Thursday, April 17, 2014
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Philanthropies of Scale

MIDLAND, TEXAS – Since starting my own nonprofit organization, I look at other nonprofits with new eyes. There are far more of them than I ever realized. As an angel investor, I did not normally engage with them. Now I worry that they are terribly inefficient.

As I travel in small towns, many of the businesses that I see – most of them, it seems – belong to large chains, with mass-purchasing contracts, standardized training procedures, consistent quality, and, I assume, profitability. The nonprofits, by contrast, are mostly small and are often run by people with passion but not much expertise or management skill. They benefit from dedication rather than efficiency – which is honorable but not easily scalable.

This is a challenge for the general proposition of self-help, and also for my own new venture: the Health Initiative Coordinating Council (HICCup), which will advise five communities competing to win the HICCup Prize for the greatest improvement, according to five metrics, in health (not health care) over five years.

The last thing we want to do or could do is to run things. Yet we do need to figure out how to provide the right support to help communities run things themselves – just as a corporation might support a franchise or a dealership. The ownership is local. Our ultimate goal is to provide models and inspiration for other, larger communities over time.

What worries me is that just having a diabetes program, a visiting nurse corps, or a bicycle-share program is not enough. There are good programs and unsuccessful ones – just as there are good and bad restaurants, airlines, and oil companies. Management makes a difference, one that ultimately boils down to good leadership and best practices.

But that is not what most nonprofit programs can achieve. They are not part of a larger organization that trains their workers, sets standards, and provides support for everything from branding to purchasing.

Yes, there are now “social entrepreneurs.” But can we find and support them at scale? Nonprofits have no easy way to expand, raise capital, or combine forces. There are some new business models (such as social-impact bonds), and there are certainly businesses that sell social programs to payers such as governments, just as there are charities that outsource. But, unlike the for-profit sector, the nonprofit world is not fluid and efficient, and nonprofits have no incentive to merge, particularly as some people would have to give up their board seats or leadership positions.

While that is also true of many for-profit companies, the market trumps their leaders’ preferences. If customers or shareholders walk away, the board hires new managers or sells the company to someone who can run it better.

The problem with charities is that they have little incentive to become more efficient. Disclosure requirements help, but they are no match for the discipline of the market. In the case of for-profit goods and services, customers and payers are the same people; they monitor the quality themselves. And the shareholders monitor – in essence – the use of resources to deliver that quality (roughly measured as profitability).

There is no simple way to monitor the quality and efficiency of a charity – especially one devoted to long-term changes (that is, investments) rather than daily delivery of services. At HICCup, we are looking for places and people that have already decided to do something and need help going further. But even where such “social fabric” exists, a proliferation of independent efforts often reflects individuals’ passions rather than broad-based capacity.

So how does one go about building the interacting capabilities that address poverty, ignorance, and poor health while avoiding too much redundancy?

The question is not how to create a chain of soup kitchens, but how to develop leadership that creates intrinsic incentives for the staff. Consider Susan Burden at Beach Cities Health District in California. Originally an administrator at a for-profit hospital, she joined BCHD when it was a small pot of money and a building left over from the sale of a nonprofit hospital to a for-profit health group.

With energy and enthusiasm, Burden turned that operation into a thriving health (not health-care) agency that covers three cities and about 300,000 people on the western edge of Los Angeles. The BCHD has 70 staff and about 700 volunteers. Outsiders have found tangible improvements in residents’ health.

The BCHD’s programs are not novel: walk-to-school programs for children, healthy menus (through the district’s Blue Zones Project) for local restaurants, social support for older people, exercise classes, immunization programs, and the like. But the energy with which people are drawn in and motivated is unique.

I am excited about the possibility of using software to help deliver customized community services at little extra cost. But the capacity in short supply is trained people. How much do we need to train the trainers – and those who train the trainers? How trainable are people? Online courses may work for teaching technical topics, but is there a way to automate, at least partly, the training of all the people who need to be mobilized to foster health?

For example, I am an investor in Omada Health, a for-profit diabetes-management service. A single counselor runs ten groups of ten people each, partly online, partly face-to-face (usually paid for by health insurers or employers, who benefit when pre-diabetics become healthy or do not develop the disease). The challenge for Omada is not the curriculum; it is training people to become effective counselors.

While I expect to learn much more as I work on HICCup, I am already sure that the biggest problem will be finding people to take on the challenges in each community.  What’s the optimal balance between replicability and the human touch?

The promise of scale is great for nonprofits – not just in terms of costs, but also for best practices and quality control. Yet the real value is in training people to deliver for themselves, at a local scale – empowered rather than controlled, creative rather than rehearsed, and working by choice rather than in desperation.

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  1. CommentedPaola Grenier

    Scaling up of non profit works and activities used to be known as government provision. There is a real tension between wanting nonprofit to become generic, efficient,and effective service providers and what many people would consider their more fundamental role in society which to provide a space for people to connect, to share and negotiate social values, to help create and sustain the delicate fabric of society. Clearly providing much needed health and other services to people in need is critical - just the nonprofit model is probably not the answer. Exactly what is when government is no longer a legitimate initiator and provider of services, is a completely different question. But perhaps all those who are coming in from business to help nonprofits become more effective could be more innovative by coming up with a better organisational and sector model for this.

  2. CommentedNathan Coppedge

    Translations of index, hierarchy, and modularity might fit into this, in terms of modular citizenship.

    For example, there is the concept of the open office, broader concepts of QOL preparedness ('community outreach'), in short a role for prophecy and interactivity in communities which benefit from health and other types of programs.

    My general thesis on this subject is something about the role of infrastructure in conjunction with new paradigms. Infrastructure is the larger idea, and new applications should fit in to that woodwork.

    Some of the questions involved (such as those addressed by modularity, index, and hierarchy) are really intermediate steps, closer to being 'woodwork' than being 'infrastructure' or 'applications'. Many of the new potentials that emerge are similar to community interfaces and creative zoning techniques. However, these things really benefit from a holistic approach to design (human design, or interface design), such that the integrative capacity of the multiple 'functions' is not overlooked.

    I'm hopeful for example, that mental health patients will be able to live their lives something like a very artistic video-game, therefore suspending disbelief about moral, political, and irrational requirements upon their minds and bodies. There should be other programs that are just as an effective paradigm as this.

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