Article first published on Pro Bono News 22 September 2021.
With the move to reporting on outcomes gaining pace, Dale Renner, director of Latitude Network, shares advice on what social organisations can do to build an outcomes-focused organisation.
Have you noticed that more and more philanthropic and government funders are asking for proposals to have an “outcomes focus”? Impact investors and service commissioners increasingly want evidence that a program makes a difference.
The move to report on “outcomes” is gathering momentum and for good reason. The purpose of social sector funding, whether in homelessness, mental health or child protection, is to improve the lives of people – to make a difference. That’s also the mission of every social sector organisation.
An outcome is a way of defining and measuring this important “difference” made in someone’s life – between dropping out of school and finishing school, between being employed or not employed, between mental distress and a sense of wellbeing. By defining and measuring the right outcomes, organisations and funders can focus efforts on what matters most to the service recipient, and therefore make the most social impact.
Funders have been experimenting with different ways to fund for outcomes, particularly over the last decade. A complex form of outcomes funding is a social impact bond (SIB), where a third-party provides an upfront investment to cover program costs in advance of the outcomes being known and outcome payments being made by the program funder (usually government). In Australia four states have funded more than $100 million across a dozen SIBs so far. We are seeing more government interest at federal and state levels in funding programs on an outcomes basis. Even if your funder is yet to raise this with you, the pressure is on to demonstrate outcomes per dollar spent, and to compare this to other programs or organisations.
Every social organisation we talk to is somewhere on the outcomes and data journey – sometimes one program has lots of good data but isn’t using it for decision making, and another area hasn’t yet decided what data to collect. Many organisations have invested in client databases (CRMs/CMSs) to deliver data that government (or external stakeholders) want, but haven’t thought through what is the right data to collect that will aid continuous improvement and demonstrate impact.
Latitude Network believes that we are on the verge of a data-driven performance jump in the social sector. The manufacturing world went through a data and performance revolution when Toyota adopted the ideas of American Engineer William Deming in the early 20th century. More recently the worlds of marketing and software have used analysis of “big data” to continually improve services and to better tailor services to individual needs. Just as the key to those leaps in quality and effectiveness in the commercial world was access to better and more precise data, we are now seeing tools emerge to enable impact improvements in the social sector.
Journey to ‘outcomes-focus’ Being an “outcomes-focused” organisation goes beyond simply defining some outcomes and commissioning program evaluations. While program evaluations can be important tools to prove point in time impact (especially if you have a counterfactual or control group to test against), other tools are needed for the modern fast-paced challenges of data-driven organisations. One state treasury official we talked to recently stated that they would much prefer to see social organisations investing in their own data capability and generating ongoing insights than in static program evaluations.
Using data and focusing on outcomes are important not only to ensure an organisation is delivering its mission and continually improving its effectiveness, but also to be competitive when it comes to philanthropic and future government funding. The business case is heart and head, mission and financial.
So what can social organisations do to build an outcomes-focused organisation:
Once you’ve got data, the next phase is to use the data well – easier said than done. This means collating data, building dashboards, visualising the right data, and testing and refining it. And if you have great data with good “before” and “after” measures of outcomes, it might be time for some really exciting analysis – using artificial intelligence tools (machine learning) to identify segments and build predictive models that help you improve impact and become more efficient. But perhaps that’s a discussion for another time.
Each year, large numbers of people in the mental health system struggle to secure and maintain housing and fall into long-term homelessness. This has significant consequences for their long-term health & wellbeing and puts a high burden on the state’s housing and health systems.
Wellways, a national provider of mental health services and leader in sub-acute mental health care, developed the Doorway approach. Doorway supports clients out of a clinical mental health service and into a home by leveraging Australia’s second-largest housing market - private rentals. Doorway does the heavy-lifting to make sure that people engage with and secure a long-term tenancy in the private rental market. This radically increases the supply of housing available to this client group, whilst normalising the process of maintaining housing in the community - not in the public housing system. Wellways has iterated and proven the Doorway model over nearly a decade and an academic review demonstrates its efficacy.
However, the challenge for Wellways was that despite Doorway having demonstrated value and impact, there were not any established channels or processes for Wellways to proactively approach Government about continuing this program beyond its pilot.
THE ROLE LATITUDE NETWORK PLAYED
Latitude Network worked closely with Wellways to strengthen the proposition as an outcomes-based program and transform Doorway into a convincing proactive funding approach to Government.
We undertook a deep-dive into the Doorway segmentation data to see for whom it worked best and under what circumstances. We then advised Wellways on how the program could be dialled-up in these areas to create a more compelling investment case for funders. We used a multi-year, data-driven analysis of client outcomes linked through to the program logic and developed a discounted cash flow financial model that reflects the 10-year cost-savings to Government in Net Present Value terms.
THE TRANSFORMATION / IMPACT
The process of reframing a proven program as an outcomes-oriented program has helped enhance Wellways’ business capacity and confidence to deliver on its promises to clients. It can now target clear and specific outcomes to be delivered with confidence.
The Doorway transformation has also created a template for the future, enabling Wellways to apply this methodology to other successful programs. Most importantly, perhaps, the process has reinforced Wellways’ position as a service provider who wants to continuously do better despite traditional block funding mechanisms. Through Doorway, the organisation is now ready for the future world of outcomes-based funding.
Cricket, and the local cricket club, is at the heart of hundreds of communities across Victoria. Growing participation numbers are a positive sign that cricket plays an important community role, transcending age, gender, race and ability. However the impact cricket has on the local community is largely undefined, and often it's potential is often untapped.
Cricket Victoria - one of Victoria's leading sporting organisations - intrinsically knew that cricket connects communities and improves lives by bringing people together. It was clear that cricket delivered mental, physical and cultural benefits, positively shaping the lives of the individuals and communities involved.
However, Cricket Victoria wanted to know ‘How can we measure and enhance our social impact through the cricket experience?’. And, ‘How can we be more targeted and deliberate in the impact we deliver locally’?
Cricket Vic also recognised that the needs and issues important to the community varies across the thousands of cricket clubs across the state. Any system for improving social impact would therefore need to be:
THE ROLE LATITUDE NETWORK PLAYED
This project was delivered over two key stages: the first focused on understanding the needs of local clubs, communities and the types of social and health issues that clubs could realistically engage with. It delivered a frame and a method that Cricket Vic could use to help clubs enhance their social impact using participation as the main tool. The second stage (ongoing through 2020-21) is piloting the process (known as the Community Outcomes Framework) by working with clubs themselves to co-design initiatives to identify and address local needs and using data to measure the impact.
Latitude Network has built a Community Impact Framework for Cricket Victoria that, once tested, will enable cricket clubs right around Victoria to identify and address important social issues within the community using participation as the key tool. We continue to work with Cricket Vic and clubs in stage 2 (2020-21) to co-design local impact initiatives and use data to monitor and evidence the effect during the club cricket season.
Outcomes framework, collective impact, local government, social impact
Australian first: $50m+ outcomes-based health & wellness hub in Brimbank, Melbourne
The municipality of Brimbank sits in Melbourne’s rapidly-growing west. It’s new health and wellness hub is located in St Albans, a suburb which has experienced deep social and health inequities for several decades.
St Albans sits at the heart of the disadvantage that runs through the region and, in Keilor Downs on the border of St Albans is the suburb’s leisure centre (SALC). While the SALC had a loyal band of users it was well-beyond its useful life with growing maintenance costs adding to the challenges of running a tired community facility in a way that generates great community outcomes.
Council wanted to go beyond a redevelopment and create a centre of regional leadership. The aim is not just to create a world-class facility (with pool, gym, community spaces) but also to ensure the infrastructure investment addresses some of the deep social and health challenges faced by people in the area.
But how can a building do this? Typically, an infrastructure project focuses on risk, speed and staying within budget. Time is money. Often the thinking about services, impacts and site usage are delayed until after the concrete is poured.
But Council wanted to make sure the development actually addressed some of the social and health inequities in the region as well as being an example of great community built-form.
THE ROLE LATITUDE NETWORK PLAYED / THE OUTCOME
Latitude Network designed and built an ‘Outcomes-Based Infrastructure’ process for Council that put a set of health and social outcomes at the heart of the development. This involved analysing social needs and patterns in the community, governance design, outcomes framework, collaboration and management structure and service design.
The process brought together the ‘community’ vision of the site with the ‘physical’ vision for the site to make sure that the investment worked harder to achieve targeted community outcomes.
In addition to helping guide the physical infrastructure decisions as part of the Project Control Group, Latitude Network advised Council on a tenancy tender process that attracted the right social service providers to join the projects as long-term tenants. The tenancy agreements even include provisions around setting and achieving outcomes - a first for a project of this type.
THE TRANSFORMATION / IMPACT
The project has proven that the money that governments and communities spend on infrastructure can be leveraged for higher social impact without delaying the build. Infrastructure dollars can create great spaces but also be accountable for positive changes in people’s lives.
More than simply a ‘hub’, the embedding of social and health outcomes into the infrastructure process has meant that alongside new world-class facilities there are also key tenants at the site who are coming together with a program logic to address long-running social and health challenges.
The development has also spawned a ‘collective impact’ project to build community momentum around addressing local social issues using the Hub. It has been set up as the ‘Impact Brimbank’ initiative with a diverse group of community members, and is building support in advance of the opening of the Hub.
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.
Latitude Network is excited to announce that we are supporting Sacred Heart Mission in negotiating one of Victoria’s first Social Impact Bonds (SIBs). Sacred Heart Mission was one of two organisations successful in applying to the Victorian Government to enter negotiations to conclude SIB contracts this year based on expanding its Journey to Social Inclusion program, which is setting a new benchmark for addressing long-term homelessness in Australia.
Social Impact Bonds are being explored by commissioning agencies around the world in an attempt to find more effective ways of funding social and health services. SIBs (also known as ‘Pay For Success’ or ‘Payment by Results’ contracts) are part of an emerging set of funding mechanisms which aim to pay for service outcomes instead of service outputs – something the Productivity Commission discussed in depth in its recent report into competition, contestability and informed user choice.
Russ Wood is leading this work for Latitude, and is acting as strategic adviser and project manager through the ‘Joint Development Phase’ of the SIB which is expected to run until the end of 2017.
If your organisation is interested in exploring which programs might be suitable for outcomes-based commissioning such as Social Impact Bonds, then let us know - we'd be happy to share our learning. Just email us.