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Desperation or a Good Idea?
Desperation or a Good Idea?
By Larry Raff In Planning & Strategy Posted August 22, 2011 0 Comments
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Just what catalyzes your prospects and donors to give?  What channels grab their attention, heartstrings, and in turn, their checkbooks? Every few years, a hot new fundraising concept seems to emerge – one that “promises” to breathe new life into your advancement efforts. The past two decades have provided us with fundraising “salvations” including…
These traditional and newer techniques all have appropriate places in the advancement office tool box. Some may take a generation to mature (1); others may never warrant the staff investment from a dollars and sense perspective (2) but/and contribute to all important mission messaging and ”friend raising” (3); while another subset may be peaking and could be on the decline (4).


2011’s contribution to this list is “social impact bonds”, which are also known as “pay for success.” Especially relevant for human service provider organizations, these are percolating in Massachusetts and at the federal level. They are based on the concept that if programs backed by investors succeed in reducing or eliminating the need for costly services and interventions, governments will realize big savings. In turn, investors are rewarded with healthy returns from Uncle Sam or state government. On the other side of the coin, if the programs fail or do not deliver to performance standards, no returns would change hands. In this case, investors would become donors.
 
It is not a coincidence that “social impact bonds” have emerged as a development tool during this extended period of harsh fiscal realities and increased demand for effective government and accountability.

And just what would make an ideal situation for “pay for success?” For example, take Roca Inc., a Chelsea, Massachusetts nonprofit who, in their own words, “alter the life trajectories of some of society’s most high-risk young people.” Roca has proposed an intervention program to provide direct services to about 650 young offenders with a price tag of $11 million over four years. But take a look at these projections…. Roca estimates the program would save $25 million to $38 million in prison costs during that span by reducing the incarceration rate. That’s a return on investment even the most conservative investor – or donor – can appreciate.
  
Is this a new version of venture philanthropy, or perhaps “investment philanthropy?” The concept certainly merits further exploration for many nonprofit sectors, especially those that touch at risk and underrepresented populations. It does, however, raise the specter for two significant paradigm shifts that touch the entire NPO universe.

Shift 1: Increased Demand for Measurement Outcomes. The role of metrics and accountability will increase as both investors/donors and government have “skin in the game.” A new challenge, as well as a priority for NPOs will include long term tracking of constituents, many of whom are traditionally the hardest people to follow over time. Performance-based investment philanthropy may spawn new approaches and longer evaluation windows for outcome measuring.

Shift 2: “Nonprofit” to “For Profit” Communications and Mentality. NPO advancement officers and management will need to demonstrate how they will achieve performance outcomes to the satisfaction of business investors – in a language which bridges both worlds and perspectives. This will force nonprofits to bring their program, organization, and financial planning to the next level in order to attract and retain the interest of “business” investor/donors. This “upgrade” will have the ripple effect in helping the organization to achieve other objectives…including old fashioned fund raising.

 Your takes:
1.      Be on the constant lookout for new ideas and funding sources for your advancement program, but be sure to do a thorough evaluation before adopting any new tools into arsenal.
2.      Measurement, measurement, measurement.  Integrate metrics into everything you do as the pressure to provide performance evaluation metrics for donors, board and government will only continue to grow.
3.      Treat your donors as investors and be prepared to provide them the level of scrutiny they expect – and deserve.   
 
Have a development, executive recruitment, or campaign strategy or management challenge? Let’s talk! Click here to connect with Rebekah Kaufman, Director of Consulting Services at CRI.

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