Four Keys to Nonprofit Effectiveness That I've Learned Through Blogging

I started this blog in April 2011 to share perspectives on two intersecting trends. The first was the mounting pressure on human service nonprofits due to the fiscal shakeout at all levels of government. The second trend was the coincidental opportunity to shift more of society's scarce resources to the programs and providers delivering superior results for the people they serve.

This will be my valedictory post on these topics. This week I am taking on a role as a senior fellow at the Hewlett Foundation, where I will be leading the development of a potential foundation initiative to support the health of democracy in the US. I have appreciated the chance to engage with a wide range of people on this blog via comments, tweets, guest posts and counter posts, not to mention old-fashioned conversations and debates that have sprung up around various topics.

While I started Cliff Notes to communicate my point of view, I quickly realized that perhaps the biggest benefit of blogging is the opportunity to better understand and learn from the perspectives of others. With that in mind, here are a few of the ways in which my own thinking has evolved over the past two years in response to the engagement with you all.

Leadership is the key to nonprofit performance measurement and improvement. At one point, I was convinced that getting the right measures and processes in place was the key to improving performance; now I realize leadership and the culture that stems from it is the key. When an organization's leaders are committed to, and its culture reinforces, the importance of measurement and improvement, a range of metrics and processes can work. But when the commitment and reinforcement aren't there, the best measurement systems will not move the needle.

We need to appreciate and make better use of the variation in performance within programs. When we speak of a government program failing to show impact, e.g., Head Start, we are often speaking of a common funding stream for programs operated by many different government and nonprofit providers. In Head Start's case, for example there are more than 1,750 programs across the country. Some are truly failing and should be defunded. Many are in the middle with room for improvement. Some are superb. Instead of arguing about the entire funding stream based on the aggregate results across this distribution, which masks excellence and mediocrity alike, let's understand what the best implementers are doing and work to spread their practices to support more beneficiaries more effectively.

How something is implemented is as important as what is being implemented. I used to think that the void was in our understanding of "what works"–that as we accumulated more experimental evidence on the efficacy of different interventions, we could use the validated solutions to solve chronic social problems. I have come to grasp that ensuring fidelity of implementation of "evidence-based" solutions is just as critical to replicating the results–and fidelity is in fact very hard to achieve at a substantial scale. Not impossible, just really difficult. I have also come to appreciate that a range of nonprofits and local government agencies, not just the developer of a given solution, can replicate programs with fidelity if they are challenged, supported, and funded to do so.

We should not shy away from practical experimentation with pay for-success. I have been a vocal skeptic on pay-for-success schemes, especially social impact bonds, as new applications have come into vogue, and I continue to think that some of the more elaborate designs floated by advocates are inherently impractical. But I have also come to recognize that many first-rate practitioners across state and local governments, nonprofit providers, and financial intermediaries are developing more practical permutations of this approach. And I readily acknowledge that the current system of funding and delivering social services is completely screwed up. So now I say, let's do some experiments with an eye toward learning from them. What have we got to lose?

Thanks for reading over the past two years. Those are my big lessons learned. What are yours?

And please follow me at @Daniel_Stid on Twitter for future updates about my new work.

Perception and Cutbacks: a Cautionary Tale from Canada for Nonprofits

In this guest post, Nora Sobolov, Founder and Senior Advisor of the Community Forward Fund in Canada, describes how accepted wisdom about nonprofits has laid the groundwork for the loss of important organizations north of the 49th parallel….and how the US appears to be moving quickly down the same path.

Nonprofits in Canada, like those in the US, are a valuable and precious resource. In both countries, it is also a resource currently under deep threat. Not coincidentally, the nonprofit sectors in both countries also are losing the public perception battle—and that is the battle that could ultimately lose us everything.

I don’t use war metaphors lightly, but my colleagues and I hosted a series of working sessions with Canadian nonprofits and began to call them: Tales from the Trenches. After discussions with hundreds of people, the fact that they were fighting a battle every day, and losing, was all too clear.

In my experience, as someone who has been a board member and offered financing and advice to nonprofits, most are extremely well run, offering high impact for low cost. For many years, however, the prevailing wisdom about Canadian nonprofits has been quite the opposite.

At times, government has helped foster the impression that large parts of the nonprofit sector have little impact and should and could do more with less. In a speech last fall, a senior government minister noted as an example that the homeless population count had stayed the same during her government’s tenure, promoting the fact as evidence that the work of those in the housing and homelessness services sector had failed to have any impact. In part as a result of such perceptions, the federal government in Canada has called on nonprofit organizations to find new sources of funding and inspiration from the private sector, and at the same time, reduce administrative costs.

Some of these criticisms are valid and some of the goals make sense. But promoting this negative view of nonprofits has helped ease the path for government cuts, even as private contributions haven’t taken their place. In Canada, donations have stagnated at 2005 levels, delivering a one-two punch from which nonprofits may be hard pressed to recover.

Quantifying funding cuts is tough. The demise of Statistics Canada surveys on the nonprofit sector has made it difficult to find meaningful numbers. What we do know is this: as part of the multi-billion dollar budget cuts made by the Canadian government over the last five years, many significant organizations (for example the Canadian Environmental Network and the Conference for the Arts) have disappeared. Organizations serving vulnerable populations such as immigrants and refugees have faced funding cuts of up to 100 percent, including those who had excellent track records of delivery, high impact and low cost. And according to Imagine Canada, approximately 85 percent of nonprofit organizations expect government cuts in the next two years.

Despite their negative impact, these cuts have largely gone unchallenged. While some national groups and foundations have attempted to shine a light on these losses, there were so many and they came without warning (often hidden in omnibus legislation), making it difficult to build momentum to reverse the decisions.

As founding CEO of the Community Forward Fund (a loan and financing fund for nonprofits in Canada) I saw a number of nonprofits that were great loan candidates, and simply needed the financing we offered to succeed. On the flip side, I saw many organizations that had gone from lean to emaciated, with no excess capacity to develop or execute on revenue generation opportunities. Ironically, often the first people to be let go in the cutback merry-go-round were those with financial expertise. Lack of financial capacity makes even the most basic of alternative financing or business planning a challenge, and for many the range of options has become narrower and narrower over time.

There is growing evidence that core funding cuts and a move to revenue generation have not produced the hoped-for positive results on levels of impact. Givewell has provided multi-year evidence that without a minimum administrative budget, organizations’ performance is consistently poorer. And social enterprise hasn’t been a quick fix either, as many take five to seven years to become profitable, if they are able to survive at all.

The United States now is facing a scenario that is strikingly similar to Canada’s. Sequestration, according to this expat’s local paper, the San Jose Mercury News, is already having significant effects on job training and employment support programs. The Nonprofit Quarterly has documented proposed federal budget cuts to organizations serving the poorest and most marginalized people, largely missed in the wake of press releases announcing funding for social impact bonds and new social innovation programs.

It seems a wake up call is in order.

We Need Them to Build That!

Should the social sector work more like a market? Should nonprofits operate like profit-seeking businesses? These questions have spurred a spirited debate in recent years. While Matthew Bishop hails philanthrocapitalism, Michael Edwards critiques it. Dan Pallotta indicts the nonprofit ethic, but Phil Buchanan rallies to its defense.

Taking these exchanges in, I find myself siding with those resisting the encroachment of market values into the work of philanthropies and charities. But this resistance need not turn into a counter-attack on the idea of free enterprise. Let's allow the punch-drunk strawmen of Enron and Lehman Brothers to stay in their corners instead of trotting them out to take yet another round of blows standing in for business as a whole. To use the shorthand of the 2012 campaign, we need business owners, especially small business owners, to build that.

I say this not because of the obvious but often unappreciated fact that much of the philanthropy fueling nonprofits today stems from the vision and ambition of one-time small business owners like Henry Ford or Bill Gates. Rather, the social sector needs business to flourish here and now because of what it provides to people in need: jobs and the possibility of self-sufficiency.

In many respects, a job is the ultimate social service, and small businesses are the most apt to provide jobs for those who are harder to employ. Data from the Small Business Administration, the Census Bureau and the Bureau of Labor Statistics shows for example that while small businesses provide one half of all private sector jobs, they employ 62-percent of workers lacking any post-secondary education, 60-percent of employees with disabilities, and 65-percent of immigrants who are working.

I was a first-hand witness to this phenomenon growing up on the family farm that my father and uncle operated in Ingham County, Michigan. Before my brothers, my cousin and I were old enough to work in earnest on the farm, and then after we started to leave home, my father and uncle hired men to help out. The work didn't pay that much, was relentless, and not especially pastoral—baling straw, castrating hogs, pitching manure. The men we hired to do this were brawlers and dropouts without much in the way of other options. So each day they'd rumble out to our farm on their motorcycles and muscle cars, park under the oak tree beside our house, and go to work.

My father and uncle didn't seem to care much about what these men had done or not done before they were hired on. In fact, the Stid brothers had a soft spot for the biggest rowdies, recognizing that they were more likely to figure out what needed to be done next and do it without having to be asked. The typical pattern was for these men to work for us for a few years and then move on with a solid reference to better paying work on the assembly line at the GM plant, with a construction outfit, or as a plumber's apprentice.

There wasn't always a happy ending. One of these men has fought a long and losing battle with alcohol. Another, a quiet and impeccably neat man who stayed at the homeless mission up in Lansing, stopped showing up for work one day, and we never heard from him again. But talking with a few of the hired men when they turned up at my uncle's funeral a few years back, decades after they had worked for us, I sensed their ongoing appreciation for the leg up that they had gotten on our farm all those years ago.

My father and uncle would be the first to acknowledge that they didn't build that business on their own. They learned animal husbandry and agricultural economics at a land-grant university. They took advantage of the crop subsidies and tax breaks available to them. And of course, they trucked their hogs, corn and soybeans to market on county roads and state highways.

Yet ultimately their business was propelled by their entrepreneurial drive and determination to provide for their families, which kept them going through five decades of early mornings and late nights. Their enterprise required a series of farm hands to help get the work done; in turn, it positioned these hands to grab hold of and begin climbing up the economic ladder.

The same holds true for small business owners all over the country who are putting people to work this very morning—on roofing and gardening crews, waiting and bussing tables, sweeping floors and stocking shelves. These aren't fancy jobs, and they don't mean complete relief from economic hardship, but they sure beat the alternatives for the people doing them and the society that would otherwise have to provide for them.

I am not suggesting that defenders of the nonprofit ethic should let down their guard. As the political philosopher Michael Sandel recently observed, "a debate about the moral limits of markets would enable us to decide, as a society, where markets serve the public good and where they do not belong. Thinking through the appropriate place of markets requires that we reason together, in public, about the right way to value the social goods we prize." We absolutely need to argue our side of this debate. However, as we do so, let's remember that, when kept in their place, markets can also serve the public good.

Political Polarization and the Perverse Logic of the Sequester

On July 2, 1964, after President Lyndon Johnson signed the Civil Rights Act into law, he acknowledged the political cost of his legislative triumph. That evening, in a somber and reflective mood, LBJ told his then young aide Bill Moyers that, "I think we just delivered the South to the Republican Party for a long time to come."

LBJ proved to be prophetic regarding the enduring political realignment that was initiated by his conversion on civil rights. What he did not foresee was how the political forces he was setting in motion would come back to erode some of the central pillars of his Great Society. We are now witnessing this erosion, and it is accelerating. The sequestration that commences today is but the latest example, albeit a striking one, in a string of tell-tale signs.

Sequestration means across-the-board cuts in federal funding for a broad array of domestic programs, many of which were established during the Johnson Administration, that support early childhood development, elementary and secondary education, higher education, workforce development, community action, housing and urban development.

Don't get me wrong—long-time readers will know that I believe we have ample room and a pressing need to refine, reprioritize, and reallocate spending within these discretionary programs. But that is not what we are doing. Coming on top of a series of lean budget years, these cuts effectively amount to a mindless war of attrition on the War on Poverty, especially as they reverberate down through cash-strapped state and local government budgets.

The sequestration will not take into account the relative effectiveness of different programs, it will not seek to reallocate funding from less to more effective uses within or across different programs, it will not consider the macro-economic impact of different courses of action and the extent to which they will set back our underwhelming economic recovery. In short, it is government by an autopilot—one equipped with a cleaver.

How did we get to this point? Let's go back to the political shift set off by Johnson's stance on civil rights. In its wake, as he predicted, Southern conservatives changed parties, moving from the Democratic Party, their redoubt since the Civil War, into the GOP. This shift was partially offset by a corresponding rallying of African-Americans and liberals into the Democratic fold once they no longer had to sit alongside those who had previously defended Jim Crow.

As the two party's centers of gravity shifted, the Republican Party became more uniformly conservative and the Democratic Party more uniformly progressive. This shift was hastened by the spread of the primary system, which made it harder to win a party's nomination by running as a conservative Democrat or liberal Republican. Indeed, since the 1970's these labels went from being simple descriptions of a common type of politician, to terms applied to rare political birds, to what they are now—oxymorons.

As a result there is no longer any political overlap between the two parties' elected officials in Washington capable of serving as the seedbed for compromises and policy refinements, let alone the periodic bi-partisan breakthroughs that led to tax reform in 1986 or welfare reform in 1996. Rather than mingling on the field politically and thus finding it easier to work together on matters of common concern on policy, politicians in the two parties are now clustered in two distinct camps that sit much further apart in opposition.

Given these developments, sequestration becomes more understandable if not acceptable. Leaders of polarized parties are hard pressed to do nuance or take differentiated approaches to reducing deficits, and are more likely to back each other into corners or to shoot political hostages they have exchanged with each other. To be honest, I don't know what social sector leaders can do about this in the near term, apart from bracing themselves for the pending cuts.

In the longer term, we all need to be taking a broader perspective on the health of our system of politics and government. We are all so focused on defending progress we've made or pushing for needed changes on the particular issues we care about—this regulatory framework, that funding stream, etc. What about the functioning of the system as a whole? What do we need to be doing to improve that? These are big questions, but we need to tackle them.

The "What Works" Movement Needs to Focus More on "How it Works"

The movement to shift public and philanthropic funding to support "what works" has made tremendous gains in the last few years. A growing number of high-quality programs—e.g., nurse home visitation for low-income pregnant women, multidimensional treatment foster care for chronically delinquent youth, and pregnancy prevention for at-risk teenagers—have been tested in rigorous trials and found to deliver superior results for society. Government innovators are creating or redirecting funding streams to support these types of interventions. Far-sighted philanthropists are helping to pave the way for this transformation.

However, this progress will be increasingly precarious if we focus only on the "what"—i.e., the technical parameters of interventions in terms of target recipients, dosage, duration, staffing ratios, and so on. This emphasis must be counterbalanced and enriched with greater awareness of the "how"—i.e., how real people in real organizations need to work to replicate not just the evidence-based programs and practices but also the results that are ultimately the point.

Education reformers have come to recognize that the impact on student learning of a particular set of academic standards or curriculum ultimately depends on the effectiveness of the teacher using them in the classroom. The same holds true with social programs. The best interventions have to be carried out by living and breathing social workers, counselors, case managers, etc.—all of whom, like teachers, can be more or less effective at their jobs.

Indeed, as implementation guru Dean Fixsen and his collaborators have pointed out, "In human services, practitioners are the intervention. Evidence-based practices and programs inform when and how they interact with consumers and stakeholders, but it is the person (the practitioner) who delivers the intervention through his or her words and actions."

Who are these practitioners? What are their credentials and capabilities? How are they being recruited, trained, coached, and assessed? How are their individual-level results feeding back into and refining the organization’s overall approach to its work?

While many nonprofit organizations say they are providing evidence-based interventions, a much smaller subset have actually developed, applied, and continue to refine answers to these questions in ways that let them replicate and improve upon the original results.

The superior performance achieved by these organizations should not be taken for granted. Too many government agencies are asking nonprofits to deliver evidence-based programs and practices without appreciating what this entails or paying for what it costs to do so. This makes it difficult for these organizations to maintain, let alone enhance, the capacity and infrastructure needed to reproduce the results.

This failure on the part of government funders to come to terms with what it really takes in turn allows other service providers to claim—either through naiveté or cynicism—that they too are offering the intervention in question, when in fact their efforts are falling far short of what is needed.

We have to strike a better balance between the "what" and the "how" of evidence-based programs and practices. How can nonprofits that have made the investments and done the hard work to replicate these interventions best navigate in the current environment? What about those organizations at earlier stages of development? What needs to happen for government agencies to discern which nonprofits really are in a position to deliver evidence-based programs and practices—and to fund them accordingly? I’d welcome your take on these issues.