July 26, 2010

Addressing Global Social Challenges: Panelists Discuss Optimal Paths to Impact

Philanthropists, foundations, NGOs, governments, and businesses large and small work hard on behalf of the world's most disadvantaged populations–and almost always wish they could do more. In this article, a panel representing diverse vantage points discuss how they can harness each others' strengths to increase their impact.

Philanthropists, foundations, NGOs, governments, venerable businesses and tiny start-ups work hard on behalf of the world’s most disadvantaged populations, and almost always, they wish the could do much more, faster, and better. What are the most effective approaches? And how can these different sectors learn from and harness each others’ strengths to increase their impact?

Those were two of the major questions raised at a panel discussion held in May 2010 as part of the Bridgespan Group’s 10th anniversary celebration. Bridgespan partner Jeri Eckhart-Queenan moderated the event, and the panelists, representing a diverse range of vantage points on the issue, were: Charles MacCormack, president and CEO of Save the Children, a global youth-serving NGO; Dina Habib Powell, director of global corporate engagement at Goldman Sachs and president of its foundation; V. Kasturi Rangan, Malcolm P. McNair professor of marketing and co-chairman of the Social Enterprise Initiative at the Harvard Business School; and Brian Trelstad, chief investment officer at Acumen Fund, an organization that provides capital, along with business expertise, to entrepreneurs taking on challenges caused by poverty.

“A billion people live in the world on less than a dollar a day; most have no clean water; their food is inadequate; they rarely have permanent shelter; it is unlikely that their children are in school.” Eckhart-Queenan said, introducing the session. “Such problems are huge in magnitude and increasingly connected. We’re here to have an open conversation about these ‘global problems without passports.’”

Rangan responded first, setting the guardrails for the talk by calling on philanthropists and NGOs to “think more broadly about funding models,” and describing two very different, yet highly effective organizations: Bangladesh Rural Advancement Committee (BRAC), and Madurai, India-based Avarind Eye Hospital. Both organizations have funding models that fit their missions, Rangan said, and that is clearly a key to their success and sustainability.

BRAC, for example, has a “soup-to-nuts” mission to address poverty, offering an integrated package of services for rural and urban communities throughout Bangladesh. In keeping with that broad mission, Rangan explained, the organization has a similarly broad funding model. BRAC is able to be 85 percent self-sustaining because it seeks grants to support the services it offers its poorest beneficiaries, and then begins to recover costs as those beneficiaries develop the skills they need to become self sufficient and are able to contribute user fees for additional services.

Avarind, by contrast, generates 150 percent of the income it needs to operate each year, despite the fact that two-thirds of the services it delivers are free. The reason, Rangan explained, is that Avarind focuses on one thing, and, as such, is a compelling example of frugal innovation. Since its founding in 1976, Avarind has been expertise-driven, and unswervingly dedicated to a single cause. The Avarind Eye Care System, which today encompasses several hospitals, a manufacturing center, a research foundation, and a resource and training center, is focused on the treatment of blindness caused by cataracts, and has geared its funding efforts to support that mission throughout its history. As a result, the organization has been able to develop a “production” practice, akin to Toyota’s assembly model, that allows it to offer high-quality surgeries efficiently and at very low cost, benefitting from economies of scale, and realizing enough of a profit on the operations it charges for to cover the cost of the surgeries it performs at no charge for people who can’t afford a fee.

Building on the theme of models that fit the capabilities of the sponsors, Powell described Goldman Sach’s innovative and high impact philanthropic initiative, 10,000 Women, a five-year investment to provide underserved women around the world with the business and management education and support they need to build sustainable businesses. 10,000 Women is now working with over 70 academic and nonprofit partners in 18 countries. Strategically rigorous, with a focus on measurement that informs rapid prototyping, 10,000 Women’s early results are encouraging. Three years ago, Powell said, when Goldman Sachs’ leaders determined that they wanted to invest in a signature initiative that could be game-changing in terms of the world’s social problems, they first asked themselves: “What does Goldman Sachs have that could offer a unique contribution here?” What was Goldman’s unique expertise, and what kind of mission and model would use that expertise to the greatest advantage?

The answer was that the firm had significant knowledge of business education, convening power, and could also offer significant support in terms of professional mentoring from the people of the firm. That insight, coupled with analysis that identified the economic development of women-owned small- and medium sized enterprises as a “white space” in need of support, led to Goldman’s decision to create 10,000 Women.

Drawing on Goldman’s experience, Powell offered advice to other philanthropists developing cross-sector partnerships. In order to live up to their potential, she said, such partnerships need to have a clear and compelling business case—well understood by all parties—on which to build their efforts. Each contributor needs to understand the others’ roles, and the unique strengths they can offer.

When Trelstad of Acumen was given the floor, he noted that increased rigor around measurements, and transparency about results, are also critical factors in solving the most pressing social challenges. Data aggregation and analysis can help NGOs and their funders improve over time, he said. What’s more, a better understanding of the problems being addressed, at the local level, can reveal market information that might encourage the flow of capital to much-needed, high-potential innovations.

Acumen, he explained, is one of an emerging cohort of social investors willing to invest in high-risk, “inductive” solutions to social problems. “We wade into that space between the negative 100 percent return of a foundation and the 20 percent return expectations of a venture fund. We think entrepreneurship can be as powerful a force, when unleashed on social problems, as it is in creating new markets,” he said. He urged other funders to consider the unique challenges faced by social entrepreneurs operating when they’re making investment decisions.

“There are places where the development infrastructure has made markets so distorted that the fundamental insights and ability to do things cheaper, faster, and better . . . are not possible [using traditional funding mechanisms],” Trelstad said. But there are still high-potential ideas being developed in those areas. One such idea that Acumen supports is called Ecotact, a company that provides high quality, ecologically sound and affordable public toilets in the central business district and slums of Nairobi.

Funders need to understand that the nonprofit, corporate and government sectors “each have distinct paths to scale—mission, margin, and mandate,” but social entrepreneurs must combine different aspects of all three in their efforts to scale, Trelstad said. Logic says that an enterprise needs to show a profit to attract significant capital. But social entrepreneurs often have to use the characteristics of a pure nonprofit, which is mission driven, to attract grant monies in order to make up for lack of market support, or to tide them over while markets catch up. They also advocate to influence government policy on behalf of the causes they support, as policy mandates can lead to more rapid scale than social replication or enterprise growth can. ”"It’s a constant struggle to get the sequencing right,” he said.

MacCormack underscored Trelstad’s point about the sectors’ distinct paths, and drew on Save the Children’s history as an example of the kind of mindset that’s needed to develop more effective connections between all of the entities trying to address common social challenges. Save the Children was established in England just after World War I by Eglantyne Jebb to provide food for starving children in Europe, he explained, and from the beginning, Jebb “realized that she had to have a legal and political framework within which to undertake concrete health, education, and protection activities or they would never get attached to an engine that would produce lasting, permanent strategic change on a multi-country basis.

He noted that successful efforts have four defining characteristics: 1) They have a clear theory of change—that is, they understand, and communicate, what their intent is, and how their actions will lead to the results they aspire to achieve; 2) they mobilize a great deal of citizen support (as he put it, “Nothing is going to stick if it doesn’t have people willing to hold policy makers responsible.”); 3) they have political support; and 4) they build and engage strong coalitions of partner organizations and others in support of their cause.

“What’s needed is strategic cooperation,” MacCormack said—among foundations, corporations, philanthropists, celebrities, governments, and NGOs. MacCormack called on big donors, in particular, to get together, pooling their resources and making it easier for grantees to deliver effective solutions and grow. “Each sector is quite internally customized,” he said. “[And] the donor marketplace is Balkanized. We’ve got to get out of the silos.”

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