This article was originally published in Pro Bono News on 4 May 2020.

In the social sector today, there is an understandable rush to manage immediate operations, protect staff, and review face-to-face service delivery. It’s a complex time and it is difficult to see beyond the next week or two. However, senior managers need to start thinking about the phases of adjustment to the COVID-19 crisis across time:

• Phase one: Manage the crisis. This is the operational reaction to shutdown – how to continue, protect staff, and manage the needs of clients whose services are stopped by social distancing, with particular complexities for residential programs (most organisations are here now).
• Phase two: Stabilise and deliver. This means delivering during six to 12 months of constrained activity, including preparing for delivery of services under different levels of social distancing rules.
• Phase three: Leverage the upswing. This is about delivering in the post-pandemic world – and being prepared as an organisation for the “permanent” effects of the crisis.

The pandemic is driving change for both commercial and social organisations across the globe. 

There are a number of significant forces at work:
Increased use of technology – In phase two, social distancing will continue to test the sector’s ability to deliver services in the traditional face-to-face mode. Back office functions will need to simplify but it is also a time to experiment with what parts of the service model can be delivered via technology and what parts require face-to-face interaction.

• Consolidation of organisations and concentration of power – Financial crises usually accelerate concentration of power (organisations with shallow reserves may shrink or merge with larger organisations with deeper pockets). In some parts of the social sector donations have fallen significantly, leading to the need for some organisations to consider their financial viability and the options for ensuring the continuation of their best programs. Non-viable social enterprises will need to be closed down or merged. Financially secure organisations might find opportunities to pick up successful programs.
• Increasing social problems arising from lockdown – The steep increase in unemployment (even if “most” people who lose work will return to it, the effects will be long term especially for more vulnerable groups) and other heightened social issues (domestic violence, mental health, school dropout) will require fresh and effective solutions. Governments will be seeking new solutions from the social sector. Social organisations can develop “proactive” funding pitches to governments with high quality programs.
• Increasing role of government in the wider economy – The Job Seeker package is likely to establish new norms and expectations about government support for people out of work. It will be hard for the government to return to the previous low level of Newstart payments. This flow of cash may mean opportunities for some programs that rely on client financial contributions (e.g. in housing). 
• Longer-term funding crunch as the government pays off debt – While it may be a year or more away, at some point the federal government in particular will begin belt-tightening to manage the huge increase in government debt. Social organisations should be ready to prove the cost-effectiveness of their programs (including with “avoided cost” financial models) alongside the “social”, to make sure they can withstand this pressure. Along with positive social outcomes, governments will be looking for improving efficiency in provision of welfare, with reforms potentially around simplification and poverty reduction.

What does this mean for social organisation strategy? While most organisations have rightfully been focused on phase one adjustment, some of our clients are now entering phase two stabilisation period. We think it is now time to plan for “living with constraints” and for phase three, the “leverage the upswing” phase after social restrictions begin to ease. One way to think about it is that operational management should be focused on phase one, while CEOs and boards need to be planning for phases two and three.

While it is incredibly disruptive, Latitude Network believes that the current upheaval also provides an opportunity for social organisations to accelerate the innovations and performance improvements needed over the next few years. This is exactly what is happening now in manufacturing around the world – technology improvements that might have taken five years are being implemented in one year. 

The high-performing social organisation

What does a high-performing social organisation look like? We will need social organisations that use data for evidence-based decision making and continual improvement, leverage technology, have a laser focus on their social impact and outcomes, and develop a “flexible playbook” of opportunities and programs that enable adaptability to changing needs and funding environments. An organisation that can evidence performance to government and other funders, and can also make a convincing case for the economic savings arising from their work.

The daily charting of COVID-19 cases and the entry of epidemiological models into the mainstream discourse have demonstrated how vital good data is at times of uncertainty. Social organisations need live, relevant data that enables them to pinpoint barriers to achieving impact, to identify service approaches that work best for specific cohorts and sub-cohorts and help allocate resources to where the organisation can have the best impact.

Social sector boards are tasked with ensuring organisations maximise their impact. They therefore need to be asking these questions to help with this transition: 

• What is the impact we want to achieve and for whom?
• Where do we currently achieve our best impact?
• How can we use technology and automation to both operate in a constrained medium-term environment (under social distancing rules) but also to improve our longer term impact and efficiency?
• What data should we collect and how do we use it to focus our efforts?
• How do we position ourselves for the future funding crunch?
• How can we demonstrate our effectiveness and make an evidence-based case for funding high-impact programs?
• If the wider changes are a fundamental threat to our financial sustainability, how do we ensure our best performing programs continue (either through partnerships, licensing or mergers)?
• What shifts in funding will occur in our sector, and how can the organisation position itself as having solutions to the looming challenges across unemployment, mental health, domestic violence, homelessness, etc.?
• What planned innovations and “moonshot” solutions do we have that we can propose to governments in relation to these rising social issues?

Special thanks to Dave Wells at Melbourne City Mission for is contributions to this article.

Invitation
As our way to contribute to social organisations in this time of uncertainty, Latitude Network is offering free “Sounding Board” online workshops for the boards and executives of five social sector organisations exploring the questions outlined above. If you are interested please contact us at dale@latitude.network to book your workshop. We will provide a pre-reading document and a summary of recommendations after the workshop.

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.

Yesterday’s release by Infrastructure Australia of its annual Infrastructure Audit is a timely reminder of how important capital spending is to our social, community and health sectors.
 
It is also a reminder of how ineffective our social infrastructure currently is in addressing some of the growing and increasingly complex health and social challenges facing our communities.
 
The report notes that it is the challenge of operating within ‘sector-based structures’ and the ‘lack of integration’ that stops us from effectively addressing these challenges through our infrastructure investments. Indeed, it can often make things worse as a result of getting differing levels and types of services depending on where people live (p.394).
 
Perhaps the most critical statement in this section of the report, however, is the following:
 
“…challenges remain, however, in overcoming sector-based planning, funding and governance structures which limit the incentives for different infrastructure sectors to work together to improve benefits to communities.” (p. 394)
 
The take-out here is that the success of an infrastructure investment should not be measured by the quality or scale of the build itself but the extent to which it delivers solutions to complex and enduring social and health challenges. To do that, it requires a process that breaks down silos and creates incentives for different parts of the infrastructure system to work together with outcomes at the centre.
 
Latitude Network’s work with Brimbank City Council in Victoria as well as Logan City council in Qld has delivered a process which puts the social and health focus at the core of the investment, including the identification of outcomes, service delivery approaches, cross-sector partners and governance structures. The planning, design, construction as well as the operations can then proceed, confident that we are arming this piece of infrastructure with the tools it will need to truly have an impact. 

As governments and service providers around the world learn from the early years of Social Impact Bonds, a wider outcomes-based contracting landscape is emerging. Originally published in Pro Bono News.

​If there’s one thing most people in the social sector agree on, it’s that they want to “make a difference”. This underpins the desire to move from a focus on outputs (where we may not have evidence about whether we are making a difference), to a focus on outcomes that matter to the social service user.

Not-for-profit boards are starting to drive an outcomes focus because part of good governance is to know whether the organisation is doing something that works. An ideal social service system ensures all participants are aligned around improving outcomes for those who need it.

Yet, the social service system is still a long way from that goal.

There are plenty of pitfalls in this transition to outcomes: debates about what and how to measure; costs of data collection; worries about unintended consequences and cherry picking; and the political hurdles in shifting resources to prevention. Yet while difficult, these are technical problems that can be solved with good outcomes-based contract design and a collaborative, co-design approach with government.

We recently attended the ICS (Institute for Child Success) Pay for Success Conference in North Carolina – a conference to support outcomes-based learning with a focus on early childhood disadvantage. We heard from an early intervention project successfully preventing at-risk kids from requiring costly special education services at school. We heard of the shift of $100 million of social service spending to an outcomes basis in the state of Rhode Island. We learned about a project that prevents hospitalisations of high risk asthma patients through allergen removal in the home – saving lives and money. These are some of the dozens of projects in operation now that are based around outcomes.

The ‘artist formerly known as a Social Impact Bond’ is back. And with a new name.
The Victorian State Government has just announced its second formal round of outcomes-based funding opportunities. And, regardless of name – these are serious opportunities to co-design fully-funded investments into service interventions that really work to close gaps for cohorts of disadvantaged Victorians.
 
The Government’s Statement of Intent, issued Friday 29 June 2018, is critical reading. It indicates that the Department of Treasury & Finance wants proposals from those who work in the following policy areas:

• Vulnerable children aged 5–14 (or school years 1–10); or
• Disengaged youth aged 15–25 (youth who have left school early and are not engaged in training or in the labour force located within a geographic area associated with social and economic disadvantage).

 
Just as with the first round of opportunities that delivered two contracts – one through Sacred Heart Mission and the other through Anglicare/VincentCare, to be considered for this round you’ll need to be well prepared.
 
First Principles.
The key things you’ll need to cover in your application are listed here: 

Social Impact Bonds (SIBs) are a powerful new tool to align the interests of social organisations, governments and investors around proven social impact. While this form of funding is still in its early stage, there are some principles that are emerging. It is clear that a SIB will not be appropriate for all social programs - the need for robust proof of impact attributed to the intervention, and the involvement of investors and multiple government departments makes SIBs complicated instruments.

We encourage social organisations to think about the future of outcomes-based funding for programs. With new SIB funding rounds opening up, social organisations are asking - do I have the right kind of program and support to be successful in applying for a SIB?

There are several key dimensions to consider before beginning your application for a SIB.