May 7, 2009

With Stimulus Aid Coming, Charities Need to Build on Success

Included in the new stimulus law is billions of dollars intended to fulfill President Obama's commitment to advance government that "works" and "expand successful programs to scale." However, as Bridgespan Managing Partner and Cofounder Jeffrey L. Bradach and Nancy Roob, president of the Edna McConnell Clark Foundation, share in this Chronicle of Philanthropy op-ed, expansion of successful programs does not come easily or cheaply. Here Bradach and Roob discuss the challenges the Obama administration will face and share important lessons they've learned through their collective experience with helping effective programs grow.

By: Jeffrey Bradach, Nancy Roob

Included in the new $787-billion stimulus law — and in the $3.5-trillion budget that Congress passed in April — are billions of dollars intended to fulfill President Obama's commitment to advance government that "works" and "expand successful programs to scale."

The risk is that five years from now we look back and see that billions were spent without clear results. Consider the challenge: National, state, and local governments not only must identify promising programs and help them expand to scale but they also must do it fast. Such urgency leaves little room, but lots of opportunities, for errors we can ill afford. Government, donors, grant makers, and nonprofit groups must invent new ways to work together to avoid these missteps.

For the past decade, the Edna McConnell Clark Foundation and the Bridgespan Group have provided financing and management consulting to nonprofit groups that strive to expand programs that work. If there's one thing we have learned, it's that expansion of successful efforts does not come cheaply or easily.

Established nonprofit groups with track records of results, like Big Brothers Big Sisters, and newer organizations, like KIPP (Knowledge Is Power Program), give government the chance to make investments that could make a real difference in the lives of people across the country. But we will not be able to realize their promise unless we understand and avoid the potential pitfalls of vastly expanding the reach of nonprofit organizations.

Experience often is the best teacher. Our collective experience has illuminated some of the challenges:

Distinguishing promising programs from proven ones is complicated, costly, and essential. Many social-service organizations have little if any evidence that their programs work.

That does not mean that they are not producing results. But it does mean we cannot say for certain that they do. And a compelling anecdote about a program's success is not the same as rigorous data and analysis that provide evidence of results. That distinction is critical when government contemplates spending millions of dollars.

The Obama administration made just such a distinction when it proposed in its budget a nationwide program pioneered by a Clark-foundation grant recipient, Nurse-Family Partnership. Thirty years of evidence and three randomized controlled trials have proven that the charity's program, which matches low-income, first-time pregnant women with registered nurses who visit their homes until their child's second birthday, can alleviate poverty by helping young mothers acquire the self-confidence and child-rearing skills to prepare their children to become healthy, productive members of society.

Mothers in the program are healthier and less likely to depend on government assistance than mothers not in the program, while their children suffer fewer instances of abuse and neglect and run into fewer problems with the criminal-justice system. A 2005 RAND Corporation analysis calculated that every dollar spent to provide the program to those families at greatest risk returns $5.70, for a net benefit to society of more than $34,000 per family. Most of those benefits consist of reduced government spending on health care, criminal justice, education, and social services.

The Obama administration can move forward with confidence because Nurse-Family Partnership's leaders and its foundation supporters have consistently been committed to proving the program works. Unfortunately, few donors or nonprofit groups are so committed to gathering evidence of results. And, for the most part, neither government nor philanthropy is immune to favoritism in choosing the organizations and programs it supports. A healthier respect for proven results would better serve philanthropy, government, and America's taxpayers.

Expansion requires rethinking traditional patterns of support. If we want to make a pervasive impact on our nation's most difficult problems, we must give larger sums to fewer organizations — and that means cutting off other charities. Concentrating resources on a few organizations is rarely how money flows today. Both philanthropy and government tend to spread their money around rather than focus on the handful of programs that have proven effective. But given the severity and the urgency of the problems confronting us, we need to ensure that money is going to those organizations that have real evidence they deliver on their promise.

Equally pernicious is the habit of providing nonprofit groups with less money — often 20 percent to 30 percent less — than they need to achieve results. A 2006 study by the Center for Effective Philanthropy found that most grants made by 163 large American foundations were restricted, short-term, and small, with a median size of merely $50,000. That's hardly enough money to cover the costs of operation, much less expansion. Government also tends to be penny-wise but pound-foolish, seldom paying providers the full cost of a service. One charity that Bridgespan provides management advice to discovered that complying with the government's reporting requirements consumed 31 percent of its entire AmeriCorps grant, which allowed only 13 percent for such administrative costs.

Encouraging a nonprofit group's programs to grow substantially without investing in an organization's management capabilities is a recipe for failure. Putting in place the strategy, management systems, and, above all else, the right people in the right jobs to convert money into results is just as important as giving an organization enough money to spread its programs broadly.

Yet many grant makers view investments that would be virtually automatic for an expanding for-profit company — like hiring talented senior managers or acquiring an information system to capture performance data — as unnecessary overhead. If the same reasoning were applied to for-profit enterprises, airlines wouldn't invest in maintenance and companies everywhere wouldn't bother to attract, retain, and develop a cadre of leaders and managers. The effect of this bias is an organizational form of chronic fatigue syndrome that burns out nonprofit leaders and compromises their ability to solve social problems.

Continuous research, evaluation, and performance measurement are imperative as an organization expands. Put simply, there is no other way to ensure that even a well-financed program with proven results will be expanded and sustained. A good idea absent its execution is in fact not a good idea at all. For example, when David Olds, the founder of Nurse-Family Partnership, was pressured to control costs by using nurse's aides as home visitors, he included a group of families served by such aides in his third research trial, in addition to a group served by nurses and a control group. When the results demonstrated extremely limited results from the aides, he decided that only nurses would be used in his program.

A common mantra at the moment is not to let the perfect be the enemy of the good. That is fine for many things. But that doesn't work in the transfer of a successful program to new cities and towns: Small changes in the approach, inadequate money to carry it out, or lack of rigor in distinguishing what is essential can turn a proven program into an expensive white elephant. If we want to save people's lives — and government money — we cannot afford simply to promote pet projects. We must focus on obtaining results.

Those insights contain important lessons for philanthropists and government officials who want to help effective programs grow. Taken together, they also help us see what a new kind of partnership between philanthropy and government, one that would hold both to a higher level of accountability, might look like.

  • Philanthropy and government share the responsibility to identify programs that work and ensure they are carried out with fidelity. Formal evaluation of programs is expensive and unlikely to happen without a committed grant maker. Philanthropy can and should place a higher priority on supporting research and evaluation that marshal evidence of a program's success. Now, only a few foundations support such work. Going forward, much more is needed, not only to establish whether a given program works, but also to add to our collective knowledge of how fundamental social problems can be solved.

For its part, government can set rigorous standards for proven results and make them prerequisites for public support. If government, drawing on the work of organizations like the Brookings Institution and the Coalition for Evidence-Based Policy, were to set expectations and raise the bar for nonprofit groups that compete for government aid, it would influence the flow of philanthropic funds to all social-service organizations and contribute to better results.

Once a program is running, government and philanthropy can ensure and improve its quality by working together to provide continuing research, evaluation, and performance measurement. Monitoring and quality control should be included in the cost of expanding a program. The nonprofit world can assume the responsibility for results only if it is given sufficient financial support; otherwise, all we have is a new requirement with no new money — and a recipe for disappointment when the results do not materialize.

That does not mean that programs need to be micromanaged by complex regulatory processes; indeed, there probably would be no faster way to undermine the results. Rather, nonprofit organizations should be held accountable for results and provided with the resources needed to deliver them, and if they do not make the promised achievements, then the support should stop.

  • Government and philanthropy must clarify their different and complementary roles in supporting nonprofit groups. Expanding proven programs entails two kinds of costs: the one-time expense of building the management capabilities an organization needs to grow, and the recurring operating expenses required to sustain programs. Broadly speaking, the former is the province of philanthropy, while the latter is where government money must come into play.

Philanthropy loves start-ups. This, after all, is one of its traditional and invaluable missions: to take risks that neither business nor government can afford and to provide seed money — venture capital, if you will — for promising ideas, many of which will inevitably fail.

Yet once a program shows signs of success, foundations often move on to the next new thing while the not-so-new program languishes for lack of a second round of venture capital. Philanthropy needs to stick around longer and strengthen the infrastructure of successful organizations, thereby laying the groundwork for government investment.

Foundations currently do provide some of the money effective nonprofit groups need to grow, but they could do more, even in this era of diminished investment portfolios.

By pooling resources and channeling them into proven programs, foundations make a bigger difference. The Clark foundation, for instance, has joined with some of the nation's largest foundations to make coordinated, collaborative, multimillion-dollar investments in Nurse-Family Partnership and two other organizations, thereby giving them the upfront capital they need to undertake significant growth.

By enabling those organizations to expand to the point at which government money can kick in and propel them even further, we hope to ally and align private and government grant makers in directing scarce dollars to programs that have demonstrated that they produce results.

Although philanthropy can play a greater role in helping effective nonprofit groups grow, in many instances only government can sustain that growth. In 2007, the Bridgespan Group analyzed 144 nonprofit organizations (other than hospitals and colleges) founded since 1970 that had grown to at least $50-million in annual revenue.

Contradicting the conventional wisdom that a nonprofit group's financing should be as diversified as possible, most of those organizations received money from one concentrated source, and some 40 percent of them were supported primarily by government money. Once again, philanthropy and government have an opportunity to use each other's investments to extend the reach of programs that work.

Government can make a big bet on Nurse-Family Partnership today, for example, because philanthropy, through the initial leadership of the Robert Wood Johnson Foundation, put its chips on the organization when it was a small research program in Rochester, N.Y.

So now it's time for government to take the promising ideas that philanthropy has nurtured, and give them the money they need to spread broadly. There is no more powerful way to solve many of society's most important challenges than to harness what we know works and make sure those solutions reach those who need them.

Jeffrey L. Bradach is managing partner and co-founder of the Bridgespan Group, in Boston. Nancy Roob is president of the Edna McConnell Clark Foundation, in New York. This column is part of a series of contributions from leaders of the Bridgespan Group.

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