This article was originally published in Pro Bono News.
Latitude Network recently took some clients with us on an ‘outcomes tour’ of the US to learn from organisations, funders and governments that are shifting to outcomes-based funding. This includes what the US calls “Pay For Success” projects, and we call Social Impact Bonds, as well as newer forms of outcomes contracting where a range of financial and non-financial incentives are provided for performance. Outcomes-based contracting is when a commissioner of services (usually a government but can include large philanthropy) agrees to fund a social service program where at least some of the funding is contingent upon the organisation achieving a target performance on clear, agreed outcomes metrics for service users.
Key lessons learned -
1) A shift to outcomes funding, while difficult, is a must
Our observation in Australia and in the US is that most people who work in the social sector (including government) want the work they do to lead to improvements in people’s lives. There is generally a strong desire in organisations - from the frontline to the Board - to work towards outcomes. The difficulty is that merely measuring outcomes or drawing up an outcomes framework, while necessary, is often far from sufficient to change behaviours and performance. Funding on the basis of inputs or outputs is a very blunt instrument with very low levels of data or feedback on what is working for long term, relevant outcomes.
Funding on the basis of outcomes, however, can provide the joint incentive to properly define, measure, track and deliver outcomes that matter to the service user. A range of different outcomes have been contracted, from reduction in recidivism, to early childhood development milestones to family reunification. Despite their challenges, everyone we met - from local and state governments such as Ventura County or LA County Department of Mental Health, to impact funders such as Maycomb Capital and First5 LA and service providers such as the Center for Employment Opportunities and Interface - everyone was focused on making the shift to outcomes-based funding.
2) Social Impact Bonds have been a useful tool to kick start the outcomes revolution, but will be only one of many tools for the next era in outcomes funding.
Our discussions with Emily Gustafsson-Wright and Izzy Bogild-Jones at the Brookings Institution highlighted how Social Impact Bonds have had powerful impacts on social sector performance, innovation and flexibility in service delivery, but there is little evidence that they bring a net additional amount of private sector funding into the social sector. This aligns with Latitude Network’s view that outcomes funding is best used to drive alignment of interests and flexibility for innovation between government, social sector and philanthropy, and should not be seen primarily as a tool for increasing private funding of social services.
3) Organisations that build outcomes-funded projects are transformed for the better - especially in managerial focus and performance capability.
All the organisations we spoke to had used the experience of an outcomes contract to drive important changes in capability and process within their organisations. One organisation, Center for Employment Opportunities (or CEO) in New York City, has built a sophisticated outcomes and performance management system that gives visibility to everyone, from the frontline to the Board, on how the organisation is tracking in delivering its mission. The organisation has a strong, singular focus on a cohort of high risk offenders leaving prison. It’s focus allows for a robust program logic and service methodology and it uses detailed performance reporting to achieve employment goals and reduce recidivism. Their data has helped them identify the most effective early responses (e.g. ensuring a client starts a job on the day they turn up), and helps frontline workers adjust their activities by getting regular, timely feedback and learning from high performers. CEO’s outcomes contracts with governments have helped provide the incentives to focus on outcomes.
4) A new ‘Outcomes Partnership’ approach between Government and providers can lead to better achievement of outcomes
Forward-thinking governments are entering into what we are calling ‘Outcomes Partnerships’ with social organisations to work together over time on defining and aligning around key outcomes that matter to services users. These partnerships allow for better targeted procurement procedures from government, adding additional incentives into contracts for achieving short and longer term outcomes, and ensuring transparency of data sharing that can shed light on areas of highest and lowest performance. They also provide a much higher degree of flexibility to both Government and service providers through ‘active contract management’ methods that allow for adjustment of performance goals as theory hits reality.
These partnerships are a part of the journey of various governments in the US to shift large parts of their funding base to be procured on the basis of outcomes rather than inputs or outputs.
Our visit to the Massachusetts Department of Transitional Assistance in Boston revealed a forward-thinking government department that is leading the internal systems and behaviour change required to procure on the basis of outcomes, increase quality and sharing of data and establish trust between government employees and leaders and the social organisations they fund.
Latitude Network and our clients see Outcomes Partnerships as the next important step for the social sector in Australia.
This week's announcement by the Victorian Government of the $100 million Community Infrastructure Loans Scheme, will provide councils with access to low interest rate loans of between $500,000 and $10 million. The loans will apply to community centres and hubs, cultural facilities, public libraries, kindergartens and early learning facilities, heritage building restorations for community use and public spaces like parks, reserves and trails.
The funding will be very competitive and so it will be important to demonstrate how your proposal will not only provide functional benefit to the community but will also deliver real, long-term community outcomes as well.
We call it Outcomes-Based Infrastructure and it is a process that sets up social infrastructure projects so they can make a measurable difference to people's lives, particularly where pockets of disadvantage exist. Brimbank City Council is leading the way with their 'Brimbank Hub' development, which will bring together a world-class leisure centre with a rigorous approach to addressing real social and health inequalities.
Let us know if you would like to talk about how your application for infrastructure funding could become an outcomes-based community infrastructure proposal.
Link to the Premier's announcement
Guidelines for a previous, similar, program
Dale Renner & Russ Wood are excited to announce that Gemma Tovey will be joining Latitude Network from September 2019.
Most recently, Gemma was Strategy & Growth Manager at Melbourne City Mission’s Hester Hornbrook Academy. Prior to this role Gemma managed Melbourne City Mission’s Social Enterprise portfolio where she founded and subsequently managed MCM’s ‘CQ Cultural Consulting’ business, among other achievements.
Gemma has qualifications in Law and and is a graduate of Leadership Victoria’s Williamson Community Leadership Program and of the Australian Institute of Management’s Project Management program.
Gemma brings an incredible commitment and passion along with a unique set of skills and experience to Latitude Network as we work with like-minded organisations to understand and interpret the future world of outcomes-driven social and community services delivery. Like Latitude Network’s two founders, Gemma is passionate about redesigning systems to improve the delivery of services that support disadvantaged communities.
From day one, Gemma will be involved with:
Gemma can be reached on:
The South Australian Government opened its second round of Social Impact Investments, with a focus on better outcomes for children and young people in out-of-home care, and after leaving guardianship. This follows South Australia's first social impact investment in the Aspire homelessness program delivered by The Hutt St Centre.
Interestingly, the Commonwealth Government is providing $5m as partner with the South Australian Treasury Department, as an early foray into learning and engaging in the social impact investment space.
Latitude Network is assisting with the preparation and development of an application focusing on improved outcomes from the residential care context.
New South Wales
The NSW Office of Social Impact Investment (OSII) is reviewing proposals from three organisations focusing on Indigenous employment and empowerment. Latitude Network was been supporting one Indigenous organisation through the 'co-development phase' where OSII collaborated with the social organisation to advise and develop a proposal together. The intent is to support organisations to prepare robust proposals that are more likely to meet Treasury's requirements and be successful through what can sometimes be an arduous 'Joint Development Phase' of financial and contract negotiations to conclude a social benefit (impact) bond legal agreement.
The Victorian Treasury is a long way through negotiations with two organisations in the 'Joint Development Phase' for its next round of social impact bond investments. This round focuses on primary and secondary school aged children who have become disengaged from school and have a variety of other complexities in their lives. Latitude Network is supporting Melbourne City Mission and the Hester Hornbrook Academy in the negotiations.
The NSW Government's Office for Social Impact Investment (OSII) has been busy. While they are about to close a tender round for a formal social impact investment based on homelessness, they have also kicked off an exciting new funding process called 'Social Impact Investment - Evolve' (SII Evolve). The SII Evolve process invites social organisations to propose an outcomes-based project based on any cohort and social policy area. This is a significant step forward for outcomes-based funding in Australia as it is, essentially, an open invitation for organisations to come forward with great ideas about how to address social disadvantage and lowers the barriers to apply.
This advance is important because it recognises that social organisations (and their clients) need to be the initiators of progress and innovation - and often are. But not every idea or initiative with promise can fit into either the narrow criteria of a large funding round nor the complexity of a formal social impact investment (think 'Social Impact Bonds').
This funding round is different because it simplifies the first step; by requiring only a 5 page submission, rather than the 30+ pages that are behind a social impact bond-type application that is typical of the Australian funding rounds so far. The OSII understands that the complexity of preparing an outcomes-based project proposal is higher than a standard tender and can therefore be a barrier for smaller social organisations (and even larger ones) to spend the time developing the proposal.
While we aren't, yet, at the stage where social organisations have strong incentives to invest in new, outcomes-focused service delivery, initiatives such as SII Evolve mark the start of what could become a structural change in our system which recognises and rewards social organisations that invest in testing and building new models that are proven to work to shift disadvantage.
Latitude Network is supporting social organisations and communities to develop proposals for the 'Evolve' funding round in NSW as well as current social impact investment rounds in Victoria. In our experience, most social organisations are excited by the opportunity to build new or adapt existing systems free from the output-focused shackles which currently hold them and their staff back. We would encourage organisations to start working on suitable proposals now, whether for this round or future rounds of funding.
The proposals are due by 12 October 2018, so now is the time to develop an application.
Find out more from the Office of Social Impact Investment's announcement here.