MFG Archive

If We Build It, Will They Come?

ID-100161858(2)Yes. That’s a corn field… but, you could call it a dugout for our purposes today. Daniel Stid, of Bridgespan Group, takes this Field of Dreams cue to ask a few tough questions to you, and to us at Markets For Good. We’re always excited to dig in to real discussion and debate to sort through conversation for ways forward.  There are a lot of ideas buzzing about data that look mighty good on whiteboards and sound great spoken from your wireless mic. And, beyond that (we’re not pessimists), there’s a lot of actual “doing” in the sector as organizations are finding ways to make data work for them and their missions. But will these ideas and work change people’s lives? That’s why we’re here, not “ultimately,” but at the outset. Daniel Stid asks what happens after we build this upgraded information infrastructure to clue us in on how to think – and how to LEAD –  while we work to that end.

In its initial concept paper, Markets for Good has put forward an inspiring vision, one of “a social sector powered by information, where capital flows efficiently to the organizations that are having the greatest impact, programs and interventions are more effective and responsive, beneficiaries have a voice, and there is a dynamic culture of continuous learning, development, and innovation.”

Markets for Good proposes that the key to realizing this vision is building out the sector’s information infrastructure, i.e., “the architecture that can help to connect, organize, and structure information so that it can be supplied and used more easily.”

As we undertake this construction, however, let’s ask ourselves whether, if we build it, the putative buyers and sellers in the envisioned marketplace—the philanthropists and nonprofits spending and soliciting money within it—will use it as planned. In short, will better information change their behavior?

A premise of Markets for Good is that we don’t really have such markets yet because the available data is “limited, unstructured, and unused.” But as Friedrich A. Hayek noted in “The Use of Knowledge in Society,” it is precisely in the dim light of these circumstances that markets serve as the best means for allocating scarce resources and in which they flourish. The social sector’s challenge may not be to establish market dynamics, but to temper those already at work.

On Giving and Data

Consider the motives and behaviors of individual philanthropists in this market. Indeed, take out your tax return or checkbook and assess what prompted your own contributions in 2012. Was evidence of impact always the driving concern? Speaking for our household, the other motives included maintaining ties to alma maters, fulfilling religious obligations (and thereby avoiding guilt!), supporting leaders we admire, and giving to causes at the request of friends as they have done in response to our requests. Was your charitable giving prompted by a similar range of motives? How much of it would be influenced by better evidence of impact?

What about the presumably more rational grant-making of institutional philanthropy? I’d like to think that foundations recognize the importance of evidence and thus support promising grantees in establishing the data systems, infrastructure, and evaluations they need to assemble it. I’d also like to think that foundations relentlessly seek out evidence to test their own theories of change and refine them when they encounter countervailing data. In my experience, though, foundations that behave in this way are exceptional relative to a somewhat dismal norm.

Defending Our Positions

The motives and behaviors of nonprofits seeking funding may be just as impervious to better information as those providing it, albeit for different reasons. We shouldn’t be surprised when nonprofits seek to share information about their work in ways that maximize the contributions they receive. Nor should we be surprised when funders’ external demands for evidence of impact leads nonprofits to assume a defensive stance in which they seek to present the best possible case for their performance. Alas, this defensiveness too often prevents organizations from doing the deeper work of measurement, reflection, and learning that could actually improve their results. Will the drive for more transparency pull nonprofits out of their defensive positions, or will it push them to hunker down even more?

In this same light, we could question whether nonprofits seeking funding will readily conform to more standardized definitions of their work and outcomes as envisioned by Markets for Good. More robust markets tend to accelerate the quest for defensible positioning and breed more differentiation, not less—as anyone who has stood bewildered in front of drug store shelves trying to choose among myriad brands, prices, sizes, and features of pain reliever or tooth paste can attest.

The Way Forward

All this is not to say that we shouldn’t improve the social sector’s information infrastructure. As we do so, though, let’s bear in mind that the information produced by it will be used by individuals and institutions driven by a wide range of motives, of which maximizing social impact is but one (and not always preeminent). Individuals and institutions will adapt and use this improved information (or not) to suit their own purposes. If we want more money to go to better solutions and continuous improvement in social impact, we will also continue to need sustained leadership and moral suasion geared toward these ends.

Comments

4
  1. Stephen J. Gill says:

    I applaud Markets for Good for posting this insightful piece by Daniel Stid. He asks some tough questions that challenge the very premise of Markets for Good. The central question being, will better information change the behavior of the nonprofit sector? Like Stid, I support improving the sector’s information infrastructure. But if we don’t address the motives of nonprofit organizations and their funders and the demands of their stakeholders, the infrastructure will remain a “field of dreams.” As I’ve commented before, the infrastructure is part of the equation; the other part is teaching people how to use the data for learning and improvement.

    1. Eric J. Henderson says:

      Hello, Stephen:

      The issues run in parallel: (1) the glaring need to upgrade how we generate, use, and share data as a way to make better use of money and ensure the free flow of high quality data and (2) determinining how we actually take advantage of that .

      There’s not much of an option not to upgrade the infrastructure. There is no sector that is exempt from the massive overhaul taking place in data practices, given the new landscape. But it’s not just to get up to speed with data. We have to do this in order to meet the speed and weight of the problems we face.

      Here’s an example, from an article last month in Bloomberg Businessweek: “How Small Businesses Use Big Data”

      “In 2008, software engineer Vidur Dhanda was consulting on a risk management project on Wall Street when he noticed a fundamental problem: Even the country’s biggest lenders, in the midst of the financial crisis, did not have good data on the health of America’s small and midsize businesses.” – http://www.businessweek.com/articles/2013-04-03/how-small-businesses-use-big-data

      Doesn’t that last sentence sound all too familiar? We don’t have good data. Turns out it’s not just a social sector refrain.

      The difficulty of our road is increased a little if you consider that, perhaps instead of “Field of Dreams”, Markets For Good is closer to the “Irrigation System of Dreams” – but, whew, what a painful movie that would make!

      In short, we have to upgrade, but we start by recognizing that data is just a tool. Managment, Wisdom, Skill, and Leadership are other things. But we welcome those questions early in order to be sure that we are ready to use the tool properly.

      1. Stephen J. Gills says:

        Eric, thanks for your reply to my comment. Don’t get me wrong; I’m in total support of what you are doing with Markets for Good. I just think we have to be very careful to avoid the trap of collecting data for data’s sake rather than increasing impact of the nonprofit sector.

        Let me know when “Irrigation System of Dreams” is made into a movie!

        1. Eric J. Henderson says:

          Many thanks, Stephen, for this discussion. Yep – We’re in pretty vigorous agreement! Markets For Good is explicitly avoiding the simply ideological conversation on “data” as well as any headlong plunge into data serving data. Data serves people, not the other way around. (Taking my Spock ears off now.)

          A few years ago, while working in advertising, I wrote an article for Advertising Age on ROI as the advertising industry faced this same data moment (without the current label) and everyone scrambled to quantify down to the gnat’s toenails. …to that, I noted that we shouldn’t let ROI become “removal of innovation” – the trade-off for blind pursuit of a number.

          I think the social sector has an opportunity to leapfrog others in the same way many people around used mobile phones to preempt land lines. Demonstrating social impact is a big deal when done correctly, i.e. not just to demonstrate impact but to translate that work into more efficient capital flows. For example, comparing the cost per prisoner in the US (around 30k a year, some say: http://cbsn.ws/13pEaIg) and the associated capital structure (esp. bond offerings per prisons as a growth industry http://onforb.es/YNS7jz) to the cost of training and educating youth shows an abitrage opportunity to convert social impact into more funding on a number of fronts: education, health, general literacy, etc. But there’s not a comparable market for investment in social impact, despite a clear route to greater financial benefit, in the form of a better workforce, for one thing. To keep the bond example, social impact bonds are new (http://bit.ly/ZRntRQ) but no matter the financial upside in savings, any new product faces strong market hurdles.

          A tough road from here. A lot of smart folks are working in these thngs, and I don’t underestimate the steps it takes to convert data into a tool for broad policy change. Other industries are having the same issues. But I do think we can add one more step to the data and social impact chain, though. Directly to your point: find ways to explicitly tie that increased social impact to changing the way money flows and the way the social sector attracts it.

          Hope you’ll hang in with us as we keep trying to figuring this out. We need as many hands on the plough as we can get.

          Eric

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