about performance management. About questions like the one you highlighted “How many and what percentage of the people they serve finish the programs or receive a large enough and long enough exposure to services so that they can benefit?”

What this means is that you have a theory about what it takes for people to benefit. Let’s put it this way: if your girl scouts are not showing up, well, they sure won’t benefit. If mentors do not meet the kids as often as necessary and the relationships end prematurely, they may even do harm. Yes, anyone who takes the trouble to do some basic research before starting a program will learn this.

And if you measure outcomes, you will learn whether people are benefiting as intended or not. If not, you can explore the reasons why, and you can act to improve the likelihood that they will benefit. If they do experience positive outcomes, you can relate the results to the services – if people weren’t receiving services, like the Girl Scout in question, well, you shouldn’t be taking credit for the results. If they were, it may have been because of you.

Rigorous external evaluation has its time and place, but all organizations should be expected to apply common sense to manage performance. And yes, funders need to support that.