*This is the final part of our three-part series dedicated to deconstructing data, measuring women’s empowerment, and understanding risk/reward when merging for-profit and nonprofit practices.
For-profit meets Nonprofit
To put it simply, for-profit industries are profit-driven while nonprofit ones are values-driven. For-profit industries strive for large figures and more hierarchical definitions of success (i.e. ‘the bigger the better’). They standardize the making and distributing of goods and services that satisfy market demands and create competitive market responses. The business models they conceive of generate income and opportunities to scale, or else companies go out of business. On the other hand, nonprofits provide social services as dictated by a “market” of inequality, which we can understand as need. Each nonprofit exists because of a mission they have to address some version of injustice; i.e. they offer a solution to a problem. The purpose of nonprofit services is not to grow a market but rather to create balance where there is imbalance. This balance can of course involve tapping into existing economic channels and/or new markets to more evenly distribute resources throughout a community. However, lower-income communities will not be able to expand their market economies without considerable and consistent support. It is a process that takes community buy-in, building infrastructure, and collaborating with existing community leaders. Such a process takes time in a way for-profit industries are perhaps unaccustomed to.
Nonprofit funders also tend to approach social impact investing similar to how venture capitalists treat their investment portfolios: by expecting a return on their investments. In investing, return on investments (ROIs) serve as performance measures used to gauge the success of a given investment. In a similar manner, human investment returns (HIRs) in theory indicate how much impact you have based on a given social investment. HIRs, however, can be problematic in how they take social issues and condense them into easily digestible figures. Nonprofits, especially smaller, locally-led ones, will generally not scale as efficiently as for-profits because the purpose behind their existence is not, first and foremost, to generate profit or growth. Their purpose is their mission. There’s a spectrum of how well they achieve this mission, of course, and that is where investors and nonprofit staff align: both groups do want to have the greatest impact on marginalized communities. Where they diverge is when discussing what expectations exist for reporting impact as well as quickness of program scaling (i.e. growth in impact). There are different (at times multiple) bottom lines to consider with empowerment development returns.
It’s worth noting the relative risk-reward with social impact investing versus that of venture capitalism. With the latter, investors can make money – sometimes quite a lot – on a good bet, or potentially lose it all. Translated to the social sector, the risk-reward is more of an ethical question. In this instance, the money is only lost if it doesn’t get properly channeled into the communities it’s intended for. The donor ‘risk’ includes for the potential that desired outcomes won’t get met; however, the primary risk in this relationship is for the recipient of development programs, not the donor. The relationship between donor and recipient is inherently uneven due to the manner in which resources flow from one to the other. There is everything to risk for these populations, and much for organizations that support them as well, because without aid they will continue to lack access to resources, education, and opportunity. It’s one thing to choose not to invest in a company because the ROIs are suspiciously low; it’s another to choose not to fund programs for communities for the same reason, especially since HIRs often vary in accuracy.
A solid social impact investment is investing in human capital and human growth, for both communities and nonprofits with their fingers on the pulse of community need. The best organizations work to address several angles of need that will consistently meet communities where they are. Nonprofits with this holistic approach are constantly learning, adapting, and evolving. This is the kind of agility funders should encourage, versus an automatic inclination to standardize expectations based on what has worked in the past. What’s important is for funders to embrace a perspective of learning through experimentation as critical to developing innovative and relevant empowerment programs. Doing so will provide nonprofits with stability and the space for creativity that will inevitably lead to greater (or deeper) impact.
Connecting the Dots
‘Social responsibility’ is more than a buzzword today; it’s become an entire arm in the private sector. Growth in philanthropic advising and corporate social responsibility provides rich learning opportunities for both nonprofit and for-profit sectors. Mediators between the two industries work to connect donors to causes and focus on distributing wealth to areas that need it most. These individuals value relationships and can bridge complex realities through genuine stakeholder involvement – especially on the recipient end. Involvement of this kind would consist of honest collaboration between people embedded in communities and with investors who want to help. It would be authentic listening to, primarily, the voices of community members and local workers. And most importantly, it would be displaying stories community members wish to share that reflect real impact: those of their own design that encompass a dignified profile of their empowerment rather than a voyeuristic one.
This endeavor will take serious effort on the part of funders and nonprofit personnel alike. Each party will have to see resources as not inherently theirs to own and therefore theirs to choose what to do with. If there is to be true value to words like “collaboration” and “empowerment” there will need to be a general practice of loosening the grip on decision-making and seeking real community input as paramount to how we do business. Doing so would inevitably mean finding value in smaller numbers offered by smaller-scale programs that may not offer as eye-catching statistics as others. These kinds of programs are run by grassroots organizations that are closer to both community problems and solutions. What we classify as ‘impact’ will need to better mirror what positive growth looks like to individual communities, which is relative.
In order to become more agile in the way we record impact, we will have to be open to a shift in mindset and search for understanding. People will come into the conversation of social impact investing from different angles, which will offer moments of confrontation and a reckoning of perspectives. Such conversation can serve as an opportunity for growth if those present at the table have a willingness to listen and evolve – and to truly walk the walk, not only talk about best practices (best for whom?) and unquestioned existing procedures. The purpose of social service work, from whichever point one enters, is to lift an underrepresented population – that is the shared goal, agenda, and priority. Authentic experience as a measure of impact has no substitute: the real stories, voices, and perspectives from people who have put in the time to do real work with communities. Maintaining that realness will keep us all closer to the heart of philanthropy and will allow us to avoid oversimplifying or overlooking people, problems, and solutions for the sake of nice, round numbers.
Success in terms of monitoring and evaluating programs is more than metrics; numbers need to be accompanied by the voices and realities of the people they represent. The system of impact reporting to fuel donor interest is also one that can place uneven demands on organizations whose work is primarily to lift the lives of others who experience vast inequalities. Embracing this kind of hyper-focus on development returns is reductionist and paternalistic in its nature. If we treat global development as we would a for-profit industry, we would be reducing the value of social services into a product-driven bottom line. If we commoditize empowerment programs so that we provide X and expect Y, we place an overly-objectified, transactional overtone to a process that often requires rich, relational practice in fluid and complex realities. Essentially, we limit ourselves creatively and hazard becoming less effective.
Amos Tversky, a brilliant behavioral scientist once said:
“It is sometimes easier to make the world a better place than to prove you have made the world a better place.”
“A part of good science is to see what everyone else can see but to think what no one else has ever said.”
The mechanisms of the human mind and decision-making are complicated processes that we can create rules of thumb for, but can rarely ever fully predict. Understanding context helps us become better situated to make clearer judgements. Everything around us is data; it’s what we see in the data that makes it meaningful. Our data stories require context – deep, involved context – to paint a picture of what real communities experience. These stories will likewise have to evolve as new information is introduced and new learning happens. This will offer creative opportunities to adapt programs and policies along the way to better fit community need – need that is fluid and that changes over time.
The crossing of for-profit industries with nonprofit ones will, in essence, take serious collaboration. Along with varying perspectives, there are also overlapping strengths and interests; and these can be built upon with open communication and perseverance. Becoming more informed and sculpted by new learning from the ground up will give us a more dynamic worldview that will make our businesses and our programs more ethical as well as more effective. This will mean holding ourselves, our standards of best practices, our governments, and so on, accountable by diligently pointing out inconsistencies where and how they exist. Such a process is sure to offer abundant avenues for genuine and lasting growth.