Fed's Office of Social Innovation is Sooooo 1998

Yesterday, Michelle Obama announced the creation of a new White House Office of Social Innovation intended to invest $50 million in innovative nonprofit efforts.

This effort will be spreaheaded by Sonal Shah, the former head of global development at Google, Inc. (FYI: I do LOVE the fact that this is being driven largely by these amazing women!)

The First Lady explained the effort this way:  “By focusing on high-impact, results-oriented nonprofits, we will ensure that government dollars are spent in a way that is effective, accountable and worhty of the public trust.”

Ugh. It’s almost hard to know where to start in critiquing this, but here I go.

In the 1990s, a venture capital approach to nonprofit investment was all the rage, particularly among west coast philanthropists.  We’re going to do this philanthropy thing differently, they said, and bring a high risk/high reward model to this sleepy town.  And they did — and it didn’t work. The common complaints were a) there weren’t models out there that had metrics we could use to assess their effectiveness (their language, not mine on the evaluation front! Their push to measure everything under the sun was misguided and ultimately really unsuccessful.) b) the for profit assumption about scale doesn’t work in a nonprofit context. When the First Lady uses the phrase high-impact, results-oriented nonprofits” I know she means well, but the biz school gobbldey gook language sets the whole thing off in the wrong direction . But the reality is that real social change is too hard to measure in the bite-size pieces that the risk-averse government needs. It is also a fantastic incentive to “cream” and only serve likely successes. Lucy has more on this faulty thinking here.

“Sustainability” is a word that funders used when their tired of funding something. In other words, we’ve done our job carrying you this far, now find someone else to do it, because at their core, nonprofits don’t generate excess capital that can be reinvested in their organizations like for profits, meaning every year they have to go back out and fundraise all over again. Endowments are intended for rainy days, like today, it doesn’t reduce an organizaton’s dependence on donors, whether they are individuals or corporations or foundations.  That’s why the IRS has a “public support test” for nonprofits (even if it doesn’t have the capacity to assess it, it’s still a fundamental part of what defines a nonprofit legally) and that’s what distinguishes nonprofits from for profits. There is a growing, unchallenged assumption that all socially responsible businesses are the same, regardless of whether they are incorporated as a for profit or a nonprofit.  It isn’t true!  Nonprofits are intended to serve people and communities in need, not just those people and communities that can generate the most revenue. Starbucks sets up stores where they can make a profit and closes stores where they are losing money. Goodwill serves the poorest communities and their efforts have to be supplemented by donations. That’s the fundamental deal that we make as noprofits, particularly in the human services arena. It is curious, as Lucy points out, that the focal point of much of the Administration’s talk about social solutions focuses on market-based solutions. This is exactly what hasn’t worked in large part in the social sector in the last 10 years; that’s why for profit schools are a bust. If you want to “do well by doing good” Great, but know that you’re a for profit entity.

And that’s not even the biggest problem I have with this initiative!  The bigger issue is the fallacy around “scale.”  Used this way, it’s an old century view of scale, that we’re going to invest millions of dollars in bricks and mortar and set up branch offices everywhere around the country. [And, if that's really the intent, $50 million isn't going to cut it to start, much less sustain all of these expensive models around the country]

The number one lesson of this recession is that big isn’t good, ask AIG, and Bank of America. The Great Man approach to organizations, the aim to keep growing them larger and larger, is dead. Small is the new big, ask Chris Anderson. They are replaced by smaller, agile efforts networked together in larger ecosystems. Remember, the reason that the DOD created the Internet was to protect it from attack, if one part of the network goes down, the rest continues. The same applies to ecosystems of social service providers.

So, here’s what I’d rather see this innovation effort focus on:

• Invest in networks of problem solvers. This is a heck of a lot less expensive than investing in bricks and mortar. The way to do is to provide intensive leadership development for creative people. They can then lead organization that have connectedness in their DNA. BTW, this is also the way to improve schools.
• Become a focal point for sharing ideas. The feds could either create themselves or fund others to create social media efforts to share ideas (not organizations!) that others can put into action quickly and share results.
• PLEASE change the language to the 21st century. I love innovations as much as the next gal, but the high performing, high impact Havard Biz School language has to go! , We have to focus on learning and sharing and improving over time, BUT

I realize that the last bullet in particular may not be palatable for the public sector. I know I’m supposed to be thrilled that the feds are investing in nonprofits, but the longer I mull this over, the more convinced I am that the feds shouldn’t be doing this at all!  So, here’s my final suggestion. Scrap the whole thing and give $50 million to food banks.