This blog post is excerpted from Leap of Reason: Managing to Outcomes in an Era of Scarcity.

Over the past year, I have been writing on the SSIR blog about how nonprofit leaders can drive culture change within their organizations to support a relentless focus on doing the most good for those they serve. In this post, I want to look at why we need to drive this type of culture change at a sector level. As you will see in my unflinching forecast below, we will need nothing short of quantum, sector-wide change to accomplish our important missions in this new era of brutal austerity.

The Big Game Changer

Our economy has taken a broadside hit, and most economists and budget watchers agree that we are now in the midst of a profound structural shift. Congress will eventually enact major cuts in the growth rates of Medicaid, Medicare, and Social Security. Even more threatening to our sector are likely cuts in the real amount of discretionary spending—not just growth rates. In a cruel irony, these cuts will not only reduce the supply of funding for many of the services that nonprofits provide; they will also dramatically increase the demand for these services.

The magnitude of the combined hit—greatly reduced funding and increased need—will require organizations to literally reinvent themselves. Incremental responses will be insufficient. I agree wholeheartedly with Dr. Carol Twigg, president and CEO of the National Center for Academic Transformation, who concludes, “We will have to produce significantly better outcomes at a declining per-unit cost of producing these outcomes, while demand for our services will be increasing.”

The frightening budget forecasts at the federal, state, and local levels are just one manifestation of a larger philosophical shift. In the twentieth century, under Democrats and Republicans, government services expanded dramatically. Many of us took for granted that when we identified a new program to handle some unmet need, we could say to the government, “Now add that to your portfolio.”

The reality today is that outside of healthcare, the expansion of public funding and government services as a share of our economy is going to come to an end, if it hasn’t already. In this new era, public policy debates increasingly will focus on how best to use or repurpose existing resources.

An Effectiveness Revolution

To respond to such a daunting game changer, we will all need to raise our games to a much higher level and seize the opportunity in the crisis. As Education Secretary Arne Duncan spelled out in a speech he called “The New Normal,” the challenge of doing more with less “can, and should be, embraced as an opportunity…for improving the productivity of our education system…if we are smart, innovative, courageous in rethinking the status quo.” New York Times columnist David Brooks agrees: “This period of austerity will be a blessing if it spurs an effectiveness revolution.”

And let’s not forget that effective programs can reduce the nation’s budget problems. For example, if serious and expensive problems like dropping out of school are prevented, then productivity and tax receipts will increase. Similarly, if criminal behavior is reduced, then taxpayers will benefit from lower costs for incarceration and rehabilitation.

We need to rethink, redesign, and reinvent the why, what, and how of our work in every arena from education to healthcare to public safety—as will the government. We need to reassess where we have the greatest needs so we can apply our limited resources to have the most meaningful impact. We need to be much clearer about our aspirations, more intentional in defining our approaches, more rigorous in gauging our progress, more willing to admit mistakes, more capable of quickly adapting and improving—all with an unrelenting focus and passion for improving lives.

It’s no longer good enough to make the case that we’re addressing real needs. We now need to prove that we’re making a real difference.
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