Great piece, Matt. Endowment gifts would seem to align well with commitment strategies. We know from our big bet research that such gifts are quite rare in the social change realm (vs. their more common use in support of universities, hospitals, and cultural institutions). In instances such as the ones you describe in this piece, big bets to endow the organization could be a powerful way for donors to advance social change.
I want to ask you about your comments in the context of two other relationships: between the nonprofit and the funder, and between the nonprofit and specific individuals it serves. Consider two scenarios:
Scenario 1: Imagine that, for the reasons you outlined, the nonprofit should remain committed to its beneficiaries, yet the donor should arguably exit its current relationship with the nonprofit. For example, a donor’s mandate and skills are in supporting early startups and the nonprofit has grown beyond that.
Scenario 2: Imagine that, again for the four reasons you outlined, the nonprofit should remain committed to its beneficiaries, yet an individual beneficiary should exit his or her relationship with the nonprofit. For example, a microfinance institution only serves the poorest of the poor and one of its beneficiaries has graduated into the middle class, as measured by income.
Have you seen either scenario play out at One Acre Fund? And I wonder to what extend some donors are really asking what THEIR exit strategy should be and when they can claim success.
Another question: Have you seen funder interest in exit strategies differ by mandate—whether it comes from an individual wealthy donor, trustees in a foundation, a development agency, or a local government? I bet local governments ask this question less often because they have an ongoing mandate to provide public benefits to their constituencies. I’d be interested in your on-the-ground experience.
Many thanks to Gail and Mike for their great comments!
- Gail points out the value of endowment gifts for commitment strategies – absolutely agreed! A nonprofit that has proven the impact, cost effectiveness, and scalability of its model is a perfect candidate for a steady income stream that can cover the (typically declining) annual cost per client. A donor that wishes to ‘purchase outcomes’, to put it crassly, should fine this very attractive. We wish more did!
- Mike poses great scenarios/questions that drive at some of the nuances of commitment vs exit. One Acre Fund has experienced the two scenarios Mike lays out:
(1) funders that exit to help catalyze the next social start-up. Obviously this makes perfect sense for those with a mandate or deep competency in early-stage funding (I think of Echoing Green and Draper Richards Kaplan Foundation in our context, for instance) – very right that success for these funders would be to exit and see the nonprofit thrive without them. Yet, our view is too many funders of innovation will prematurely exit, missing out on the fact that highly innovative mid/late-stage nonprofits (with their better understanding of the context, greater opportunity set given credibility and relationships, more systematic ways of winnowing innovations, etc.) may offer better returns on innovation than an earlier-stage organization. All that said, we think funding of innovation is very different than funding of ongoing service delivery; for the latter, we hope funders will only exit if they find a better SROI with the same target population. To Mike’s related question: definitely we see funder interest in exit differ by type: generally-speaking, we’ve found individuals (of all gift sizes) and public funders to be ‘stickiest’; foundations and corporations less so either given firmer mandates to fund innovation, changing preferences, or simply desire for ‘peanut-butter philanthropy’. That said, we’ve found the more relevant delineation to be the stated purpose of the funds; for instance, public funders are increasingly launching innovation vehicles that we expect to operate very differently (i.e., with stated exit) than their traditional funds.
(2) clients that choose to exit One Acre Fund. We are of course thrilled when this happens – e.g., a client can access farm inputs from their savings, and need not pay the credit cost at One Acre Fund. That said, we also offer what we think of as an ‘internal graduation’ path – farmers that do well in the program may find they can best increase profits by enrolling more land, purchasing previously unaffordable income-saving products from us, like solar lights and clean cookstoves, and so on. This is especially the case in contexts where the markets have not sufficiently developed to serve smallholders. At the end of the day – we believe in and promote farmer choice. As noted in the entry, it is absolutely incumbent on nonprofits pursuing commitment strategies to constantly monitor the context, because it is very conceivable that promoting exit becomes the right strategy over time.
Personally, I have personally seen that played out in the conversations with the people of Haiti. I get the same question you get in Africa. “Will you be there next year?” It is important for funders to understand the long term investment needed. The 4th point you made, about a transformative scale pathway, along with the comment about and the continuum between exit and commitment are important to remember.
I think there could be a sequel to this article written about the second most asked question by communities “when will the project you talk about actually start”. Certain areas are full of “broken promises”. This might be most prevelant in commiunities where church volunteers over promise. Thoughts? Nonprofits and funders I think need to understand the commitment question at the onset as well.
Great point Josh - thank you for this addition. Sadly we do see this also in the communities where we work - often well-intentioned organizations or individuals that over-promise and under-deliver. Your framing of ‘commitment at the onset’ reminds me that One Acre Fund and other organizations also encounter this question in trialing their work in new geographies. At One Acre Fund, we don’t want to commit long-term to a new country, for instance, if we haven’t yet verified that our model will work for farmers, and be a cost effective use of subsidy. In these tricky situations, we are especially careful to transparently share with village leaders, staff, and clients what we are doing, and that in fact we cannot make a commitment to indefinite service at these early stages. As organizations, we owe full candor to the clients we serve
Hi Matt, this is an insightful article. Thank you for sharing your work on this.
I would add one additional condition to your three for when a commitment strategy should be followed: (4) when there are no other credible projects/strategies with significantly higher Social Return on Investment.
Sometimes a population may need your organization and you may be improving, but it’s still not that high impact as compared to another opportunity.
COMMENTS
BY Gail Perreault
ON July 21, 2016 05:11 AM
Great piece, Matt. Endowment gifts would seem to align well with commitment strategies. We know from our big bet research that such gifts are quite rare in the social change realm (vs. their more common use in support of universities, hospitals, and cultural institutions). In instances such as the ones you describe in this piece, big bets to endow the organization could be a powerful way for donors to advance social change.
BY Mike Belinsky
ON July 21, 2016 06:05 AM
Matt,
Thank you for sharing these insights.
I want to ask you about your comments in the context of two other relationships: between the nonprofit and the funder, and between the nonprofit and specific individuals it serves. Consider two scenarios:
Scenario 1: Imagine that, for the reasons you outlined, the nonprofit should remain committed to its beneficiaries, yet the donor should arguably exit its current relationship with the nonprofit. For example, a donor’s mandate and skills are in supporting early startups and the nonprofit has grown beyond that.
Scenario 2: Imagine that, again for the four reasons you outlined, the nonprofit should remain committed to its beneficiaries, yet an individual beneficiary should exit his or her relationship with the nonprofit. For example, a microfinance institution only serves the poorest of the poor and one of its beneficiaries has graduated into the middle class, as measured by income.
Have you seen either scenario play out at One Acre Fund? And I wonder to what extend some donors are really asking what THEIR exit strategy should be and when they can claim success.
Another question: Have you seen funder interest in exit strategies differ by mandate—whether it comes from an individual wealthy donor, trustees in a foundation, a development agency, or a local government? I bet local governments ask this question less often because they have an ongoing mandate to provide public benefits to their constituencies. I’d be interested in your on-the-ground experience.
Thank you again,
Mike
BY Matthew Forti, One Acre Fund
ON July 22, 2016 07:21 AM
Many thanks to Gail and Mike for their great comments!
- Gail points out the value of endowment gifts for commitment strategies – absolutely agreed! A nonprofit that has proven the impact, cost effectiveness, and scalability of its model is a perfect candidate for a steady income stream that can cover the (typically declining) annual cost per client. A donor that wishes to ‘purchase outcomes’, to put it crassly, should fine this very attractive. We wish more did!
- Mike poses great scenarios/questions that drive at some of the nuances of commitment vs exit. One Acre Fund has experienced the two scenarios Mike lays out:
(1) funders that exit to help catalyze the next social start-up. Obviously this makes perfect sense for those with a mandate or deep competency in early-stage funding (I think of Echoing Green and Draper Richards Kaplan Foundation in our context, for instance) – very right that success for these funders would be to exit and see the nonprofit thrive without them. Yet, our view is too many funders of innovation will prematurely exit, missing out on the fact that highly innovative mid/late-stage nonprofits (with their better understanding of the context, greater opportunity set given credibility and relationships, more systematic ways of winnowing innovations, etc.) may offer better returns on innovation than an earlier-stage organization. All that said, we think funding of innovation is very different than funding of ongoing service delivery; for the latter, we hope funders will only exit if they find a better SROI with the same target population. To Mike’s related question: definitely we see funder interest in exit differ by type: generally-speaking, we’ve found individuals (of all gift sizes) and public funders to be ‘stickiest’; foundations and corporations less so either given firmer mandates to fund innovation, changing preferences, or simply desire for ‘peanut-butter philanthropy’. That said, we’ve found the more relevant delineation to be the stated purpose of the funds; for instance, public funders are increasingly launching innovation vehicles that we expect to operate very differently (i.e., with stated exit) than their traditional funds.
(2) clients that choose to exit One Acre Fund. We are of course thrilled when this happens – e.g., a client can access farm inputs from their savings, and need not pay the credit cost at One Acre Fund. That said, we also offer what we think of as an ‘internal graduation’ path – farmers that do well in the program may find they can best increase profits by enrolling more land, purchasing previously unaffordable income-saving products from us, like solar lights and clean cookstoves, and so on. This is especially the case in contexts where the markets have not sufficiently developed to serve smallholders. At the end of the day – we believe in and promote farmer choice. As noted in the entry, it is absolutely incumbent on nonprofits pursuing commitment strategies to constantly monitor the context, because it is very conceivable that promoting exit becomes the right strategy over time.
Welcome thoughts from others!
BY Josh Goralski
ON July 27, 2016 04:42 PM
Matt, Thank you for sharing this.
Personally, I have personally seen that played out in the conversations with the people of Haiti. I get the same question you get in Africa. “Will you be there next year?” It is important for funders to understand the long term investment needed. The 4th point you made, about a transformative scale pathway, along with the comment about and the continuum between exit and commitment are important to remember.
I think there could be a sequel to this article written about the second most asked question by communities “when will the project you talk about actually start”. Certain areas are full of “broken promises”. This might be most prevelant in commiunities where church volunteers over promise. Thoughts? Nonprofits and funders I think need to understand the commitment question at the onset as well.
BY Matthew Forti, One Acre Fund
ON July 27, 2016 05:15 PM
Great point Josh - thank you for this addition. Sadly we do see this also in the communities where we work - often well-intentioned organizations or individuals that over-promise and under-deliver. Your framing of ‘commitment at the onset’ reminds me that One Acre Fund and other organizations also encounter this question in trialing their work in new geographies. At One Acre Fund, we don’t want to commit long-term to a new country, for instance, if we haven’t yet verified that our model will work for farmers, and be a cost effective use of subsidy. In these tricky situations, we are especially careful to transparently share with village leaders, staff, and clients what we are doing, and that in fact we cannot make a commitment to indefinite service at these early stages. As organizations, we owe full candor to the clients we serve
BY Sarah Huber
ON August 29, 2016 06:06 PM
Hi Matt, this is an insightful article. Thank you for sharing your work on this.
I would add one additional condition to your three for when a commitment strategy should be followed: (4) when there are no other credible projects/strategies with significantly higher Social Return on Investment.
Sometimes a population may need your organization and you may be improving, but it’s still not that high impact as compared to another opportunity.