07/29/2014 | 4 mins |

In Praise of Operations: Making "What Works" Actually Work

07/29/2014 | 4 mins |

The fundamental value proposition of the "what works" movement is that the lives of many people in need can be materially improved by expanding the reach of programs and organizations that reliably yield strong results for those they serve.

Which leads me to this question: why do we in the social sector give so little attention to operations—that is, what makes "what works" actually work?

Peruse the sector's journals, blogs, webinars, and conference themes and what do you see? Pretty much anything but ops. They seem to be dominated by more glamorous subjects: the invention of new programs and interventions, the application of "design thinking" to routine problems, scaling, policy advocacy and "systems change," novel approaches to luring private capital into the social-purpose marketplace (such as social impact bonds and "impact investing"), even scientific methods of proving what works.

But what about delivering what works? Rarely addressed is the need for quality and consistency of a program's performance, not to mention the painstaking, repetitious internal processes required to produce outstanding results–in a word, "operations."

Disciplined management, rigorous analysis of performance data, accounting for true costs, relentless efforts to improve processes and programs, the hiring and development of great people—these are essential to ensuring that what is promised in theory is realized in practice. but simply don't seem to get due attention or respect.

This stands in stark contrast to the business sector, where it's clear that what creates real value for people served—and thereby justifies their parting with their hard-earned cash—is consistent, cost-effective delivery of a high-quality product or service that works! True, design is important, as is marketing, branding, technological innovation, capital-acquisition, and advocating for favorable public policy. But the ultimate purpose, and key driver of an organization's health and growth, remains the production and use of products or services that satisfy people's wants and needs.

No one understood this better than Steve Jobs. Yes, he was a charismatic visionary who could generate excitement about compelling concepts and truly breakthrough product ideas. (Indeed, he was so accomplished in these regards that there's every reason to believe he would have made an outstanding nonprofit CEO!) But he also knew that what motivated millions of people around the world to hand over billions of dollars to Apple was not the hype but the reality of reasonably priced, reliably performing, feature-laden products—made and distributed through painstaking, highly repetitious, exacting and decidedly unglamorous processes. Indeed, Jobs appreciated this so well that he selected as his successor Tim Cook, the mastermind of Apple's operations.

Of course, we do not have to rely on for-profit exemplars to demonstrate how operational excellence can drive high customer value and organizational health and scale. Take Teach for America, where Wendy Kopp's legendary vision and dedication to her cause have been matched only by her messianic focus on determining which practices, procedures and methods do, in fact, work—ensuring that TFA could be counted on to deliver, day after day, year after year.

So why does our sector undervalue operations? Mainly, because the financial health and growth of nonprofit organizations is generally not a function of reliable, consistent delivery of products and services that provide superior results. For most nonprofits, funding comes from third parties—government, foundations, individual donors—paying for services on other people's behalf. And in making funding decisions, these third parties have typically focused on many factors—such as well-crafted stories of transformation, clean audit reports, or recommendations from influential supporters—rather than objective, comparative performance. It's hardly surprising, therefore, that the most valued skills of nonprofit CEO's have tended to be the ability to woo those foundation, government, and individual backers, not to rigorously manage and continuously improve program quality, cost, and delivery.

But let me point to two budding efforts that give me hope that operations may finally be gaining respect.

Changing how we think about overhead. Too often, a nonprofit's investments in robust operations capabilities and capacities are categorized as "overhead"—long a dirty word among both funders hoping to maximize their return on investment and agencies aiming to identify the most effective nonprofits. But things may be changing. In a widely publicized "open letter to American donors" in June 2013, the CEOs of GuideStar, Charity Navigator, and BBB Wise Giving Alliance—Jacob Harold, Ken Berger and Art Taylor—wrote that "The nonprofit sector…has too often erroneously focused on overhead over the past few decades, which has starved nonprofits from investing in themselves as enterprises and created what the Stanford Social Innovation Review calls 'The Nonprofit Starvation Cycle.'" And in December, the federal Office of Management and Budget released guidance that requires that nonprofits receiving federal funds get a minimum of 10 percent reimbursement rate on indirect costs (previously it could be—and often was—zero).

Focusing on high-performing organizations. Building on his influential book Leap of Reason, entrepreneur Mario Morino's Leap of Reason Institute is using an annual conference, a website, speeches, and publications to build support for high-performance nonprofit organizations. Leap of Reason focuses on strong management, operational execution, ongoing performance measurement, and continuous improvement, all intended, as Mario writes, to aid "those who understand in their bones that high performance is integral to ensuring material, measurable, and sustainable good." Which brings me back to Steve Jobs. "Some people think design means how it looks," he once said, "but of course, if you dig deeper, it's really how it works."

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