What Social Impact Bonds tell us about social impact
Two reports (NPC and Big Society Capital) in the same month on the lessons learned from Social Impact Bonds (SIBs) provides a handy opportunity to compare different perspectives on the subject, and reflect on your own. Even more so, when you happen to be working on the topic yourself.
As part of our membership of the UK Advisory Board to the G8 Social Impact Investment Taskforce, Impetus-PEF is currently chairing a Working Group on Capacity-Building. Our motivation for this work was to build consensus around which organisational capabilities and behaviours seem to lead to reliable production of social outcomes. This is extremely relevant to social investment, as some organisations’ ability to make financial returns, including via SIBs, depends on their reliable production of social returns. But it’s also crucial to our day-to-day work of Driving Impact – supporting charities to become increasingly effective at producing outcomes for their beneficiaries, even without the incentive of repayable finance.
We had already dug a little deeper under the successful performance of two of our portfolio charities currently delivering under SIBs. We found that, while financial skills are important as the bond is being put together, it is the performance management skills that are crucial for organisations to produce the social outcomes, and then the financial payments, that investors are counting on. These skills were extremely similar to those we build in our portfolio charities to help them narrow the gap between their desire to help their beneficiaries and the outcomes they achieve for them – in other words, to help them make more impact for more people more of the time.
Our G8 Working Group intends to shift the focus of ‘capacity-building’ the social sector away from a previously narrow definition of ‘investment-readiness’ (largely financial and negotiation skills) to one that recognises the specific capacities necessary for creating impact. BSC’s report is on the same page. It stresses the importance of tightly defining your cohort of beneficiaries, and clearly articulating your logic model: which activities you think will produce specific outcomes. It goes on to emphasises the importance of performance management – using defined data sets to check, in real time, whether your beneficiaries are hitting the outcomes you expect, and changing your activities if they’re not. When you see a pattern of outcomes not being met, used this information to rethink your logic model, and change your programme. This gives you the best chance of getting every single beneficiary to the desired outcome – and of course, this is the case whether you’re delivering with SIB money, under a PBR or fee-for-service contract, or with donated funding. If impact is the goal, this is how to make it.
NPC’s report of a roundtable with organisations delivering SIBs contains useful reflections, including on the lack of readiness and resource amongst local and national commissioners to engage with SIBs. But it does not raise the issue of performance management. Instead it emphasises “outcomes measurement”.
To be sure, performance management involves plenty of measurement, but it’s measurement that is tightly linked to the active day to day management of the programme. Without this, measurement is divorced from the process of making impact, and therefore becomes an add-on, not part of an organisation’s core business.
As the G8 Working Group moves towards final paper and recommendations in September, it’s heartening to see that consensus is growing around what we are learning from the SIBs to date. As you might expect, there is much that is useful to those who are interested in building a social investment market. But arguably the more valuable lessons are for those of us interested in seeing social organisations driving more social impact – whoever happens to be paying for it.