I manage two funds: the SeaChange-Lodestar Fund for Nonprofit Collaboration and the New York Merger, Acquisition and Collaboration Fund. Both funds encourage and support mergers, acquisitions, and other types of formal, long-term collaboration involving nonprofits.

Denizens of the effective philanthropy circuit regularly ask me how this type of “collaboration” compares with the concept of “collective impact.”

Since contrasting two poorly defined terms (one of which—“collaboration”—is used in lots of different ways) is a recipe for jargon-rife disaster, for the purpose of this article I’ll use these definitions:

Collaboration: a merger, acquisition, joint venture, or programmatic alliance in which two or more parties (usually nonprofits though government or business can participate) combine some or all of their important activities in a long-term formal way. (Some call this a “consolidation,” “combination,” or “strategic restructuring”.)

Collective Impact: a strategy for creating a very particular type of collaboration whereby nonprofits, government, business, and the public coordinate around a common agenda to address a complex social problem. Led by a backbone support organization (an organization created to manage the collective), the parties continuously communicate, refine their common agenda, develop shared measurement systems, and pursue mutually reinforcing activities. (I’ve paraphrased this definition from FSG. Going forward, I’ll refer to this as a “collective.”)

The basic contrast between a collective and the other types of collaboration is clear—respectively: bottom-up vs. top-down, narrow-deep vs. wide-shallow, mission-driven vs. problem-driven, and micro vs. macro.

Both approaches are important, and each has its adherents. In a nutshell:

Collaborationist: “Nonprofits operate in a dynamic environment of political, financial, demographic, technological, and leadership change. They consistently struggle with issues of insufficient scale, duplicated effort, leadership succession, limited funds, and high fundraising costs. There are many opportunities for them to take their missions forward more effectively, efficiently, or sustainably through various types of collaboration.”

Collectivist: “We need to go beyond piecemeal attempts to make nonprofits more effective. No single organization is responsible for any complex social problem, nor can any single organization solve it. Achieving social impact will come from cross-sector coordination rather than from the isolated intervention of individual organizations.”

But these statements are too simple.

First, any would-be collectivist must examine the assumption that if a problem is “complex and social,” the solution should be “coordinated and collective,” and include an honest assessment of whether the most effective use of resources should be to pursue a collective approach. Sure, some problems are irreducibly complex, as only real-time, coordinated action by different parties can address them even at the most basic level. A classic example is community development, where the success of revitalization links institutions and services such as, affordable housing, transportation, and schools, and requires participation by government, nonprofits, and the private sector. However, most problems are usually reducible to less-complex, sub-problems—problems amenable to a portfolio of more “technical” solutions that may require little, if any, collective agenda, measurement, or action. AIDS prevention might be reducible to sub-problems that different independent approaches (needle exchanges, free condoms, safe sex education, etc.) can address. More generally, education might be reducible by district (or school) and/or by function (early learning, middle school math, smaller class size, etc.). Large institutions with the muscle to start collectives must be careful that they don’t assume that a problem—as they define it—usually in broad, high-level terms—needs a collective approach. The collective approach may be the most idealistic, but it may not be the most pragmatic.

Second, collectives are easy to start (if you have initial funding), but reaping the benefits takes time. A collective is an attempt to coordinate activity by independent parties in the absence of an effective market. It begins by creating market-like information (metrics regarding inputs and outputs, costs, efficiency and effectiveness) and a central “marketplace” where the parties can “transact” by contributing and sharing information. The real value comes when the parties use this information to, as one collectivist puts it, “allocate their efforts rationally and effectively.” But some participants may resist these changes as difficult, threatening, or impossible. This raises the risk that they will leave the collective, which can happen just as the initial stakeholders begin losing interest in what will no longer be the new-new thing.

Third, the ongoing cost-benefit of a collective can be difficult to see because the backbone support organization has an obvious institutional incentive to calculate and publicize the benefits while the leaving the costs (primarily the precious staff time of the participants) diffused and unmeasured.

Other types of collaboration are just the opposite. The toughest issues—such as governance, leadership, mission, and brand—come upfront, so it usually takes mission-driven leadership, time, patience, trust, and a little bit of pump-priming money to get a meaningful collaboration off the ground. Yet once started, these collaborations do not require additional, ongoing funding, and will often deliver tangible and measurable benefits within the first 12-24 months.

Thus, eager collectivists must be tough-minded in thinking through reducibility, long-term resource requirements, and how to measure cost-benefit over time. By contrast, disheartened collaborationists must not to give up too early, for there may yet be light at the end of the tunnel. Let collaborationists be brave and collectivists cautious!

Finally, I suspect that under the common banner of “achieving social impact” collectivists and collaborationists see the realm of the possible differently. While I applaud the collectivist’s desire to “solve” all complex social problems, in most cases it’s too risky and utopian for me. I recognize that philanthropy addresses unsolved problems that are neglected by government (because they are politically unrewarding) and by the market (because they are financially unviable). I’m not at all surprised that, at any given moment, the problems of philanthropy can appear insoluble, but I resist being bullied into the implicit conclusion that philanthropy is a wholesale failure requiring radical redesign. Even where a complex social problem persists, it may have been solved for some people. Things that look bad might well have been worse. History is littered with grand plans that did more harm than good. What some may see as tinkering at the margin is often the best we can do with the resources at hand.