Rootcause
04 Mar

The role of the funder in building social impact markets

When it comes to accelerating progress on difficult social issues, I believe that we must focus singularly on directing resources towards programs based on performance. I also believe that the funder is the central driver of this process. With limited resources trying to make progress on unlimited needs, “doing more with less” must focus on sound data to direct financial and non-financial resources toward high performance. However, this does not mean that funders should only direct resources to the “best” programs or to the ones that can “scale.” The limited number of high-performing organizations can neither grow fast enough nor do they have the critical community relationships to meet current demands. Therefore, funders must be willing to both devote their resources to high-performing programs and help the other million-plus programs improve their performance.

This past week, I explored how social impact markets can facilitate this role in a webinar hosted by Stanford Social Innovation Review based on my Winter 2012 article in the magazine. The webinar featured State Street Foundation’s Corporate Citizenship Vice President Sheila Cody Peterson representing the Youth Violence Prevention Funder Learning Collaborative, ACCESS CEO Bob Giannino- Racine speaking about his participation in Root Cause’s Social Innovation Forum, and Shawn Dove, the Campaign Manager for Open Society Foundations’ Campaign for Black Male Achievement. Through the conversation, it became even clearer to me that there are two ways in which a funder can be the key lever in ensuring the allocation of resources based on performance in a social impact market.

First, funders need to take the initiative to provide the infrastructure, information, and incentives required to direct resources toward performance. Created three years ago to align funding in youth violence prevention, State Street Foundation’s Youth Violence Prevention Funder Learning Collaborative stands as such an example of an emerging social impact market. Currently the collaborative consists of 45 private and 12 public funders, who are learning, sharing, and acting in a market-based approach. Yet the knowledge sharing goes beyond the collaborative since all the information is publicly accessible to any interested funder.

According to Sheila, one of the most important first steps was to identify strategy areas most in need of aligned funding based on research and on funders’ current giving priorities. The three areas—workforce development, youth development and mentoring, and family support and mental health—helped organize funders into working groups aligned around these strategy areas.

Within these working groups, funders learn about their area of focus, creating a common set of knowledge. They share funding expertise and learn to use this knowledge to align funding by developing funding tools, co investing, etc.

The funders invest in nonprofits based on shared views of prevention and by choosing outcome-driven practices they all agreed were necessary. Using the social impact market model, some funders in the YVP Funder Learning Collaborative have aligned $1.5 million in private investment, increasing meaningful employment experiences for over 900 youth in targeted communities where violence is highest.

Second, funders need to be willing to help programs build capacity to perform better and spread what’s working within the social impact market. Root Cause’s Social Innovation Forum played that role for ACCESS, a national nonprofit working towards removing the inability to afford college as a barrier to education. During the webinar ACCESS CEO Bob Giannino-Racine attributed the organization’s tremendous growth to the capacity-building support provided by SIF. Within the few years of working with SIF, ACCESS has gone from serving 2,734 students to serving 9,500, while securing $57.2 million in financial aid compared to $45 million before SIF. ACCESS went from an individual organization in need of support to piloting a training program in ten cities and expanding direct services in three others.

Shawn Dove, representing the Campaign for Black Male Achievement, reiterated this role of funders while discussing the work required to improve the lives of black men and boys. As an example, with 42 percent of all black boys failing an entire grade at least once, black male achievement is a challenge in need of a social impact market. He noted that there are thousands of programs working in communities across the country that are having results; however, there is currently no social impact market structure to organize the efforts, incentivize performance, and spread the impact.

Therefore, the challenge lies in the process of getting funders to take these two bold steps: data-aligned funding and provision of capacity building support so organizations can strengthen performance to improve lives. A striking example Shawn brought up was that there are currently many foundations that ask for performance data in their grant proposals, while very few of these actually give grants for measuring performance and evaluation. Sheila added that since not all nonprofit partners can provide outcome information in a cost-effective manner, the initial selection of performance indicators should be based on feasible and currently available indicators. The funders should talk to content experts to understand what indicators these nonprofits can feasibly measure while simultaneously supporting nonprofits to build capacity to evaluate their own impact.

All in all, the conversation brought to light the need to emphasize the role of funders in directing the flow of resources in a social impact market. The market approach pushes beyond collaboration as it allows a clearer way to allocate limited resources. As Sheila stated, funders need to move away from loose collaboration with individual areas of focus and a lack of sharing practices and knowledge toward strategic alignment that incentivizes performance and builds capacity.