Last week, the 2nd Annual Innovation Summit convened nearly 500 philanthropists, impact investors, government officials, and nonprofit service providers in Salt Lake City. All of these individuals and organizations are focused on ways society can use innovation and data achieve concrete improvements on seemingly intractable challenges for kids, the poor, and communities as a whole. I had the privilege of moderating a panel of four mayors from around the country talking about their experiences with government innovation and a focus on outcomes. Through that conversation and throughout the two-day conference, there were a number of key themes and great insights from contributors that apply to anyone interested in making a difference in society.
Prioritize Outcomes and Impact over Services, Activities, Compliance, or Contracts
Many focus on the financial mechanism of Pay for Success (PFS, sometimes called Social Impact Bonds), but that mechanism is only one of many ways to pursue the broader philosophy embodied in paying for success. This paradigm involves some key principles:
- Clearly specify the outcomes (not activities) you want to achieve.
- Measure consistently and with appropriate rigor to ensure you know what’s working and what’s not.
- Allocate resources and efforts toward the things that work and away from what doesn’t.
Of course, this paradigm, while perhaps intuitive, typically involves a significant shift to counteract the traditional approach that focuses on compliance with regulation or even increasing the number of people served rather than focusing primarily on impact. Yet as Utah Governor Herbert noted, what we’ve been doing hasn’t been working: ever since President Johnson’s declaration of a War on Poverty there has been nearly no change in the national poverty rate. So it seems clear that we need to change how things are done if we want to reach our goals.
Pay for Success projects like the one being implemented in Salt Lake County are concrete examples of this transformative approach. But while the PFS funding mechanism might be limited to certain opportunities, the paradigm that prioritizes and measures outcomes should not be. As Caroline Whistler, co-founder of Third Sector Capital Partners, said in her presentation, “every contract is an opportunity to identify outcomes and pay for impact.”
Prioritizing Outcomes is the Right Thing to Do, But It’s Still Hard
In his keynote address, David Wilkinson of the White House’s Office of Social Innovation supported this paradigm, arguing that “good government, better outcomes, and efficient use of tax dollars is not partisan, it’s something everyone wants.” And while that is true, it’s not always easy to shift to a focus on outcomes. Indeed, several of the panelists in another session said the hardest thing about making this shift is finding the political will.
In the panel I moderated, the mayors of Salt Lake County, Utah; Chattanooga, Tennessee; King County, Washington; and Carmel, Indiana all emphasized this theme, saying that getting people to understand and buy in to a new way of thinking takes a lot of work. Their advice included:
- Be transparent, sharing the goals, the data, and the progress widely and openly. Mayor Brainard of Carmel noted that as he informed the public and other stakeholders about what he was trying to achieve and use data to paint a full picture, special interests had a harder time insisting on traditional approaches.
- Start and end every conversation by reaffirming the ultimate goals. Mayor McAdams of Salt Lake County reiterated that focusing on outcomes elevated discussions above tactical differences or partisan ideologies.
- While it’s often possible to reallocate existing funds to more evidence-based, effective initiatives, Mayor Berke of Chattanooga emphasized that getting to that point requires important investments in people and data. Knowing which programs work requires evidence, which requires data, which requires tools and systems. Those data systems don’t need to cost millions of dollars, but they are essential. So too is team members’ capacity to use the data effectively and do things in a way that follows the outcomes paradigm.
Of course, all of this requires excellent leadership. In an earlier panel, Linda Gibbs of Bloomberg Associates told how the first staff meeting under Mayor Michael Bloomberg of New York City only lasted a matter of minutes. Bloomberg’s message? “In each of your departments, find out what actually makes things better for the citizens and the city, and then focus relentlessly on getting to those outcomes. As long as you do your homework and use the available data, don’t worry if you pursue something and it doesn’t achieve the outcomes you aimed for. Just learn what you can and try again.” The administration followed that pattern throughout Bloomberg’s tenure.
Data is the Key to Transformation…
Over and over again, speakers reiterated the power of data. Numerous examples illustrated how data can identify root problems and optimal solutions. JB Pritzker, a billionaire philanthropist, shared his process of seeking the best return on his significant philanthropic efforts. After extensive research conducted by a consortium including Nobel Laureate James Heckman and the Bridgespan Group, he found that no other effort could make a bigger impact than ensuring disadvantaged children were ready to learn by the time they reached kindergarten. The facts he shared at the Summit are startling:
- 90% of all brain development happens in the first five years of life.
- Yet 50% of all low-income children are not fully prepared for kindergarten, with only a 45% chance that they’ll catch up by age 11.
- As a result, these little five-year-olds are 25% more likely to drop out of school, 40% more likely to become a teen parent, and 70% more likely to be arrested than children who are ready for kindergarten.
Given the data, it’s not surprising that investing in a child’s earliest years improves her trajectory for a lifetime while simultaneously reducing spending and negative societal impacts for the entire community. With this data in hand, JB has gone all-in to support early childhood development, becoming a leading investor in related PFS projects in Salt Lake County and Chicago.
Another panel discussed leaders in San Diego County who used data to not only highlight a problem, but to also build a comprehensive approach to reforming mental health services. After matching data for the first time on users of criminal justice, healthcare, and other systems, the country realized that the 25 individuals who used the county’s services the most—accounted for $3.5 million in support. That reality woke everyone up, from the county to businesses to nonprofit providers. Since then, the community developed a comprehensive “housing first” approach to supporting these individuals, dramatically improving their stability across a number of outcomes while also achieving significant cost savings. But that was just the start. Nick Macchione, Director and Deputy Chief Administrative Officer of Health and Human Services for the county reported in his comments that “The data allowed us to build the trust with our partners that this new approach was worth it. And that has led to much larger initiatives and impact—going from serving just 28 people to 1000.”
…But So is Assessment and Improvement
Of course, not everything works perfectly the first time. Even PFS has had a bumpy start as a mechanism for effecting social impact. The first project was closed after it didn’t yield positive results. And while the second project here in Salt Lake County showed very encouraging early results last fall, some criticized these results for being skewed in favor of the program. But as we argued at the time, learning and improving is actually a success in itself. This message was reiterated this week in an op-ed by David Wilkinson of the White House and by Andrea Phillips of Goldman Sachs Urban Investment Group. As she said, we need to remember the big picture—“The model worked and is working in Utah insofar as a diverse group of stakeholders, local advocates, government, investment, philanthropy, etc. came together, agreed on the outcomes we were trying to achieve, agreed on how we would achieve those outcomes, and worked together to achieve those outcomes. That in itself is a huge success.”
That said, Phillips also agreed in her panel presentation that there was a lot to learn. Among other things, we need to continue to refine the measurement approaches and apply appropriate techniques to each situation. Furthermore, we need to be better at communicating our expectations: “We learned that we have to be very careful about our language and what we call success. We might have been a little too enthusiastic in Utah.” And overpromising can jeopardize support for future success.
Finally, Phillips said that while assessment, refinement, and debates about what is working are crucial, “we need to be cautious in the social sector about being our own biggest critics, since that can really squash innovation and impact.”
A focus on individual and societal outcomes, the use of data to inform and drive decisions, and innovative approaches to funding, measuring, and pursuing impact were all on prominent display at the Innovation Summit this week. And even for those of us who are steeped in the outcomes paradigm, it was an invigorating opportunity to share successes happening around the country. Most of all, it’s encouraging to know that governments, philanthropists, nonprofits, and investors can, in fact, come together to identify what truly works and make a difference for the individuals and communities they care about.