August 9, 2016

What’s Your Exit, er, Commitment Strategy?

Photo: One Acre Fund farmers preparing for the 2016 planting season.

There are conditions under which nonprofits, even those pursuing transformative scale, will find commitment strategies—rather than exit strategies—to be the right answer for their direct service programs.

By: Matt Forti

Any nonprofit leader will tell you it’s impossible to make it through an initial funder meeting without the inevitable “What’s your exit strategy?” question. This query is well intentioned—funders provide subsidy that powers nonprofit programs, and they have the right to understand when that subsidy might end, what the nonprofit will have achieved, and how that impact will sustain. But in 10 years of improving prosperity for Africa’s smallholder farmers, One Acre Fund has never heard a smallholder farmer ask us this question. In fact, we’ve found that the clients we serve are concerned about the exact opposite. They want to know: Is One Acre Fund committed to serving our community next season?

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Clearly funders and clients have different objectives, incentives, and information. Exit—moving a direct service program to new geographies or clients, or ceasing it altogether in favor of a more scalable path—aligns well with a common funder (especially foundation) goal of catalyzing change and moving on. For clients, ongoing access to a service that works, especially a service they typically don’t pay full price for, is understandably desirable. Nonprofits, which sit between funders and clients, have a clear role: to carefully and continuously evaluate the exit-commitment continuum, and to argue for the solution that generates the most total social good (scale multiplied by net impact) for their target population.

When is a commitment strategy the superior choice?

First, when there is a lack of credible alternatives. Exit strategies are ideal for situations where belief or behavior shifts can ultimately solve a problem, or where credible alternate actors (the private sector, government, other nonprofits) can provide a superior, ongoing social return. Commitment strategies are ideal when such scenarios are unlikely. At One Acre Fund, our studies show that behavior change (in our case, improved farming practices) persists in our absence, but that farmers’ inability to reliably access other crucial services we provide (such as flexible finance, quality inputs, and crop insurance) leads to a reduction in profits when they exit. In our context, for instance, private sector providers are rare, because average transaction sizes are low (under $100) and costs to serve remote areas are high.

Second, when there is a believable path to growing social good over time. Nonprofits should presume alternatives will improve as economies grow, and in a subsidy-constrained world, ongoing service should come with the duty to deliver greater cost effectiveness, or social return on investment (SROI), over time. At One Acre Fund, we have set a goal of doubling our SROI by 2020, in part through rollouts of products that improve soil health and reduce energy expenditure, and initiatives that increase the average number of farmers front-line staff can serve. Even when full commercial viability is impractical, nonprofits must work tooth and nail to drive greater impact efficiency in their work.

Third, when you work with an especially vulnerable client base. In such settings, unfavorable contextual changes can undo impact if a nonprofit exits. For instance, when a maize virus struck western Kenya in late 2012, the primary crop grown by One Acre Fund and neighboring farmers suddenly became a suboptimal choice for several years. Because we were still present in these communities, we supported farmers through an alternative crop program that maintained their incomes. Vulnerability to exogenous shocks, such as climate change, gives us particular pause as we consider ending service in an area.

And fourth, and most importantly, when ongoing service is the learning lab for transformative scale pathways. Like many social entrepreneurs, we aspire to help solve a giant social problem—50 million hungry farm families in Africa—and recognize that scaling our direct service program alone will be insufficient. And so we’ve passionately pursued a number of what the Bridgespan Group has called “transformative scale pathways,” several of which address the very lack of credible alternatives described above. In Rwanda, for instance, we are working with the government to strengthen its agriculture extension system—a “train the trainers” network that reaches every village in the country. We also supply farm inputs and credit to retail shops, supporting an alternative channel for input purchasing. These activities are causing us to rethink the role of our direct service program, but we also realize exiting it entirely would deprive these newer pathways of the insights we gain from being close to the farmer and from rigorously trialing new techniques and products. In such circumstances, we believe the right solution for farmers lies in-between strict exit and strict commitment.

Commitment strategies don’t make sense in all contexts. But when they do, we believe a great sense of responsibility ought to accompany them. Nonprofits must ensure that they do not use subsidy to crowd out alternatives or build attachment mechanisms that discourage clients from pursuing better options. They must constantly monitor the context, since a breakthrough new entrant, technological advance, or other change could fundamentally alter the conditions that originally led to the commitment strategy choice. And they must evolve their measurement to answer tougher questions—for instance, how impact would persist in the absence of direct service and whether strengthening public or private sector alternatives would maximize total system impact.

At the end of the day, nonprofits and their funders must put clients at the center. Exits and commitments aren’t intrinsically valuable; whatever produces the greatest social good over time must guide our decisions and resources. And for nonprofits seeking systemic change, we believe the sweet spot will increasingly be the pursuit of transformative scale strategies that seek to bring about the conditions for eventual exit, nourished by commitment strategies that generate insights and get the job done now for clients in need.

Matthew Forti is managing director of One Acre Fund USA (@OneAcreFund), where he leads the organization’s work outside of Africa, and helps oversee its measurement and evaluation function. Forti is also advisor to the performance measurement capability area at the Bridgespan Group (@BridgespanGroup), an advisory firm to mission-driven leaders and organizations.

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Archived Comments

Stephanie Dodson
8/12/2016 10:11:40 PM

So well articulated, Matt. Thanks for this great article. Stephanie

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