When I last wrote for Stanford Social Innovation Review three years ago, I claimed that the social sector needed to undergo a transformation. The thesis I presented attempted to confront the realities of a sector in which organizations are in theory accountable to those they aim to serve, but in practice influenced significantly by the incentives an entirely different group of stakeholders creates: their funders and investors.
In the simplest possible terms, it’s all very well to focus on doing what’s most important and most effective to help those you aim to serve, but if that doesn’t align with what foundations, philanthropists, and other funders want you to do, you can’t even get off the starting blocks.
You could say that the nonprofit sector is a market for funding, not a market for social impact.
The sector is changing
Over the last three years, a number of trends have crystallized that I believe herald the promise of a new phase—perhaps even a new paradigm—for the social sector. I want to explore three of the most exciting, and sketch out where I believe they might take us and why we’d all do well to get involved.
- The rise of feedback
- New forms of collaboration
- Disruption through technology
Taken individually, these three themes are hugely significant in their potential impact on the work of nonprofits and those that invest in them. But viewed together, as interwoven threads, I believe they have the potential to transform both how we work and the underlying fundamental incentives and structure of the social sector.
The rise of feedback
The nonprofit sector is built on a deep and rich history of community engagement. Yet, in a funding market that incentivizes accountability to funders, this strong tradition of listening, engagement, and ownership by primary constituents—the people and communities nonprofits exist to serve—has sometimes faded. Opportunities for funding can drive strategies. Practitioner experience and research evidence can shape program designs. Engagement with service users can become tokenistic, or shallow.
Yet over the last three years, the practice of listening systematically to primary constituents has begun to re-emerge and flourish. Led by pioneers like Keystone Accountability’s David Bonbright and more recently by leaders like Feedback Labs’ Dennis Whittle, the movement to more fully incorporate constituent or user voice in program analysis and design has been gathering momentum.
In July 2014, a group of progressive US foundations formed the Fund for Shared Insight to explore and invest in these approaches. As the number of case studies on nonprofits’ use of feedback grows, so does the evidence of its benefits—it can improve programs, inform decision-making, and drive learning. A brief scan of the field provides multiple examples of these benefits, such as Integrity Action’s Fix Rate, which reports on how development projects respond to community feedback, and the subsequent actions organizations take to address identified issues. For example, community monitors identified a lack of basic facilities in schools in Timor-Leste, raised those issues with officials, and are seeing a project-level fix as a result.
In recognition of this growing momentum, Keystone Accountability and New Philanthropy Capital (NPC) published a paper in 2016 to explore the relationship between impact measurement and user voice. It is our shared belief that many of the recent criticisms of the impact movement—such as impact reporting being used primarily for fundraising rather than improving programs—would be addressed if impact evidence and user voice were seen as two sides of the same coin, and we more routinely sought to synthesize our understanding of nonprofits’ programs from both aspects at once.
I participated in the 2016 Feedback Summits in Washington DC and London, and if the passion, excitement, and creativity on show there are any indication of the potential of the feedback movement, then the social sector should expect great things in the coming years.
New forms of collaboration
As recent critiques of collective impact have pointed out, the social sector has a long history of collaboration. Yet it has not always been the default operating model of nonprofits or their funders. The fragmented nature of the social sector today exposes an urgent imperative for greater focus on collaboration.
Funders and investors acting in their own interests and in isolation shape incentives in the social sector. As a result, collaboration is often disincentivized. And recent trends—such as the decline of grant funding from local government in the UK, which has removed what slack there was in the system for nonprofits to collaborate, and an ongoing shift toward restricted funding for projects rather than unrestricted funding for organizations—have arguably exacerbated this problem. Competition, not collaboration, is the default mode of nonprofits under such financial pressures.
Yet the need for greater collaboration and new forms to incentivize and enable it is increasing. Deepening austerity policies, the shrinking of the state in many countries, and the sheer scale of the social issues we face have driven the “demand” side of collaboration. The collective impact movement has certainly been one driver of momentum on the “supply” side, and a number of other forms of collaboration are emerging.
The Young People’s Foundation model, developed in the UK by the John Lyons Charity, is one response to deepening cuts in nonprofit funding. Young People’s Foundations are new organizations that serve three purposes for nonprofits working with young people in the local area—creating a network, leading on collaborative funding bids and contracting processes, and sharing assets across the network.
Elsewhere, philanthropic donors and foundations are increasingly exploring collaboration in practical terms, through pooled grant funds that provide individual donors unrivalled leverage, and that allow groups of funders to benefit from each other’s strengths through coordination and shared strategies. The Dasra Girl Alliance in India is an example of a pooled fund that brings together philanthropic donors and institutional development funders, and fosters collaboration between the nonprofits it supports.
Collaboration is certainly not new to the social sector, but there is great promise in new models that make smart collaboration easier.
Disruption through technology
Technology might appear an incongruous companion to feedback and collaboration, which are both very human in nature, yet it’s likely to transform our sector.
The scope and pace of technological change is terrifying for most nonprofits and funders., Technology has driven huge changes in how we as citizens and consumers live our lives—how we find information, buy products and services, find love, and communicate with businesses and politicians. While nonprofits have been quick to work out how to use digital technologies in their communications and fundraising, the same cannot be said for their delivery of services and products. And while individual organizations are starting to move forward, we have not yet seen the true potential of web-based technologies in the social sector—the potential to radically transform the relationships between individuals and organizations, between organizations, and between individuals themselves.
The social sector has not yet grasped the power of the network.
Of course there are exceptions, such as mass online campaigning through organizations like Change.org and 38 Degrees, and the kinds of tech-for-good startups featured in the Nominet Trust 100 and in NPC’s own paper. But we have yet to see a general shift in the social sector from passive beneficiaries as recipients of services to empowered customers with access to and control over not only an ecosystem of products and services, but also support driven by and responding to data about their needs, preferences, and experience.
To move more rapidly toward true digital transformation in the social sector, we believe three things need to happen. First, organizations must shift from thinking about their own apps and solutions in isolation to seeing them as products on underlying platforms, along with many other products. Second, funders and investors must recognize that they cannot scale startups or digital products in the nonprofit sector in the same way the tech sector does; they have to approach scaling differently. And third, most importantly, we must embrace user-centred design as the basis of all successful tech products and put the primary constituent’s real lived experience at the heart of everything we develop.
Putting the puzzle together
This brief exploration of three trends—user voice, collaboration, and digital technology—barely scratches the surface of their potential to shift practice within the social sector. But what if all three were integrated and amplified by one another?
NPC has been exploring for some time whether and how it is possible to make huge leaps forward in the application of technology to the social sector. We think there is a unique opportunity here, and that technology can be both the driver forcing that leap and the mechanism for achieving it.
Digital technology is such a huge opportunity—and challenge. As the private sector advances at an ever-faster rate, even keeping up is more difficult—the gap between the sectors is growing, not shrinking. Surely we must take collective action.
We also know that successful technology products rely on deep understanding of users’ lives. So focusing on tech in the social sector also requires that we focus more on the user and embrace design thinking.
We need more vehicles for making such collaborative, user-centred design approaches to technology easier for everyone to embrace. At NPC, we’re working toward launching pooled funds for technology, built on the following:
- A pooled fund that is initially grant-only, but exploring the potential for impact investment. The funds will bring together philanthropists, foundations, businesses, and government.
- A sector focus, starting with women’s empowerment. The funds will tap into networks of nonprofits, incorporate governance that includes nonprofits and donors, and work in the open.
- User-centred design. The funds will map user journeys and pathways based on lived experience, and then overlay a map of tech opportunities, prioritized by primary constituents.
- Focused investment. The funds will bring promising social sector solutions to scale, help the private sector adapt its solutions to social sector markets, and innovate where there are gaps.
There are still many questions to answer about how it will work. We will undoubtedly fail in many different ways, but plan to learn and iterate quickly. And if we succeed, we’ll be driving resources toward the most effective solutions, based on the perspectives of the most important people in the equation. We might even be starting to flip the model—from a market for funding, to a market for social impact.