In the advent of the sequester bringing the expiration of the continuing budget resolution on March 27, and the
2013 budget battles raging in Washington, my concerns echo many others. This gridlock loses sight of opportunities and mechanisms to create demonstrable, sustainable solutions to larger societal issues.
OK, I realize that a $3.6 trillion Federal budget, makes it hard to understand
$85 billion mandatory across-the-board federal budget cuts. Reportedly, the cuts spare many aid programs serving the poorest and most vulnerable Americans. Putting aside personal politics, little doubt exists that current needs outstrip the quantity and quality of dedicated resources to meet them. Particularly troubling, the March 1 cuts disproportionately affect low-income Americans adding additional burdens on resource strained charities. The emotions released by the congressional battle further complicate objective program evaluation and consideration of where and what programs warrant
cutting vs. preserving. It also avoids honest discussion of historic questions.
What should and can be the net value, or efficacy, of federal funded grants and programs to meet these needs?
The complex interactions, mechanisms and incentives by which government, private enterprise and the third sector operate in the social arena make alternative scenarios and innovation difficult but not impossible. Change may come based on a new budget requirement that I hope will unleash much-needed adjustments to the system at every level. I’ll do my best to explain, and in return ask you to consider your own role in perpetuating the divide, and how your investments could be redirected and the benefits redistributed.
How effectively are you using your muscle, teeth and bone?
The preview: Conscious Government Capital
Effective 2014, a May 2012 budget instruction the White House issued to the heads of executive departments and agencies, requires all Federal grant-making agencies increase the role of evidence in their grant-making formulas. The memo suggested three approaches:
- Encouraging use of evidence in formula grants,
- Evidence-based grants, and
- Pay for Success.
These were in addition to a model developed by the Washington State Institute for Public Policy (WSIPP) that ranks programs based on evident returns on investment.
Wow! Competitive advantage and grants will flow to agencies whose programs demonstrate greater levels of evidence of their effectiveness. Program providers who can prove their outcomes will get paid for their successes. This slight change in policy does more to jumpstart accountability within a sector slow to measure itself. It also energizes and attracts the interest of unusual bedfellows—players in the larger capital markets.
Debating organizational responsibility for the whole of society typically pits private vs. public players’ activities against one another. Each watches and fights the efforts and right of the other to create the future. In the process, advocates arguing for greater checks and balances exclude careful inspection of a third vital force. I’m describing the third leg’s impact, specifically, the poorly understood effects and poorly coordinated activities supported by charitable donations, well-meaning grants and volunteer contributions.
Writing for The Daily Beast , Ken Stern eloquently shares his observations on the inefficiency of our current philosophy around charitable giving. Puzzled by the surety of faith and absence of critique on this third sector’s intermediary role in our lives, he writes:
“The public—and private—investment in the social sector is one of the critical elements of the American social compact, yet it is one of the oddities of public life that each year we renew this investment without ever pausing to ask the same questions that we ask of every other public and private investment: what are we getting in return, is the investment structured correctly, is the money going to the right places?”
The answers reflect different levels of engagement and interaction ranging– from passive to active. The vast charitable landscape and ease with which individuals establish personal private charities further dissipates impact on any single issue. Consider where your donations flow relative to your top concerns.
Can additional accountability changes revitalize the third sector and elevate its stature sufficiently to offer a significant counterweight to break the deadlock in Washington?
New mechanisms open new opportunities. How can performance partnership pilots (such as those embedded into Health care reform and now promoted by all Federal agencies) create new paths and alternative realities? Can these channeled resources provide the necessary fuel and impact to reinvent health care systems and access, guaranteed quality education, preserve the environment, resolve energy issues etc? Of course commitment levels vary and weaken foundations’ abilities to impact and sustain significant changes that contain or alleviate complications.
These problems and their complexity challenge everyone and explain the growing continuum of investment, participation and contributions in this space. Engagement ranges from Muscle, using influence; Teeth, making your mark; and Bone, establishing a connective, resilient structure. Which is right for you and your organization?
Historically, the heaviest lifting done to eradicate disease and increase economic livelihoods succeeded through comprehensive coordination. In Colonial times, governments leveraged their authority to build necessary infrastructure and disproportionately benefit business and economic interests. These changes rippled improvements and improved the lives of the general populations too.
Today, spiraling entitlement program costs and accumulated tax credits, tariffs and sector supports produce exclusive benefits difficult to sustain, making everyone ill at ease. Intricate problems don’t make them impossible to resolve. Downstream economic benefits often justify providing credits and supports to resource consuming and output producing organizations. But, as Ken Stern observed, increasing social needs now exceed the capacity and political will of government to act alone to meet them.
Ken Stern is not alone in his assessment of what holds back resources, devoted to this sector from realizing greater impact. In 2011, the Chronicle of Philanthropy reported that demand for aid from nonprofits increased at a faster pace than philanthropic giving by companies.
“Because of the small growth, many nonprofits aren’t getting the money they need to do their job…”
The spirit of personal choice permeates the landscape of charitable giving. Gates and Buffet use their muscle, their influence, to secure significant commitments from fellow billionaires by encouraging that they too dedicate the majority of their wealth to philanthropy. The Giving Pledge lists the pledging individuals, but does not pool funds or support a particular set of causes or organizations. It only asks individuals to give the majority of their wealth to philanthropic causes or charitable organizations either before or after their death.
Are there clear benefits using this approach? It extends charitable activities supported by these donors and the charities reach by introducing much-needed attention and critical dialogue to the merit of these activities. Stern points to the ever-increasing number of non-profits and specialized, if not duplicitous charities that result. Each carve out a niche and unintentionally work at cross-purposes.
So why did Warren Buffet, known for his prowess in picking great companies that anyone can run, turn over his charitable fortune to Gates to invest? Simply, he empathized with Gates’ action plans that address the absence of good measures of charitable efficacy. Their charitable interests transcended seeing their millions merely alleviate pain and suffering in the manner of many religious charities, whose good work largely continues unquestioned.
The concept of Social Impact or making measurable differences quickly captured Gates’ imagination and energy. Recently, Gates wrote about the value of impact measurement for the WSJ and makes clear that if you aren’t monitoring progress than it’s pretty difficult to make any.
Strategic philanthropy can be defined by dedication personal resources to a singular focused charity, or channeling them to an agreed purpose or outcome that creates real opportunity and situational impact. Defining the purpose clearly, defining the outcome and agreeing on the measure of success helps every donor make a mark, boost their efficacy and ultimately diminish the problem.
Hunger in America, provides an interesting case in point. Sadly, this problem re-emerged after national awareness generated by the media had it licked in an earlier era. The successful campaign attracted high level politicians’ attention and secured commitments to adapt pre-existing Federal support programs to meet these needs. The result was the Federal Food Stamp program administered by the Department of Agriculture in coordination with the farm support programs. Today, multiple federal public assistance programs exist not from inefficiency but out of a growing understanding of the problem and efforts to target services to specific critical populations, e.g. low-income pregnant and breastfeeding women and new mothers and their infants; distribution of temporary hunger relief through food pantries and the school lunch program as well as households in poverty.
Feeding America, in their online FAQs, document how today, food assistance needs exceed the capability and capacity of SNAP , Supplemental Nutritional Assistance Program and the other programs.
In spite of ample effort and dedicated coordination and volunteer efforts, the gap has not closed but grown with the economic downturn. The persistent number of households living with food insecurity lives daily with uncertainty not knowing where their next meal let alone access to basic nutrition will come.
Good news once again, activists have kicked up a media frenzy to draw both volunteers and the interest of politicians to rectify this situation. Learn more at TakePart and the film A place at the table. Will and should government assume leadership to resolve?
The coordination and interconnections necessary to move beyond marked progress and end the problem requires much more than charitable resources. It also reflects the long-term trend the Chronicle of Philanthropy reported in July 2011:
“[Increasingly,] companies are zeroing in on social issues that threaten their bottom lines, like people’s ill health, high transportation costs, or diminishing fresh water. They are also focusing on causes that help them tap into new markets, appeal to their customers, and use their employees’ skills.”
Case in point, CSX donated $1 million to the Future Farmers of America, one of a few key national groups it supports. Tori Kaplan, assistant vice president for corporate social responsibility, explained their desire to attract young people with the skills and interests it needs were participating in FFA.
“We’re hoping to foster relationships with FFA where the students would look at transportation and its connection to agriculture as a viable career,” she says.
The numerous partnerships between Non-governmental organizations often supported by philanthropy, the business sector and the government provide the three legs that create a stable platform for society. Each leg keeps the other in check and accountable.
These partnerships go beyond what Feeding in America highlights on their site. They depend on investments to rewire the mechanisms that created the problem and create value to attract capital to create more mutual sustainable system. That requires a deeper assessment of problem inter-dependencies. Desperate people engage in desperate behavior to get their needs met. Reduce if not remove the reasons for their desperation and the resources used to combat them can be used more productively. Instead of relying on redistributing waste, kindness and surpluses to satisfy unmet needs create greater efficiency, employment and opportunity for understanding and accomplishment.
Leveraging the efficiency and accountability of capital markets offers new hope to create sustainable solutions. Social impact bonds, or pay for performance success instruments offer such a mechanism to make all parties publicly accountable. The example demonstrated how investing in social services for released offenders that successfully integrate into their communities and find meaningful work at a living wage, produced measurable benefits of increased safety and lower future incarceration costs.
The full circle encompasses economic measures of societal impact, and look beyond the benefits to the target population or social service recipients. It means everyone benefits from the success, not just the immediate clients. In spite of several programs demonstrating this full complement of returns, it took recent calculation of the benefits and the costs to produce the necessary investment instruments to support their funding. In the UK they call them pay for performance or social impact bonds and now slowly appearing in the US.
Regardless of how your corporate charitable activities uses its muscle to invest in community causes and provide valuable volunteers, have you looked for more tangible benefits beyond risk avoidance or raising the positive sign on your public profile. Maybe it’s time to ratchet up your game. Chances are your employees already sit on boards of numerous non-profits and use their teeth to place their mark and extending with charitable matches your firm’s resources to mutual benefit.
More interesting opportunities come when going beyond the marginal resources at your disposal in corporate foundations. Why not leverage the full force of the economic assets at your discretion? The Chronicle of Philanthropy noticed a shift evident in 2011 when corporations appeared to concentrate their support in favor of bigger, higher-profile gifts to fewer organizations.
“in part because of a long-term trend of companies zeroing in on social issues that threaten their bottom lines, like people’s ill health, high transportation costs, or diminishing fresh water. They are also focusing on causes that help them tap into new markets, appeal to their customers, and use their employees’ skills.”
Case in point, Walmart. Over the last several years, Walmart’s amount of charitable cash donations, over $342 million in 2011 topped the Chronicle of Philanthropy’s Corporate giving list . In 2013, they joined the Partnership for a healthier America changing their own business practices to align their efforts to make healthy food affordable for families. This is the public private partnership that helped Walmart leverage its supply chain efficiencies and prowess while also gaining toe holds in communities who fought their incursion. Key opportunities cited by the Washington Post following Michelle Obama’s recent Walmart visit included:
- Wal-Mart opened 86 new stores in “food deserts,” areas where accessibility to affordable healthy foods is limited.
- Launch of its “Great for You” icon, which will appear on more than 1,300 of its house brands of foods and beverages in U.S. stores, making it easier to identify nutritionally sound choices.
- Cutting salt and sugar in its house brands and encouraging national brands to do the same.
Wal-Mart, the nation’s largest food retailer, holds at least one-fifth of the grocery market, according to trade magazine The Packer.
Lots of ideas here, but would love to hear what I may have missed, or other stories that show evidence of more creative innovative approaches to improve the overall system!