Tuesday, November 24, 2009

Vendorism vs. Innovation


So the recent academia buzz about Social Innovation has taken hold in government quarters this spring. The White House Office of Social Innovation (if somebody can locate its website, let me know) and the Social Innovation Fund (SIF) are the manifestations of the Obama administration’s belief in the ability of the nonprofit sector to come up with new grassroots answers to old problems, and the willingness of the government to invest in dissemination and scaling of high-impact programs.

That’s as much of a definition as you’ll get from publications about these two new institutions. The SIF will be run out of the Corporation for National and Community Service, and work with grant makers to identify community organizations that have projects worthy of scaling.

But haven’t foundations tried it all before? As Steven Goldberg demonstrates in his book, “Billions of Drops in Millions of Buckets” philanthropy’s support of innovative nonprofit work has failed to produce any meaningful social change. Grants are too small and spread too thin, and there will never be enough private funds to spread high impact models to any significant number of people in need.

Or, as Thomas Luce said at the National Philanthropy Roundtable annual meeting last year““We have lit enough pilots that we ought to have a furnace somewhere.”


Despite efforts at renaming philanthropy, and consultants, writers and bloggers selling strategic,
catalytic, targeted and high-engagement philanthropy and impact investing, I fail to see how these re-definitions of the same thing will make any difference for significant numbers of people served by the sector.

Anyway, should it really be the function of private donors and foundations to solve all problems of inequitable societies, by throwing more money at them?


Philanthropic giving only accounts for 12.3 % of nonprofit revenue nationally, and government accounts for 29.4 %. (
NCCSS, 2008) Maybe there is potential for a bigger scale impact if government funds provided to the nonprofit sector are re-organized to be more strategic? Such as with SIF….it’s a good idea, but if it happens within the parameters of the current system, I have doubts:

I think the biggest barrier to innovation is the government itself. I sound like some libertarian, anti-big government wacko. What I mean is that the systems that have evolved at federal and state levels are forcing social service nonprofits into a vendor role. Government –nonprofit relations have been reduced to, in many cases, the submission and processing of reports and invoices, and the regular contract renewal process. Services are provided in compliance with binders full of standards and regulations. All services are reimbursed based on billing units, not based on positive outcomes for recipients. There is no incentive nor time nor creative space for innovation.


And, at least in New Mexico, there are no effective communication channels between nonprofits and state entities. So the problems of the out-of-control bureaucracy, the failure to improve clients’ lives, or any ideas for improvements outside of the current system are simply not discussed. In NM, the communication between government and the nonprofit sector happens mostly between the larger nonprofits with lobbying capacity and the legislators, usually aimed at creating additional funding sources, benefiting the bottom line of already well-funded corporations. Innovation?


There are a few examples of funding agreements that were designed to encourage local problem solving and development of innovative, integrated community-based service systems . One example I know of are the local behavioral health collaboratives in New Mexico. They were born out if the notion that locally coordinated services might be more effective than throwing money down various silos. Local collaborative have formed in each judicial district of the state to build effective local systems of care for mental health and substance abuse services. They are not directly supported by state funding.


At the state government end, a “statewide entity” was formed, and contract management and billing was outsourced to a for profit company. The state began to merge all grant announcements into one “super-RFP”. Sounds like a good idea? The
organizational chart on the NM Behavioral Health Collaborative website illustrates how the attempt at streamlining the system went haywire at the government end.

Then the NM State Legislature decided to put their money where their mouth was and approved “Total Community Approach” (TCA) funding for six judicial districts. The funds were to be used to create or improve local systems of care to reduce the suffering caused by substance abuse and mental health problems.


In Judicial District 6, the TCA funds were used to fill the gaps in the continuum of care of small, rural and economically desolate Hidalgo County, starting with universal prevention all the way over to intensive outpatient treatment and everything in between. Providers came out of their silos, started working together to assure multi-point access to seamless service provision, and effective prevention messages. They created new programs, including a youth organization and an adult drug court. They are just starting now to talk about effective tracking of services, referral follow-up and evaluation of outcomes, supported by a professional evaluator. The scale is really small: Hidalgo County has 5000 people. The TCA network is onto something good, but it is certainly not close to proving it yet.


Meanwhile, the state end of the program has morphed into another bureaucratic monster. Providers have to submit monthly narrative reports, reporting on the cost reimbursement, enter claims into a web-based system and prepare a monthly invoice that includes fee for service units and deliverables. The TCA Coordinator spends 80% of her time managing the billing process, and the rest of her time liaising, or should I say, struggling, with the State Behavioral Health Division and Optum Health Care, the for profit company that “
manages” the contracts this year.

In one or two more years, legislative TCA funding will expire. It remains to be seen if the project will manage to reach a stage where outcomes are measured effectively, and where enough funding is available to sustain the evaluation, cooperation , quality improvement and dissemination functions to make the whole thing sustainable and replicable. They could have gotten there a lot sooner, if the coordinator and the providers hadn’t been so busy wrestling with the ever changing billing company over each providers’ invoice and monthly report.


Early nonprofit theories explained the existence of nonprofits as a response to government failure. Now it is widely believed that nonprofit and government sector are complementary. Interdependence theory sounds really good- in theory: the nonprofit sector provides community-based services , while government assures sustainable funding streams.

Other recent theories are emphasizing the role of nonprofits as innovative societal forces. I am not arguing with the notion that the best ideas often come from the communities that are tackling the problems.

But I would suggest that the current system of nonprofit revenue generation from government grants and contracts constitutes a barrier to innovation.


What, to my knowledge, has not been looked at –neither by the research community, nor by the new social innovation institutions, are the factors that prevent innovation. Although, groups like the Nonprofit Finance Fund have been laudably outspoken about how the current nonprofit financing system sets organizations up for failure. More questions to explore could be:


How we can improve government –nonprofit relations and funding mechanisms to allow room for creativity?

How can reimbursement systems incentivize outcomes over units of service?
How can service provision and innovation be paired, and made mutually supporting functions?
How can we create avenues of communication between the two sectors?
How can we build capacity of individual nonprofits to develop, test, disseminate and assist in replication of effective models?

2 comments:

Anonymous said...

You have some really interesting thoughts here, some I agree with and some I don't. I think you're asking all the right questions, but I would encourage you to dig a little deeper in terms of government promoted innovation. If you are talking only about specific innovations, then yes, perhaps the government seems to be a bit behind the times, but you would also be surprised at how innovative the government can be in certain areas. Areas that we traditionally take for granted, actually. Glad I found your blog. I'll look forward to reading more.

Nikki Zeuner said...

Thanks, Anonymous. Any literature you can point me to, describing successful government promoted innovation, and/or successful government-nonprofit contracting structures, would be much appreciated. I am still digging deeper on this, and will for a while.