An Answer to: Why Don't the Best Nonprofits Grow?

Tamara Schweitzer Raben, Social Impact Exchange at Growth Philanthropy Network
Posted: March 14, 2013

Last week, the Harvard Business Review blog network posted a relevant article by Paul Carttar, the former director of the Social Innovation Fund and partner with the Bridgespan Group, which raises the question: Why Don't the Best Nonprofits Grow? Paul's post primarily focuses on the disconnect in the social sector between nonprofits that have proven results and their ability to access the necessary capital to grow their impact. Paul makes the point that it is the lack of evidence about what works and what doesn't that is holding the field back from making greater strides towards bridging this gap.

He writes, "If you can't tell which organizations or models are truly generating social impact, you can't know which warrant investment. Yet there is an astonishing dearth of reliable evidence on the performance of different programs, practices, and approaches for solving social problems. And there are deep disagreements about what "impact" is, how it should be measured and how much evidence is enough. Funders and investors are making decisions in the dark."

This discussion is central to the founding purpose of the Social Impact Exchange, which is dedicated to building a capital marketplace that scales high-impact social solutions to improve the lives of millions. The Exchange has launched several initiatives designed to help funders and donors make informed giving decisions, so they aren't operating in the dark, as Paul says. The goal is to create the conditions for a marketplace to take shape in which capital flows more efficiently to the most effective nonprofit organizations. What follows is a blog comment, drafted in response to Paul's post, and meant to compliment the discussion that Paul started on HBR's blog network. You can find the original post at this link: http://blogs.hbr.org/cs/2013/03/social_enterprises_cant_grow_w.html

The Social Impact Exchange's response:

This is an insightful article that touches on a very critical issue in philanthropy today: how to transform donor behavior so that evidence-based giving becomes the norm rather than the exception. Paul adeptly points out that a lack of evidence is a key hindrance to more efficient flow of capital to nonprofit programs that “work” and thus to achieving greater social impact.  It is also true that assessing impact remains a major challenge for the social sector, and because as Paul states, “it’s hard to do and it can cost a lot,” few nonprofits have third-party evidence of their effectiveness in the form of a quantitative outcomes study, quasi experimental study or randomized control trial. Additionally, it is becoming increasingly important for organizations to show positive outcomes outside of self-reported performance data.

However, it’s not just that few organizations have evidence of their impact, but also that this information can be hard to find, especially for donors who are looking to make a greater impact with their giving. The Social Impact 100 (S&I 100) Index and the Social Innovation Fund Registry, were created to address this gap, with the aim of giving funders an easy way to identify those organizations and initiatives that have evidence of their impact. The S&I 100 is the first-ever broad index of U.S. nonprofits that have third-party evidence and are growing to serve more people. The platform was designed to be an easy online resource that allows donors to give with confidence to the causes that they care about and know are having an impact. Similarly, the SIF Registry is geared toward grantmaking foundations and raises awareness of and attracts matching funds to eligible Social Innovation Fund grantees that have proof of impact. It also inspires a community of funders to continue supporting the growth and further evaluation of high-performing nonprofits that are part of the Social Innovation Fund.

Still, we know that having an easy way to act on evidence won’t be enough on its own to unlock the large amount of funding and number of funders needed to create large scale impact. The real work is in promoting and encouraging the use of these funding platforms and other vehicles focused on evidence-based nonprofits. Institutions that work with major donors through donor advised funds, as well as many of the SIF intermediaries such as Edna McConnell Clark Foundation, Venture Philanthropy Partners, New Profit and REDF can play a critical role in alerting donors about opportunities to fund what works. It will take a concerted effort by many stakeholders to raise the bar and allow for evidence-based philanthropy to take hold. But to echo Paul’s sentiments, we are well on our way.

Please join the discussion. We welcome your thoughts in the comments section of this blog.