Steven Mayer is one of the people behind the Pathways to Progress website, dedicated to social justice philanthropy. Albert Ruesga wrote recently that “metrics based” philanthropy and “social justice” philanthropy are often viewed as two warring camps. But Albert suggested that in fact, “We fail to appreciate how closely united these two camps are in their rejection of philanthropy as usual.”
Today I want to highlight a recent essay by Steven Mayer that I think shows an approach to metrics that has the potential to bridge the divide between “metrics” and “social justice”. Because of the way Steven frames his approach to evaluation, I think he even presents a way to think about these issues that bridge the gap between the participants in the philanthrocapitalism debate.
Steve Mayer:
Our website JustPhilanthropy.org presents many productive avenues for pursuing social justice using the resources of philanthropy. Funders, nonprofits, and potential donors exploring these options frequently ask, “How can we evaluate these efforts?”Needed: useful evaluation questions
“What is being achieved through this effort?” and “What kind of results are you getting?” are worthwhile questions that must be addressed to be fair to those who support this work. But demands for “measurable impact” and “outcome measures” are inappropriately placed on separate, local efforts; they apply more to the bigger picture, the picture indicated by disparities data. This is not to avoid the questions, but instead to find better ways of answering them. More satisfying data that inform next steps, stimulate innovation, engage participating stakeholders, and make better use of scarce philanthropic capital would come from asking for “evidence of progress” or even “early signs of impact.”
Think courtroom, not science
To appreciate these better questions, try this mental exercise: assume the program you support or operate has been accused of being trivial or ineffective, doing nothing to reduce disparities or improve social justice. What evidence could you provide in its defense? Think of a parade of witnesses testifying from their unique expertise, vantage point, experience, and vested interest. What “portfolio of evidence” could make a case good enough to persuade a jury of peers that this work, when considered in context, is useful and necessary for closing a key disparity?
No less rigorous or accountableAsking for “evidence of progress” is by no means a diminished demand for rigor. Instead, it frames evaluation in more familiar and approachable terms. Data of all kinds can be considered — numbers, stories, graphs, pictures, records, opinions, artifacts, etc. There is no single “measure” that communicates effectiveness or truth, just as in a courtroom no single witness provides all the testimony. In a court, multiple lines of evidence are entered and judged on their merits, resulting in conclusions that stand tests of credibility and accountability.
I’ve seen lots of frameworks borrowed from different disciplines in an attempt to find a good way to evaluate the effectiveness of nonprofits and philanthropy. I even once suggested that we should turn to movie critics as a model of how evaluation should be performed. But I think that Steven’s court room framework is elegantly simple and captures the way I think of evaluation and impact analysis better than I have ever been able to describe.
The fact is, I think that the best way to evaluate the social sector is via a system similar to investment research on publicly traded stocks. But to most people, this is an alien system that they incorrectly believe is concerned only with quantitative evidence. In actuality, stock market analysis is much more like the idea that Steven presents, “Data of all kinds can be considered — numbers, stories, graphs,
pictures, records, opinions, artifacts, etc. There is no single
“measure” that communicates [the potential of an investment idea].” But most people do understand that in court rooms all sort of evidence is presented and evaluated as a composite whole.
Steven’s framework is brilliant. The one point I would make (I think Steven would agree although he doesn’t make this point explicitly) is that in the court room things musted be proved “beyond a reasonable doubt.” This makes sense because the ramifications for deciding incorrectly are very high. But in the nonprofit/philanthropy world, we simply need to get to a point where it can generally be agreed that some funding opportunities are better than others.
Bravo Steven!
When debating a phrase like “philanthrocapitalism”, one requirement is that we understand the relationship between capitalism and philanthropy. I believe that capitalism is the best system that humans currently have to distribute goods and services. I believe philanthropy, while intertwined with economics, exists to do much more than simply distribute goods and services. Philanthropy is a higher calling that is driven my the human desire for self-actualization (which I discussed in a post for the Stanford Social Innovation Review).
One of the reasons why I think the philanthrocapitalism debate seems to be discombobulated at times, with the participants talking past each other, is because of a specific belief that many people who agree with Michael Edwards’ anti-philanthrocapitalism views hold. That view is articulated perfectly in a comment left yesterday by Tactical Philanthropy reader Nicole:
Why should nonprofits conform more to the corporate model, when corporations are the main source of the problems non profits were created to solve in the first place?
If you believe that capitalism is the source of the problems that philanthropy seeks to address, it is no wonder that you would reject the concept of philanthrocapitalism. There is no doubt that markets produce plenty of negative outcomes. Even hardcore free market economists agree that there are “externalities” (costs or benefits that accrue to non-market participants and therefore are not reflected by the market. A classic example is smoking where non-users accrue health related costs and so the market produces too many cigarettes). Capitalism is not perfect.
But I reject outright the idea that philanthropy’s main role is to correct the problems produced by our economic system.
To me, viewing philanthropy as primarily a correcting force on capitalism essentially sets philanthropy up as a kind of handmaid to capitalism. A clean up crew for financial markets. Philanthropy is so much more than that. Even in an economic utopia, humans would still have plenty of problems. Mental illness would still exist. Children would still lose their parents. Pain and fear and anger would still persist.
Philanthropy is about humans coming together out of an interest in each others well being. Capitalism is about people coming together to further their own self interest. It is OK to be self interested. With out self interest the human race would die out. Capitalism manages to harness self interest in a way that allows the pursuit of self interest to benefit the community. This tool set should be useful to philanthropy as a way to further our community interests.
To me, if you believe that philanthropy’s main role is to correct the problems of our economic system, than you are truly worshiping at the alter of capitalism. You are elevating the role of economics to the very center of human happiness.
To truly benefit from a positive form of philanthrocapitalism, we must be able to gather the accumulated wisdom of each discipline and integrate them into a more complete whole. This is the challenge and opportunity for philanthropy in the 21st century.
One of the biggest difficulties around the philanthrocapitalism debate is what the word even means. There is a branch of philanthrocapitalists who believe that for-profit business models can cure all the world’s ills. That every social problems has a profitable solution.
I think those people are deeply wrong.
There’s another branch of philanthrocapitalists who believe that philanthropy and the nonprofit sector can benefit greatly by using a financial markets approach to understanding nonprofits and to funding their operations.
This is the camp I fall in.
There is a set of simple equations that are important to understanding the difference between for-profits and nonprofits.
For-profits take labor and capital as inputs into an organization and produce financial profits as an output.
Nonprofits take labor and capital as inputs into an organization and produce social impact as an output.
To me, this implies that there is a good deal of overlap between understanding how nonprofits and for-profits utilize inputs. But there is relatively little overlap in understanding their outputs. This is why there is so much theoretically debate around measuring impact. There’s no good reference point in the for-profit world. Nonprofits exist for a fundamentally different purpose than for-profits. When philanthrocapitalist types demand that nonprofits become financial sustainable, I think they’re missing the point. The real point is to achieve impact. Achieving financial sustainability is just a fancy way of saying that nonprofits need to find a systematic way to secure the inputs they need to operate. But first nonprofits need to determine if they have a system in place to efficiently turn inputs into outputs (impact). If they do (and I believe many do not), then securing sustainability is key.
But sometimes nonprofits will find ways to become sustainable in a way that impairs their ability to achieve impact. Maybe a nonprofit that provides housing for low income families realizes that they could increase rents and become financially sustainable. But in all likelihood, doing so would reduce impact. It would reduce the degree to which the nonprofit was helping the cause of providing housing to low income families.
The interesting thing is that for-profits actually face the same problem. Let’s say a for-profit isn’t taking in enough revenue to pay their bills. They need more revenue so they slash the price of their product by 50%. This may very well have the impact of increasing demand so much that they sell tons more product and revenue goes up. Except profits go down. The for-profit is losing money on every sale and while they’ve increased the “inputs” available to the firm, they’ve reduced their “output” (plenty of for-profit firms have made this mistake, seeking to maximize revenue instead of maximizing profits).
Nonprofits are firms that transform capital and labor into social impact. While there are interesting opportunities for for-profits to create social impact as well as profits, the majority of issues that nonprofits seek to work on will not provide profit opportunities to the firms that are maximizing social impact. There may be ways that a firm can produce both a profit and social impact, but in most cases the firm will realize that by foregoing profits they can increase social impact.
What I think is most critical is that we begin to understand that the work of producing social impact is just as worthy as the work of producing profit.
