TOPIC #1: SHIFTING AWAY FROM COUNTERPRODUCTIVE FUNDING MODELS. The Unintended Consequences of Typical Non-profit Funding Model

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1 Overcoming the Often Unseen Obstacles to Collective Impact Part 1 in the Achieving Collective Impact Series (October, 2012) By Bill Barberg, President, Insightformation, Inc. TOPIC #1: SHIFTING AWAY FROM COUNTERPRODUCTIVE FUNDING MODELS Two recent articles on Collective Impact in the Stanford Social Innovation Review (SSIR) make a compelling case for the need to shift from Isolated Impact to Collective Impact in order to dramatically enhance the social benefits of funders, non-profit organizations, and government entities that are attempting to address many of the serious challenges faced by our society today. This article is the first in a series that will look at specific obstacles to achieving Collective Impact and identify practical ways to overcome those obstacles. The first obstacle is that of counterproductive funding models. As noted in the SSIR articles, the typical approach to funding social sector work involves funders selecting individual grantees through a competitive process that typically involves responding to some type of Request for Proposal (RFP). The Unintended Consequences of Typical Non-profit Funding Model The typical grant-giving process is designed to maximize the funds that get to the communities to get things done and have a positive impact. Because of past cases where excessive funds have been consumed by lavish offices, administrative overhead and other costs that help the non-profit organizations advance their own prosperity rather than advance the mission, funders generally reward organizations that maximize the funds spent on their programs in the field. The unintended consequence is that an emphasis on minimizing administrative overhead can undermine the ability to fund the backbone support that is vital to achieving the many benefits of Collective Impact. Certainly not all overhead is equal. Later in this article, we will explain how money wisely spent on the right type of backbone support can have significantly more impact than program spending. The typical funding model is based on a competitive process that is designed to surface the most promising programs and organizations so that the funder s dollars have the greatest impact. This has several unintended consequences. First, many organizations put in a huge amount of time and effort to apply for these grants. For the vast majority of them who do NOT receive the funding, this effort draws precious resources away from work on their mission. I am sure it would be disheartening to see the net impact of many well-intentioned grants. If 30 organizations each invest $7,000 worth of time and effort to try and win a $100,000 grant from a community foundation that is hoping to advance a particular cause, that funder s competitive process is consuming a total of $210,000 in resources for the very organizations they are attempting to help. Even when one receives the $100,000 funding, the community has a $110,00 net loss of resources that are actually working on addressing the social need and this is not counting the staff time of the funder and the actual recipient to manage this competitive process and the post-grant reporting requirements. PAGE 1

2 However, that net loss of resources is not the worst of the unintended consequences. Far more costly from a Collective Impact mindset is the dysfunctional dynamics that this process puts in place. Organizations who care about the same issues and who should be working as a team find themselves hoping the other will fail. Most organizations have grown reluctant to share data, tools, or promising practices that may give a competing organization an advantage in the next grant competition. The pressure to get additional funding creates a barrier for sharing that could help stretch everyone s resources. The competitive funding process typically has an evaluation component that is designed to create accountability and to demonstrate that the funds are achieving the intended impact. Evaluation activities often consume about 10% of the resources for many grants, and the evaluation typically requires data that demonstrates the impact of each organization s individual effort. This tends to drive redundant data gathering and inconsistent measures of progress. In addition to that waste, the bigger unintended consequence is how the pressure to show program-specific impact further reinforces a culture of non-cooperation among the very organizations that should be working as a team to achieve Collective Impact. As noted in the SSIR articles, when evaluation focuses on individual programs, those programs are likely to grow even more independent and isolated than would otherwise be the case. This exacerbates the fragmentation that undermines real, sustainable progress. Practical Alternatives Models for Funding Collective Impact As communities, foundations, and state or federal grant programs embrace the ideal of Collective Impact, there are several practical things they can do to offset the unintended consequences of the current funding model. 1. Embrace Collective Impact. Funders should come together and acknowledge the unintended consequences of current practices and strive to minimize them while remaining aware of the reasons that led to the design of those processes. The more funders that get on the Collective Impact bandwagon, the easier it will be to change the culture among non-profit organizations in any given community. Some funders may play the role of funding backbone support and then work with other funders who can leverage that backbone support to achieve Collective Impact with their individual programs. Alternatively, a critical mass of funders can agree that a certain percent of any grant they offer should be used to provide the necessary support for the backbone organization and infrastructure. This would be similar to how most grants now allocate a certain percent for evaluation purposes. When done well, the backbone organization and shared measurement system can result in a significantly more economical AND more valuable measurement and evaluation system, so the savings in evaluation offset much of the new investment in backbone support. 2. Recognize the importance of backbone support in RFPs. To the extent that competitive RFPs are still used (and I ll suggest alternatives below), those RFPs should be very specific about asking respondents to demonstrate how they will efficiently and effectively PAGE 2

3 address the needs for backbone support for long-term Collective Impact. This may involve establishing backbone infrastructure if it does not exist or embracing and leveraging what may already be in place. Four recent SSIR blog articles clarify the important role of the backbone organization. 3. Emphasize digital backbone infrastructure over staff, manual information management, and meetings. The early examples of Collective Impact generally provided backbone support with a heavy investment in staff and meetings. While some staff and meetings are necessary, there are much more efficient ways to accomplish the communication, alignment, and coordination than relying on these low-tech options. There are compelling examples of where new technologies enabled profound transformation by dramatically reducing the coordination and communications costs in different areas. Think about how Craig s list, ebay, and Freecycle enabled breakthroughs in peer-to-peer purchasing or exchanging of just about anything people no longer needed. Consider how more than 77,000 active contributors keep 22 million articles in 285 languages updated in Wikipedia to share knowledge. When the right capabilities align with the right need, the impact is tremendous. The emerging movement toward Collective Impact can be greatly strengthened with the right supporting technologies. Unfortunately, the use of online technologies (often called Web 2.0 ) has sometimes gotten a bad name because of poor choices made by early enthusiasts of these new tools. For example, we have seen many examples of new social media sites that were launched with the hope that they would become like Facebook, but focused on connecting people around some particular issue or geography. Alternatively, a well-intentioned techie will create a site for blogs and forums, only to discover that nobody will come to the site and it consumes far more resources than anyone imagined. The large number of these inactive or abandoned sites has undermined confidence that adding online tools will greatly improve communication and coordination. What should differentiate a successful digital backbone for Collective Impact is: The way it is integrated with collaborative processes that are embraced by a critical mass of community organizations and funders; Innovative capabilities that provide high-value, purpose-driven functionality to streamline work people need to do (so it saves them time rather than being a distraction), How it integrates work on different issues and crosses boundaries to engage diverse organizations. A properly deployed digital backbone infrastructure should significantly reduce long-term costs of supporting collaboration. Once deployed, it costs far less than staff-intensive backbone models to sustain, and it provides a means of communication that is much more partnerfriendly than frequent meetings that are primarily to share information. A single deployment of the right technology can meet the needs of many different issues in a community as PAGE 3

4 diverse as chronic disease, graduation rates, crime, economic development, environmental protection, and enhancing culture or quality of life. It should elegantly simplify the complexity of these often-intertwined issues and promote the efficient engagement of many of the same community organizations (schools, businesses, local governments, non-profit organizations, etc.) in ways that reinforces consistency, not chaos. When the digital backbone infrastructure includes the right strategy management, measurement and monitoring capabilities, it will provide the type of transparency that keeps appropriate pressure on all the community partners to use funds wisely minimizing the expenditures on other types of overhead that don t advance strategy execution. The online strategy management and measurement capabilities also allow advances in evaluation that can be based on each organization s contribution to the Collective Impact effort even if their indirect impact on the higher-level outcomes is more difficult to measure. (Improvements on evaluation techniques will be covered in a future article.) There is not space in this article to describe the details of the many ways that using online collaborative strategy management tools to significantly enhance Collective Impact, but there will be another article in this series that focuses on the most valuable capabilities for digital backbone infrastructure. 4. Adopt a Cooperative Model, rather than a Competitive Model. If we build on the prior hypothetical example where 30 organizations spent $210,000 in efforts to pursue a $100,000 grant in a typical RFP scenario, our recommended approach would be to shift much of that $210,000 in effort from being wasted to being productive work on the mission. But the real power of the Cooperative Model is how innovative technologies and the key principles of Wikinomics openness, peering and sharing (Tapscott & Williams, 2007 and 2010) can be leveraged to allow the funders resources to be multiplied as a result of extensive sharing, reducing redundancy, leveraging mutually-beneficial activities, and tapping into far more of the underutilized resources in a community. The use of collaborative strategy execution processes and techniques can allow the typical RFP process to be skipped. Instead, a large number of organizations that need resources for a particular type of activity (such as developing community gardens or establishing employee wellness programs) can efficiently connect, divide up the work that can be shared, and spend the time that would normally be spent applying for the grant can be spent working to accomplish much of the project-related work in a way that maximizes sharing, scale and efficiency. There are several ways that the collaborative efforts of a larger number of programs can dramatically reduce the cost of getting things done compared to a typical competitive model where a relatively small percentage of the desired organizations get funded. Grant funding is often used to hire staff or contractors to do work that could easily be shared among peers striving to do similar projects researching promising practices, creating policies, conducting training, gathering data, developing communications materials and so on. Equipment, software, or services that are purchased could often be shared among peers to reduce PAGE 4

5 everyone s cost a concept known as collaborative consumption. When things cannot be shared, they can still be purchased collaboratively to really stretch everyone s dollars. Imagine, for example, the cost savings if 100 employers in a community that wanted to encourage employees to bike to work picked a small team to identify the best option for the purchase and delivery of bicycle racks to go outside their office buildings. The savings compared to each company doing its own research, price comparison, purchase and delivery would be very significant. Skeptics may argue that while working cooperatively may sound good in theory, the coordination costs are relatively high, and it is often just too much work to get everyone organized to work as a team. That is where the new techniques enabled by the digital backbone come in. In future articles, we will cover examples of how technology and innovative funding processes can allow this cooperative model to be successful. Do not depend on grants; just work together to tap into underutilized resources! Once the appropriate digital backbone infrastructure is in place, non-profit organizations may find that it is much easier to find the resources to do new projects through collaboration than through chasing grants. When work can be accomplished through efficient, voluntary teamwork, the amount of time wasted in chasing grants or jumping through all the requirements of the funders can be reallocated to much more meaningful (and satisfying) mission-focused work. There is typically vastly more underutilized capacity for work in a community than there is cash. When a community embraces the cooperative model described above, they will often discover that it is much more efficient to tap into those non-cash community assets than to try to find available cash. When the many different organizations in a community shift from a typical inward-focused, budgetoriented mindset to think from a community-wide collaborative mindset, the opportunities to improve everyone s situation are abundant. Sometimes, the resources can be captured by saving someone else s waste. When highly distressed individuals repeatedly visit the emergency department in the local non-profit hospital, they are wasting thousands of dollars. Rather than just accepting that those are written off as charity care by the hospital, the community can see that those are real dollars that are indirectly being paid by the community, and that money could be saved and re-applied elsewhere. When a city government has a department that spends 30% of their time chasing information that other organizations have available, there is a big opportunity to create significant savings that could allow those resources to address real needs better. The key innovation is to have a strategy that involves a broader number of stakeholder and connects the dollars saved and the resources that must be expended to bring about those savings. Talent and time are other resources that are abundantly available but in highly-fragmented forms. The talents of retirees, volunteers from faith communities, students who want to make a difference, and the time some people spend seeking satisfaction from creating funny internet videos are examples of the human resources that can help fuel Collective Impact. The number of examples of PAGE 5

6 technology-enabled collaboration is growing rapidly as the right tools enable people with the available talent and time to pitch in on something big. For an insightful presentation on how the right technology can tap into cognitive surplus and mass collaboration, view Clay Shirky s TED video. When the right ideas (such as Collective Impact) are combined with the right technologies (such as the collaborative strategy management tools that should be part of the digital backbone), these vast, underutilized resources can be efficiently engaged to accomplish the things that communities are striving to address. Conclusion Regardless of whether you are a funder, a government agency, a non-profit organization attempting to lead a Collective Impact effort, or an individual or organization that might be a part of a larger effort, you can help bring about the shift in funding models from today s model with its many unintended consequences. The practical steps in this article are just of few ways to begin that journey. Future articles in this series will address a series of other mutually-reinforcing actions that can help the concept of Collective Impact be instrumental in enabling our society to successful address its biggest challenges. About the Author Bill Barberg, president of Insightformation, Inc., is a globally-recognized expert on collaborative strategy execution and strategic measurement systems. He has recently presented on best practices for achieving Collective Impact at two national conferences (2012 Association for Strategic Planning, 2012 National Network of Public Health Institutes) and has consulted with a wide variety of organizations and coalitions on collaborative efforts to improve health, environmental, and other community issues. Scorecard and performance expert, James Creelman, author of the recent book, More with Less: Maximizing Value in the Public Sector described Mr. Barberg as a global thought leader on the topic and stated that his knowledge of the do s and don ts of building scorecards is as good as anyone in the world, and some of his innovations (especially around creating space for partner collaborations) are simply unrivalled. LinkedIn 3/30/12 About Insightformation, Inc. Insightformation, Inc. specializes in strategy management for organizations and communities. Insightformation s strategy management platform, InsightVision is being used by states, counties, communities, hospitals and other organizations for performance management, Collective Impact, and improved strategy execution. Learn more at Contact Bill Barberg bill.barberg@insightformation.com or call PAGE 6