Stanford Social Innovation Review

Stanford Social Innovation Review

Disruption for Good

by Laura ArrillagaAndreessen

Using Economic Forces to Conserve Nature

by John Reid, Aaron Bruner, & Alfonso Malky

Co-Creation in Government

by Francis Gouillart & Tina Hallett

Spring 2015 Volume 13, Number 2

Empowering Women at the Grassroots / Disruption for Good / Co-Creation in Government / Using Economic Forces to Conserve Nature

Empowering Women at the Grassroots Corporations seeking to improve women’s economic well-being often overlook an important partner— locally rooted organizations that promote a multifaceted approach.

By Marissa Wesely & Dina Dublon

Spring 2015 / Vol. 13, No. 2

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Stanford Social Innovation Review / Spring 2015

Published by the Stanford Center on Philanthropy and Civil Society Spring 2015 / Volume 13, Number 2

F e at u r e s

26 34

Empowering Women at the Grassroots

By Marissa Wesely & Dina Dublon

Initiatives to develop the economic potential of women are becoming a staple of corporate activity in many parts of the world. But companies often overlook an important set of would-be partners—locally rooted organizations that promote a multi-faceted approach to women’s empowerment.

Disruption for Good

40 48 Co-Creation in Government

By Laura ArrillagaAndreessen

By Francis Gouillart & Tina Hallett

Rapid advances in technology are changing philanthropy in fundamental ways—making it potentially more rational, ­effective, collaborative, transparent, and democratic.

Bringing innovation to the public sector is famously—and perhaps inherently—­difficult.

But efforts that open up the public sector ­value chain to citizens, frontline employees, and other stakeholders can deliver ­impressive results.

O n t h e c o v e r : Illustration by Stephanie Wunderlich

Using Economic Forces to Conserve Nature

By John Reid, Aaron Bruner, & Alfonso Malky

Conservationists have devised numerous ways to use financial incentives—such as conservation easements and pollution credits—to preserve nature.

But a more sophisticated ­approach can help conservationists do an even better job of targeting ecosystems and industries where they can have the biggest impact.

1

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Stanford Social Innovation Review / Spring 2015

, Ann Cotton believed that poverty, not prejudice,

kept African girls away from school. In 21 years, no family has refused Camfed’s offer to educate a daughter. —FROM BURSARIES FOR GIRLS, P. 17

D E PA R T M E N T S

15

4

EDITOR’S NOTE SSIR ONLINE

5

Making Ideas Move / Online-Only Series Archive A Place for Optimism / Greeting the Dawn / Up Your Endgame

20

17 Bursaries for Girls The relatively simple act of providing African girls with the money they need to stay in school has achieved significant results.

BY ALICIA CLEGG

8

An Incubator for Labor / The Barber Will See You Now / Leveling the Internship Field / Data Game FIELD REPORT

13 Entrepreneurship and Ebola

Creating an ethically sourced apparel company in West Africa is hard enough, but when Ebola strikes, the challenges become almost insurmountable.

BY BRANDON KEIM

15 Engaging Teens

A financial literacy program created by the Charles Schwab Foundation and the Boys and Girls Clubs of America has reached a half million teens.

BY COREY BINNS

20 Cause for

Reflection

With high hopes, and often with great fanfare, new mission-driven businesses appear on the scene at an ever-increasing rate. Less noticeably, many of them fail. The story of Cause, a “philanthropub” that closed 14 months after it opened, offers vital lessons for aspiring social entrepreneurs.

BY MICHAEL COBB, CAITLIN ROSSER, & ANDREAS VAILAKIS, WITH ROBERT TOMASKO

64

VIEWPOINT

55 The Embedded

RESEARCH

64 If It Does Good, Feel It /

A “Value Added” Evaluation / Sharing the Stage / Ends and Means

Enterprise

To reach base-of-thepyramid markets, entrepreneurs need to align their business models with customers’ lives.

BY TED LADD

CASE STUDY W H AT ’ S N E X T

59

BOOKS

68 Past Isn’t Always Prologue

57 Adventures in

Daniel Immerwahr’s Thinking Small

Adaptation

One funder’s willingness to shift course strategically has been crucial to sustaining a decade-long education initiative.

REVIEW BY MICHAEL WEINSTEIN

69 A More Perfect Union?

Thomas Geoghegan’s Only One Thing Can Save Us

BY ANNE B. STANTON & ALISON POWELL

REVIEW BY THOMAS A. KOCHAN

59 School for Scaling

A highly focused effort in Kenya to treat worm infections in children delivers lessons for expanding a proven program.

BY JESSICA HARRISON

61 Training in

70 Uncertain Legacy Patricia L. Rosenfield’s A World of Giving

REVIEW BY PETER FRUMKIN

71 Misdiagnosing Science

Progress

A program at Credit Suisse helps high-level employees—and valued clients—to master the art of nonprofit board service.

BY LALITA ADVANI & JULIA CHU

Roberta Ness’s The Creativity Crisis REVIEW BY MARYANN FELDMAN

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Stanford Social Innovation Review / Spring 2015

Learning From Failure rowing numbers of entrepreneurs are creating successful social enterprises that use the tools of business to further a social mission.

Take, for example, Change.org, a business that we wrote about in “From Petitions to Decisions” in the fall 2014 issue of Stanford Social Innovation Review. With 85 million registered users in 196 countries, Change.org has become the go-to place for people and organizations around the world to wage public interest campaigns.

Ben Rattray and his team have not only succeeded in furthering their social mission, but they have also succeeded in creating a thriving business. In December they raised an additional $25 million to help fund their eight-year-old organization’s continuing growth.

Not all social enterprises do as well as Change.org. In fact, roughly half of all new businesses are gone after five years.

I don’t know of any studies of the failure rate of social enterprises specifically, but it’s likely to be similar. Capitalism is an amazingly creative system for providing goods and services, but it can also be coldhearted, weeding out enterprises that aren’t efficient users of capital, ideas, and labor, in favor of those that are, regardless of a company’s social mission.

In this issue of Stanford Social Innovation Review we take a look at two social enterprises that have had trouble being efficient, one that failed, and another that has recently gone through tough times and may not survive. Although there is much to be learned (and inspired by) from success stories like Change.org, there is an equal amount to be learned (and cautioned by) from failures.

G

The company that failed is Cause, a restaurant and bar in Washington, D.C., whose social mission was to dedicate all of its profits to nonprofit organizations. (See “Cause for Reflection” on page 20.) It’s an approach that might have worked if the “philanthropub” had been profitable, but sadly it never broke into the black. Cause did succeed in attracting some customers because of its social mission, but it wasn’t enough to compensate for the company’s confused marketing efforts, founders who were never fully committed to the enterprise, and the host of usual problems that most new restaurants and bars confront. Cause closed after just 14 months in operation.

The second social enterprise we examine in this issue is Liberty & Justice, an apparel manufacturer in Liberia founded

by Chid Liberty that is struggling to survive amidst the West African Ebola crisis. (See “Entrepreneurship and Ebola” on page 13.) If Chid Liberty were simply trying to build an apparel manufacturing business it is unlikely that he would have located in Liberia. He did so because a central part of his social mission is to help rebuild the Liberian economy. It was tough enough to try to build a business in war-torn Liberia, but doubly tough to do so after Ebola struck. Last year, just when the business was getting off the ground, Liberty had to shut his factory down.

Liberty & Justice is still technically in business (in part because of the good graces of its impact investors), but the company’s prospects are uncertain.

The lesson? Having a social mission does not insulate a business from the forces of capitalism. In fact, it can sometimes place an added burden on the company that makes it even more difficult to survive, let alone thrive.—ERIC NEE

Academic Editor Managing Editor Senior Editor Senior Digital Editor Publishing and Marketing Director Publishing Associate Publishing Assistant Art Direction and Design Contributing Writers Copy Editors Interns

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SSIR ACADEMIC ADVISORY COUNCIL

Paola Perez-Aleman, McGill University; Josh Cohen, Stanford University; Alnoor Ebrahim, Harvard University; Marshall Ganz, Harvard University; Chip Heath, Stanford University; Andrew Hoffman, University of Michigan; Dean Karlan, Yale University; Anita McGahan, University of Toronto; Lynn Meskell, Stanford University; Len Ortolano, Stanford University; Francie Ostrower, University of Texas; Anne Claire Pache, ESSEC Business School; Woody Powell, Stanford University; Rob Reich, Stanford University STANFORD CENTER ON PHILANTHROPY AND CIVIL SOCIETY

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Chairman Members:

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Stanford Social Innovation Review (ISSN 1542-7099) is published quarterly by the Stanford Center on Philanthropy and Civil Society, a program of the Institute for Research in the Social Sciences at Stanford University’s School of Humanities and Sciences: 559 Nathan Abbott Way, Stanford, CA 943056042. Phone: (650) 724-3309, Fax: (650) 736-3454.

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Stanford Social Innovation Review was established in 2003 by the Center for Social Innovation at the Stanford Graduate School of Business. The founding publisher is Perla Ni. The former academic editors are Stephen R. Barley, James A. Phills Jr., Robert Scott, David Brady, and Chip Heath.

Stanford Social Innovation Review / Spring 2015

ssireview.org D I G I TA L H I G H L I G H TS

various tools and approaches that organizations are using to maximize communications and make their ideas move.

Making Ideas Move

ssireview.org/making_ideas_move

In this multipart series, presented in partnership with the Communications Network, leaders from foundations, nonprofits, and research institutions share how effective communication has helped them drive social change. Articles in the series address the purpose and impact of strategic communications, what it takes to improve communications, the power of a nonprofit brand, and

Online-Only Series Archive SSIR Online features a growing collection of special online blog series, on topics such as strategic planning and effective philanthropy. Now you can access all of these series in one place on the SSIR website. ssireview.org/supplement/blog_series

F R O M T H E B LO G A Place for Optimism In his December 4, 2014, online article, “A Strategy for Alleviating Poverty,” Elwood Hopkins articulates a newfound optimism about alleviating poverty through place-based initiatives. He argues that the field has evolved enough to “generate informed, self-reflective insights.” He notes, for example, that low-income areas are not all the same: “Today, the field has formulated nuanced typologies to describe neighborhoods at distinct stages of socioeconomic development, cultural assimilation, and civic capacity. A neighborhood’s type determines the outcomes that can realistically be achieved, the timelines for achieving them, the resources required, and which sector should take the lead.”

Another insight is that communities perform different functions: “The challenge is not to transform every neighborhood into a middle

I rarely see the increase in the political involvement of the community that is being served as an objective. This is a must ... because it’s the most immediate resource that could lead to change and bring more resources to make these initiatives sustainable. ... Second, there is often a bias [for] funding services that are primarily for the poorest of the poor.

Often services that exist in middle class communities are missed because there is an assumption that there is no need for these services.”

—Lee Reagan Single Stop USA

class ideal. What’s important is that neighborhoods play a role in helping the people who live there access opportunities. Success is not necessarily about achieving arbitrary levels of income or home ownership, but rather

“The concept of ‘resident en-

ensuring opportunity through mixed-income development or links to the

gagement’ has seldom been

regional economy.”

elevated to the level of genuine

M AGA Z I N E E XT RAS

Visit SSIR Online to access supplementary material for selected articles in this issue.

PHILANTHROPUB STORY

READERS RESPONDED:

“It can be argued … that con-

well as for the potential to create

“I wonder if what is at the root cause [of] sustained poverty is its concentration and that ... those of us with means ... segregate ourselves, financially.

So often the goal is to provide services and improvements to ‘them’ when what may be a deciding factor is those of us with means redistributing our resources simply by making more intentional choices about where we live. I have heard this called ‘gentrification with justice.’”

—Kirk Wester,

centrated poverty is linked [to]

broader constituencies for change

“Cause for Reflection” (p. 20): Watch a video clip about Cause, a “philanthropub” that went out of business; follow a timeline of Cause; and review a financial snapshot of the now-defunct social enterprise.

the emergence of concentrated

across many low-income neigh-

ssireview.org/philanthropub

wealth. And that ‘poor ghettos’

borhoods. ... Also I agree with

are the flip side of ‘rich ghettos.’

you that there is often a bias for

I think some of the really cutting-

funding services [aimed at] the

edge work in this field is focused

poorest of the poor at the ex-

political involvement. It is crucial for the reasons you mention as

Growing Together

not so much on improving the conditions of low-income communities—which is important— but on the creation of mixedincome communities.”

—Elwood Hopkins “There are two areas [of focus that] I believe place-based strategies have often missed. First,

pense of others who might benefit more quickly from support.”

—Elwood Hopkins Read more complete comments online. ssireview.org/poverty_and_place

Follow SSIR

View an eBook of this issue online or download a complete PDF.

GRASSROOTS POWER

“Empowering Women at the Grassroots” (p. 26): Explore an array of reports—including “Gender at Work,” a publication of the World Bank—that make the business case for promoting women’s aspirations in a comprehensive way. ssireview.org/grassroots_women

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Stanford Social Innovation Review / Spring 2015

SSIR ONLINE

[Y]our article helped inspire many ideas on how we can grow without diluting the quality of our program.”

—Ryan Worthington in his comment about “What’s Your Endgame?”

CO M M U N I T Y Greeting the Dawn “The article helped me identify [a] missing ingredient. In short, the need for a different order of leadership,” writes Matthew Taylor, chief executive of the Royal Society for the Encouragement of Arts, Manufactures, and Commerce (RSA), about a recent cover story by Peter Senge, Hal Hamilton, and John Kania (“The Dawn of System Leadership,” SSIR, vol. 13, no. 1, p. 26).

Taylor, writing on his blog at the RSA website, explains the context for that discovery: “As I rushed from initiative to initiative the sense that something fundamental is lacking in them all grew and grew.” The SSIR article, he suggests, “provides a compelling and concrete account of the components of the kind of leadership needed to solve tough problems.” Readers at SSIR Online also tie the concept of system leadership to their own experiences. “The thinking in this article has numerous applications,” writes Robert Siegel, cofounder of 21st Century Education, a consulting group. “[M]uch of my time is now spent on spreading the word about a new social science framework for K-8 schools … where first we consider our common humanity and then we identify the diverse components within which we are personally involved.” Jason Bohn, systems change coordinator for the Homelessness Task Force of Greater Kansas City (Mo.), praises the authors for capturing “the sensation that I’ve been living and not able to articulate to friends and family, except with platitudes like ‘trying to move a mountain’ without the permission to ask anyone to shovel.” Co-author Hal Hamilton replies to Bohn: “I agree that this is hard work, of which a crucial and time-consuming step is to have all the one-on-one conversations that build an energetic field.” A couple of people criticize the article for presenting an idea that, in their view, isn’t original. At the Collective Impact Forum blog, Arthur T. Himmelman writes, “I do not understand why you think it is necessary to create new terminology that appears to be just another

B O O KS way of describing … collaborative leadership.”

Co-author John Kania replies: “In putting forth the concept of system leadership, we focus more deeply on the connections between individual development and collective leadership. … Our hope is that this lens will assist [leaders] in diagnosing areas against which they should focus attention, as well as providing them with the tools to do so.”

Up Your Endgame The alternative framework for nonprofit scaling that Alice Gugelev and Andrew Stern present in a recent feature article struck a chord with a number of readers (“What’s Your Endgame?” SSIR, vol. 13, no. 1, p. 40). “This might be the most important chart in existence for #nonprofits today,” tweets Oscar Perry Abello, a freelance journalist who works with Population Services International, in reference to a visualization of the authors’ argument that accompanies the article. Also on Twitter, Eric Mullerbeck, a program specialist at UNICEF, calls attention to the authors’ “6 ‘endgame options’ for social change leaders” and asks, “Are UN organizations thinking about these?

(They should be.)” Commenters at SSIR Online note Gugelev and Stern’s nuanced approach to the goal of scaling up impact. “There are many other options for increasing your reach beyond organisational growth,” writes David Bull, policy and development officer at New Philanthropy Capital.

Bull suggests, however, that there are structural impediments to pursuing some endgame strategies: “At present charities are asked to share ideas

In The Resilience Dividend: Being Strong in a World Where Things Go Wrong, Judith Rodin, president of the Rockefeller Foundation, explains how individuals, communities, and organizations have developed resilience in the aftermath of disasters, and why resilience is an urgent socio-economic issue.

Soar: How Boys Learn, Succeed, and Develop Character illuminates the joys and challenges of educating at-risk boys as they become young men.

Written by David Banks, founder of Eagle Academy for Young Men—the first all-boys public high school in New York City in more than 30 years—the book shares the story of the school and its success, with the hope of helping other institutions get similar results.

Read excerpts from these books, as well as excerpts from other recent titles, and browse book reviews online. ssireview.org/books

and be collaborative, but the [system] incentivises them to be protective and competitive.” For Ryan Wolfington, founder of a Las Vegas nonprofit called the MHJT Foundation, the endgame framework has immediate relevance to his organization. “We have already begun to duplicate our program in other cities by offering our insights free of charge,” he comments. “[Y]our article helped inspire many ideas on how we can grow without diluting the quality of our program.”

P O D CASTS Listen to any of the more than 1,000 podcasts—on topics such as nonprofit scaling, fundraising, and collaboration—in the SSIR archive. You can also hear recordings by speakers at past SSIR events. ssireview.org/podcasts

STANFORD SOCIAL INNOVATION REVIEW PRESENTS

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Digital Civil Society Lab

Stanford Social Innovation Review / Spring 2015

! WORKERS LAB: The SEIU, one of the nation's most activist unions, has launched an innovation incubator.

New approaches to social change / By Suzie Boss

Economic Development

An Incubator for Labor ould digital gaming be used to retrain fast-food workers for better-paying waiter jobs in fancy restaurants? Could an Uber-like “sharing economy” app help freelance workers boost their income?

Today’s napkin sketches might well become tomorrow’s solutions to the challenges faced by the American working class.

That’s the hope behind the Workers Lab, a first-of-its-kind incubator launched this past October with $1 million in startup funding from the Service Employees International Union (SEIU). “We’re looking for audacious ideas about how to rebuild the middle class,” says Carmen Rojas, CEO of the Workers Lab. Winning applicants will receive $150,000 over a ninemonth period to develop and pilot their ideas. They’ll also get access to mentors and introductions to investors who might provide next-round financing.

The first cohort of winners—to be announced early this year— will include up to five projects.

Despite its links to organized labor, the Workers Lab, based in Oakland, Calif., aims to be “platform agnostic,” Rojas says.

It will entertain ideas from all sectors, and winning ideas won’t necessarily be those that bolster union rolls. Incubator-worthy efforts might range from new enterprises to projects that focus on advocacy or policy work.

Protecting union membership “would have been a con-

cern in 1950 or 1960,” says David Rolf, chairman of the Workers Lab. (He’s also president of SEIU 775, a local union that represents long-term-care workers in Washington State and Montana, and international vice president of SEIU.) “The fact is, the labor movement has already eroded: Eleven percent of American workers are now in unions.

In the private sector, it’s 6.7 percent. What we desperately need is to find something to replace those [lost union] jobs.”

The Workers Lab, Rolf explains, aims to cultivate ideas that have three characteristics: “the power to change workers’ lives for the better; the ability to scale up, geographically or across an industry; and a sustainable revenue model that will enable [a venture] to survive even in a bad economy.”

Beyond those essentials, the field is wide open: “What are the experiments and models that can do what the labor movement used to do—help all boats rise together?” Rolf

says. The best idea, he adds, “might come from a social entrepreneur, a PhD, or a former SEIU janitor with a cool idea for other janitors. We want to plant a lot of seeds and see what roots.”

Project teams selected for the incubator will meet as a cohort four times during their nine-month funding period.

They will need to meet certain milestones along the way, but otherwise they will be on their own. “We want to invest in great leaders and then give them time to noodle around.

They can fall back on our resources and mentors if they need them,” Rojas says.

Rolf expects funding to expand beyond SEIU. “We’re hearing excitement about this idea from philanthropy, high-networth individuals, venture capital, and banking,” he says. The Workers Lab is also convening discussions about the initiative with a variety of partners, including the Ford and Rockefeller foundations, and Democracy Alliance.

Amalgamated Bank, owned by the SEIU affiliate Workers United, is one early backer.

Keith Mestrich, president and CEO of Amalgamated, says the Workers Lab “gives people with good ideas a runway, without them needing to raise money all the time.”

As projects exit the incubator, the bank may offer financing to help them grow. “We’re open to being creative. Just imagine if the labor movement had invented Uber,” says Mestrich, referring to the ride-share company that competes with taxis. “We’d have an electronic hiring mall. Maybe someone is looking at other industries that have variable employment needs and is thinking about Uber-like technologies that could match workers with employers on a regular basis.”

Joseph McCartin, professor of history and director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University, sees the Workers Lab as a sign that the

photograph by elvert barnes, used under creative commons license

C

photograph courtesy of working washington

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Stanford Social Innovation Review / Spring 2015

suzie boss is a Portland, Ore.-based journalist who writes about social change and education. She is the author of Bringing­­ ­Innovation to School and contributes ­frequently to Edutopia.

! HEALTH AIDS: Barbers are being recruited to help monitor hypertension among African-American men.

labor movement is ready for innovation. “The union movement is more open to reinvention now than it has been at any time since the mid-1930s. The present crisis is triggering a period of healthy experimentation and openness to new ideas,” he says.

“When the labor movement was at its strongest, its influence spread far beyond its ranks. We need to think that way again.” n H e a lt h

The Barber Will See You Now ames Smith, a barber in Dallas, has spent four decades tending to the hair care needs, and more, of his African-American clientele.

“In the black barbershop, we talk about the most important things in life—politics, religion, business. Now we’re adding health to the list,” he says.

Smith belongs to a pioneering team of barbers who have received training to perform blood pressure screenings. The goal of that training is to help reduce the epidemic rates of hypertension among AfricanAmerican men. The condition is often silent; in its initial phase, it may be unaccompanied by pain or other noticeable symptoms. Left untreated, high blood pressure can lead to stroke or heart disease—and to early death. “We need to take this seriously,” says Smith.

African-American men “are more likely to have a barber than a doctor,” says Ronald

photograph by elvert barnes, used under creative commons license

photograph courtesy of working washington

J

Victor, director of the CedarsSinai Hypertension Center and associate director of the Cedars-Sinai Heart Institute in Los Angeles. Hypertension rates are high among both black men and black women, he notes, but “there’s a big gender difference when it comes to awareness and treatment of the condition. We guys are not very proactive about our health.”

Victor, a physician, is leading a push to use barbershops to raise awareness of hypertension. After conducting an initial study in Dallas, he is launching a multi-year, $8.5 million investigation in Los Angeles funded by the National Institutes of Health. Smith, who participated in the Dallas study, is an advisor to the new project. In late 2014, he traveled to Southern California to talk up the idea with barbers in that region. “It’s a natural role for us,” he says.

Barbers have a long history of serving as community health workers. During the middle ages, they acted as surgeons. “If they could pull teeth and put

on leeches back in that time, then barbers today can certainly learn to use an automatic blood pressure machine,” Victor says.

As an environment for getting a reliable blood pressure reading, the barbershop outperforms the typical doctor’s office. “The barber chair is comfortable, with a straight back and armrests at heart level,” Victor explains. Then there’s the ambiance. “If you can’t relax in a barbershop, you’ve got a problem,” he says. “Compare that to a medical office, where you may be sitting on the edge of a gurney in a cold exam room. A doctor’s office is probably the worst place to get a good [reading of] blood pressure.”

What’s more, barbershops tend to enjoy strong customer loyalty. “Men go to see their barber, on average, every two to four weeks,” Victor says. Smith, for instance, can trace some of his customers back three generations. “I’ve been part of their lives,” he says. “I’ve seen them grow up, go to college, and come back. That puts me in a

good position to mentor them to eat right and get their blood pressure under control.”

When the new study ramps up in early 2015, an estimated two dozen Los Angeles barbershops will become hypertension screening and education sites.

The goal is to track 500 AfricanAmerican men with uncontrolled hypertension for a year.

Investigators will match participants with clinical pharmacists and doctors who will help them manage their hypertension— in most cases by prescribing a combination of medication and lifestyle changes. A local barbershop will be their go-to spot for regular blood pressure checks.

Participants who show up on schedule will receive coupons for free haircuts, and barbers will get an extra tip for each check that they perform.

In addition, for purposes of comparison, another group of barbers will serve as health educators. They won’t do blood pressure checks, but they will encourage patrons to see a doctor and will distribute educational pamphlets about hypertension.

The longer-term goal is for barbers to become “part of the health-care team” for certain patients, Victor says. By showing proof of concept for the community health model, he hopes to attract funding to continue the program after the research phase ends. “We want to have whopping positive results so this idea will be attractive to chain pharmacies, insurers, and HMOs,” he says. “We don’t have the business model worked out yet, but we hope to take the idea national.” n

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Stanford Social Innovation Review / Spring 2015

N o n p r o f i t s & N G Os

Leveling the Internship Field n his four years as a health sciences major at Boston University (BU), Michael Parello (Class of 2015) has managed to squeeze in three internships. All were unpaid, which meant that he also had to hold down paying gigs.

“I’m not the kind of student whose parents put money in my bank account every week,” he says. When he compared notes with classmates who could afford to spend their summers working as full-time, unpaid interns, Parello realized that he was missing out on some intangibles. “Other students were getting career advice, mentoring

I

% PAID LABOR: Boston University students can soon get paid internships with local nonprofits.

relationships, building that kind of capital,” he notes.

To provide better out-ofthe-classroom opportunities for needy students and also bring youthful energy into Boston’s nonprofit sector, BU is launching the Yawkey Interns program. Funded by a $10 million endowment from the Yawkey Foundations—an organization established by the former longtime owners of the Boston Red Sox—the program will place up to 100 undergraduates annually in paid positions with Boston-area nonprofits.

“A lot of students would like to participate in an internship but need to be paid for it,” says Leslie Pohl, vice president of enrollment and student affairs at BU. “We also know that many of our students really want to change the world.

The nonprofit space appeals to them. We wondered: How

could we enable greater access to internship opportunities by taking some of the financial considerations off the table?”

The solution emerged from discussions between BU and Yawkey. “What these nonprofit organizations need, often, is more capacity,” says Maureen Bleday, executive vice president of programs and operations at Yawkey. “Our trustees saw a chance to help meet BU’s career development goals and also help the nonprofit community.”

The first Yawkey Internships will start this summer, and a more extensive rollout will take place in 2016. Recruiting, according to Pohl, will focus on students with need-based scholarships who want to get “practical, hands-on work experience where they’re applying their academic knowledge in the nonprofit space.” Students will need to invest effort in the program, she adds: “We’re not going to find internships for students.”

Instead, prospective interns will have to enroll in a specially created non-credit class that helps them polish their career skills. “Part of this new course involves finding a quality position,” Pohl explains. “Then

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Stanford Social Innovation Review / Spring 2015

there’s the reflective piece, where [students] think about what they want to get out of the experience, what they have to contribute. This has to be more than a résumé builder.”

BU announced the program in September, and people from nonprofits began calling the university soon afterward. “Managing expectations is going to be part of this,” Pohl acknowledges. “Some internships turn out to be about answering the phone or doing ‘gofer’ work. Our obligation is to make sure our students are learning.” Bleday echoes that point: “Students will compete for these spots, and so will the nonprofits.”

One Boston nonprofit that already appreciates the value of paid interns is the Pan-Mass Challenge, a cycling event that raised $41 million for the DanaFarber Cancer Institute in 2014.

Planners for the event rely on as

many as five paid college interns to expand their small staff during the busy summer months leading up to the ride. “We size up their skills and interests and then give them full responsibility for different projects,” says Bill Alfano, director of marketing and sponsorships for the Pan-Mass Challenge. Some students have an interest in event planning or sponsor recruitment. Others are eager to tackle logistics challenges. “It would be a waste to bring in someone really bright and have them get coffee for you,” Alfano says.

The Yawkey program is coming along too late for Parello, but he has insights to share with future applicants. “My best internship treated me as someone with a valuable perspective to offer. I had a seat at the table,” he says.

“In my worst one, I sat at a desk with a stack of reports and never saw anybody. These experiences

help steer you in the direction of what you want to do—and also what you don’t want to do. I’ve been able to cross a few things off my list.” n Te c h n o l o g y

Data Game ig-name companies such as PepsiCo and Kraft Foods Group have run contests to crowdsource new product ideas. Topcoder, an open innovation platform that awards prize money for software development and design projects, has attracted hundreds of thousands of participants.

Now a start-up called Driven Data is working to enable online competitions that give data scientists a chance to vie for cash, glory—and social good.

Driven Data, a for-profit housed at the Harvard Innova-

B

tion Lab, develops those competitions working with missiondriven clients. “We want to help them frame a question that they really care about—something hard and hairy,” says Greg Lipstein, cofounder. Clients pay for that service and also put up the prize money; Driven Data runs the contest.

The first competition, launched this past October, aims to help school districts spend their money more strategically. Education Resource Strategies (ERS), a nonprofit in Watertown, Mass., grapples with that issue regularly. Many school districts “have no reliable way to compare their spending to other districts,” says Dan Turcza, an associate at ERS. There is no standardized reporting system for such information. Comparative perpupil spending data is available, but it’s not granular enough to

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Stanford Social Innovation Review / Spring 2015

show whether a district might be spending too much on maintenance, for example, or spending too little on field trips.

Fixing that problem requires applying uniform labels to hundreds of line items in multiple district budgets. For ERS, doing that much coding by hand poses a huge challenge. That’s where data science—and a competition managed by Driven Data— come into play. “This is a classic machine-learning problem,” says Peter Bull, another cofounder.

The contest aims to encourage skilled data scientists to dig into this dilemma, and ERS is offering a $7,500 purse that will be shared by the top three solutions.

Driven Data will identify winners on the basis of three criteria: accuracy, speed, and economy. A solution that delivers on those metrics would allow ERS to reduce its prices and greatly extend its impact. (Results will

be announced after the contest closes in early January.)

Like their company, the founders of Driven Data span the gap between analyzing data and putting it to use. Bull and a third cofounder, Isaac Slavitt, are recent graduates of a data science master’s program at the Harvard University School of Engineering and Applied Sciences. Lipstein is an MBA student at Harvard Business School. “If we can find interesting questions where data science tools can be used to drive social change, we think that practitioners and students will engage,” Lipstein says.

Driven Data isn’t the first effort to leverage data science for social good, but its approach is different from what others in this young field are doing. DataKind (formerly Data Without Borders) matches data scientists with social impact organizations

and helps them conduct quick “data dives.” Bayes Impact places data scientists in yearlong fellowships with civic and nonprofit partners. “There’s an ecosystem coming together,” says Bull.

“We see ourselves as part of a continuum.”

What differentiates Driven Data is its commitment to complexity and its competitionbased model. The right problem for a Driven Data project is one that’s too complex for a weekend hackathon but not so intricate that it requires an extended research project.

“We’re looking for projects with enough complexity that they need to go for two or three months,” Bull says. Online competitions, moreover, can be a powerful tool for developing such projects. “There could be multiple really good ideas for how to approach a problem,” Lipstein says. “We can compare

them side by side. It’s not necessarily clear beforehand what the best approach will be.”

Research on open innovation contests supports that view of how beneficial they can be. Not only do such competitions generate an abundance of ideas, but “the value of the best idea generally increases with the variability of the ideas received,” Karim Lakhani and Andrew King write in the fall 2013 issue of MIT Sloan Management Review. (Lakhani, an associate professor of business administration at Harvard Business School, is an advisor to Driven Data.)

Driven Data is now pursuing opportunities in public health, basic scientific research, education, microfinance, and humanitarian aid. Whatever the topic may be, Bull says, the goal is to investigate questions that involve “the most data and the highest potential for social impact.” n

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Stanford Social Innovation Review / Spring 2015

! Elizabeth Jarpah (left) and Miata Chea at Liberty & Justice’s Monrovia, Liberia, factory before Ebola struck.

Profiles of innovative work

Entrepreneurship and Ebola

Six years ago, Liberty lived in Silicon Valley, working in finance for tech startups. His fam-

unrealistic. Liberia was not a likely source of ethically made apparel; after the war, most Liberians lacked electricity and water. The country was a literal disaster.

Nevertheless, starting a clothing business in West Africa made a certain business sense. Inhumane conditions in many developing-world apparel factories—conditions that came gruesomely to global consciousness after more than 100 Bangladeshis died in the 2012 Tazreen Fashions factory fire—had fueled growing consumer demand for apparel produced ethically, rather than by some anonymous, poorly treated person at the invisible end of a long supply chain.

Liberia also had, at least before the war, a textile industry, and West Africa enjoys a prime shipping location on the Atlantic Ocean, closer than Asia to markets in Europe and North America. With various NGOs hav-

ily had fled Liberia in 1981, when Liberty was just 18 months old, and he hadn’t returned since. But after the end of Liberia’s two civil wars—brutal conflicts that raged from 1989 to 2003, claiming several hundred thousand lives and leaving millions displaced—he’d wanted to go back and help his former home.

That he would start a clothing factory might at first seem fanciful, if not downright

ing sponsored post-war vocational training, there were plenty of capable seamstresses looking for work. Liberty & Justice offered a chance to build a decent peace.

Liberty reached out to some of Liberia’s famed women’s groups, whose nonviolent protests were pivotal in ending the war.

Despite their organization and newfound political influence, however, women were

Creating an ethically sourced apparel company in West Africa is hard enough, but when Ebola strikes, the challenges become almost insurmountable.

By Brandon Keim

Photograph by glenna gordon, courtesy of liberty & justice

E

arly in June 2014, Chid Liberty’s factory hummed with promise.

Workers were almost done installing the sewing machines, completing a two-year-long overhaul of the facility, a multi-story building that rises above the slums of West Point in Liberia’s capital of Monrovia. Liberty & Justice, the company he founded to produce ethically sourced apparel and bring prosperity to a pocket of this war-torn nation, had just hired 200 workers.

Liberty’s mind was on logistics and possibilities, zippers and supply chains, and how best to conduct studies on the effect of employment on worker well-being. Sure, there were news reports of an Ebola outbreak in neighboring Guinea; but in Liberia, where only 16 people had died, the disease was just “a blip on our radar,” recalls Liberty. It wouldn’t stay that way for long.

Fast forward six months and more than 3,000 deaths. The factory was silent. Nobody stood at its gleaming machines. The workers were at home, an official state of emergency had been declared, much of West Point was under quarantine. Fabric lay in piles on the floor.

Fortunately, as of the end of 2014 none of the workers or their families had caught Ebola, but the company’s health is still recovering. It was difficult enough getting Liberty & Justice off the ground before the outbreak. Now Liberty must do it again, except this time under the shadow of an outbreak that not only took a terrible human toll in West Africa, but reduced much of the Western world to panic and paranoia.

“We had just under half a million dollars in open purchase orders when we took

a break,” says Liberty. “Hundreds of thousands of raw materials on the ground. And we had to stop working. That was extremely painful. We are now trying to rebuild from that—which will be challenging.” One thing is certain, though: Liberty loves a challenge.

ROOTS IN SILICON VALLEY

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Stanford Social Innovation Review / Spring 2015

BRANDON KEIM is a freelance science, environment, and technology journalist. He has written for a number of publications, including Mother Jones, Wired.com, USA Today, and Psychology Today.

still marginalized in Liberia’s patriarchal society. Liberty envisioned his enterprise giving them work and a measure of independence, with social benefits rippling out from them.

“Most of the women here now at the factory had nothing to do. They were without jobs. Since Liberty & Justice started working with us, our lives have improved. We are able to send our children to school, to provide for our homes,” said Leona Monger, head of the factory’s worker union, in an interview before the Ebola outbreak.

Coming from someone else, those sentiments might sound hackneyed. But Monger and her colleagues had ended a war, and Liberty & Justice offered a chance to build a decent peace. They now own a 49 percent share of the factory itself (not the company), which opened in 2009. There they earn approximately $100 a month—20 percent more than their Liberian peers— and are offered savings accounts with deposits matched dollar-for-dollar for one year.

Workers have company-sponsored health insurance and can afford an education for their children. Some 98 percent of their children attend school, more than double the national rate—a profound achievement in a country where, in the words of Nobel Prizewinning President Ellen Johnson Sirleaf, “access to quality education is the social justice issue of our time.”

Theirs is an extraordinary human-interest story, but it would have important business ramifications, too. Many of the women’s group members were in their 30s and 40s. Liberty didn’t realize that standard garment-industry practice is to hire younger women, who are considered better suited to sewing long, fast-paced hours. A consultant originally called their hiring a mistake. But it turned out that the women’s age gave them a deep sense of responsibility. “I was struck by the degree of motivation of the women’s groups,” says Nate Schaffran, who oversees lending in Africa for impact investment fund Root Capital, one of Liberty & Justice’s early backers. “It was very clear that these women’s groups wanted the project to succeed, and they were making sure it would.”

The women’s story would also prove crucially compelling to buyers. From the outset, it was evident that Liberty & Justice would not compete with cheap apparel. Instead, as with ethically produced coffees, which differentiate themselves from commodity coffee as much by telling origin stories as by taste, Liberty & Justice would sell its narrative.

“If the apparel was going to commercial buyers who treated it as a commodity, then a startup factory in West Africa isn’t going to compete on cost,” says Schaffran. “But their buyers [including prAna, Haggar, and FEED Projects] were motivated in part by the opportunity to be part of the story.” The same applied to funders, says Jim Villanueva, executive director of the Eleos Foundation, another of Liberty’s investors. Funders needed to understand the story, accepting the workers’ well-being as a first priority, the inevitability of challenges, and the possibility of lower financial returns than other investments.

CHALLENGES AHEAD

The challenges of building a business in Liberia were many, some a function of postwar Liberian life but many typical of the garment industry. The logistics—“labels from New York, threads from Turkey, fabric from Thailand, zippers from Hong Kong,” says Liberty, “all needing to arrive on time, go through the Liberian port system, and get processed”—are daunting in the best of times. Within two years of opening, the factory also expanded its production nearly sixfold, which Liberty in retrospect acknowledges was probably too ambitious.

The company learned the ropes and important lessons, though. Orders kept coming in; they became Africa’s first Fair Trade Certified apparel factory. For a time Liberty & Justice shifted production to a second factory in Ghana, allowing them to renovate the factory in Monrovia. Workers there were furloughed for more than a year, a blow Liberty tried to cushion by offering training programs. In June the Monrovia factory finally re-opened, with a work force now numbering 330 people, ready for their biggest projects yet. Then came Ebola.

By mid-August, when President Sirleaf declared a state of emergency, Liberty had already told his workers to stay home.

Though the official emergency lifted in midNovember, when Ebola appeared to be under control, the factory stayed shuttered. Deadlines for the previous orders were long past, and no new orders had come in.

Liberty has filled the time by negotiating deals for other manufacturers. He also plans to use the factory to package Ebola prevention kits containing disinfectant, face masks, and thermometers that will be distributed by health groups. These are, however, stopgap measures. Eventually, Liberty & Justice needs to make clothing again. It may not be an easy sell. “After the war, a lot of people wanted to do something positive in Liberia,” says Liberty. “But Ebola has a tougher stigma. It tends to freak people out.”

Hopefully the story will prevail against fear: companies that previously saw their support of Liberty & Justice as part of a narrative of post-war Liberian rebirth will welcome their role in the recovery from Ebola. “It could almost be a source of pride to pay for pants coming from a country that’s trying to recover from something like that,” says Liz Luckett, president of The Social Entrepreneur’s Fund at Root Capital.

Along with Liberty & Justice’s other investors, Root Capital says it’s ready to be patient. Tragedies like these underscore the importance of impact investment in places like Liberia.

But even if the story resonates with apparel buyers, says Liberty, problems remain.

However well-intentioned they might be, companies are wary of risk; they’re reluctant to send employees to Liberia, which is necessary to work out practicalities of compliance and quality control. For now, Liberty can only wait and hope.

“Our work is probably more important today than five years ago,” says Liberty.

“Obviously this is going to change how other people view Liberia. But I can tell you that from our workers’ standpoint, nothing has changed. They want to know when they’re getting back to work.” n

Photograph courtesy of boys & girls clubs of america and the charles schwab foundation

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Stanford Social Innovation Review / Spring 2015

$ Producer Khao Cates helps Blake McGuire of Boys & Girls Clubs of Indianapolis record his winning rap song.

Engaging Teens A financial literacy program created by the Charles Schwab Foundation and the Boys and Girls Clubs of America has reached a half million teens.

By Corey Binns

B

rad Bartick stood in front of a room full of teens sprawled on couches and chairs, tired after a day at school. The Charles Schwab Corp. branch manager was at a Boys & Girls Club in Vancouver, Wash., to coach kids on finances. Unlike most of Bartick’s clients, who are employed and financially successful, many of these students came from families where there was barely enough money to save. He invited the kids to the

Bartick applies lively teen-friendly tips using a financial education curriculum created by the Boys & Girls Clubs of America (BGCA) and the Charles Schwab Foundation. He teaches his students about budgeting, interest, and debt by using examples they could easily relate to, such as spending $500 to buy a Sony PlayStation. “How much would that PlayStation be worth three years from now?” he asked. “What would happen if you’d saved that money instead and earned 7 percent interest?”

Bartick finds the experience rewarding.

It’s not fair, he says, that some people are

The financial education curriculum, Money Matters: Make It Count, was developed in 2002. The after-school program instills the basics of budgeting, borrowing, investing, entrepreneurship, and saving for education after high school in a way that’s relevant to teens. “We decided that because we were such a small organization, we had to be extremely focused,” says Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation. “We thought that by focusing on youth, we could make generational changes.”

The after-school program runs about one hour a week for six to 10 weeks and is taught by Boys & Girls Club staff as well as by Schwab Corp. volunteers. The program rolled out nationally in 2004. Today, Money Matters is the most widely adopted BGCA teen program, taught at more than 1,700 clubs. A half million Boys & Girls Club teens have completed the program since inception, and almost 84,000 teens now go through the program each year.

LAUNCHING MONEY

Photograph courtesy of boys & girls clubs of america and the charles schwab foundation

MATTERS

front of the room to write down the jobs they hoped to hold. Teacher, engineer, police officer appeared on the white board.

“OK, assuming you get to one of these positions,” Bartick told the kids, “money is going to come into your life and you’re going to have to make decisions about your money.”

never taught these basic financial concepts, including the notion that your money should work for you. “How would you benefit from something that you had no idea existed?” he asks. “I can spend a little bit of time with these kids and, not everyone of course, but some of them will get it.”

When Schwab-Pomerantz became president of the foundation in 2002, she and her team scoured the country for a partner who could bring resources and knowledge that the foundation lacked and complement the expertise Schwab did have.

The now decade-long affiliation with BGCA—the largest youth agency in the United States, serving some 4 million kids in about 4,000 clubs—is a testament to the partnership’s strength.

Schwab-Pomerantz says the organizations share a similar mission and culture. “It’s a true partnership where we could give each other feedback that we would hear and we would implement based on the feedback.” BGCA President Jim Clark agrees that the financial literacy program aligns the missions of both

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Stanford Social Innovation Review / Spring 2015

Corey Binns is a journalist based in Northern California.

She writes about science, health, and social change for NBCNews.com, NPR’s Science Friday, and Popular Science.

organizations. “In our case, when kids and teens become more financially literate in society, they become successful adults and citizens in our country.”

The close connection between the Money Matters mission and the Charles Schwab Corp.’s mission has also fueled the partnership’s sustainability. The company was built around the idea of helping people help themselves with their finances so that more people can participate in the financial markets. “Without that tie to the mission, which you’ll see in a lot of corporate giving, you really just don’t see longevity,” says Karen Aidem, founder of the consulting firm Sage Partners and advisor on the development of the relationship with BGCA and the Money Matters program.

Corporations often choose a cause of the moment or a CEO’s pet project, says Aidem. Rather than focusing on a cause she was passionate about at the time, women’s economic parity, Schwab-Pomerantz instead focused on financial literacy, a cause all of her colleagues could identify with. “Schwab has been able to broaden the mission behind what they’re doing, and that’s helped sustain the partnership,” says Aidem.

IMPACT OF FINANCIAL LITERACY

Before Colorado high school senior Aisha Barrows took the Money Matters program in 2011, she was a little leery about applying and paying for college. She has since started a 529 college savings plan where she puts 50 percent of her paycheck, and she shares money-saving tips on her local radio show, “The Melting Pot,” on KYGT-FM in Idaho Springs, Col. Now, when kids tell her they can’t afford college, she tells them otherwise. “Everybody can afford college, you just have to apply yourself,” says Barrows.

“There are so many opportunities out there that Money Matters showed me that I want to show other people.”

In 2014, Barrows was one of 15 Boys & Girls Club teens to receive college scholarships ranging from $1,000 to $5,000 from the Charles Schwab Foundation. The foundation has given a total of $485,000 in

scholarships to 237 teens who have completed the Money Matters program and shown leadership in personal finance. The benefits from the program reach far beyond college scholarships. Some teens have gone on to careers in the financial industry, and others have gone home and helped their families create a budget.

To measure the impact of Money Matters, the Schwab and BGCA team have conducted three program evaluations. The evaluations found that the teens are not only learning about savings, for example, but they’re actually opening up savings accounts. Results from a 2012 yearlong national evaluation found that teens who took the class had increased 45 percent in understanding the problems of check cashing stores; 29 percent in their ability to budget monthly expenses; and 50 percent in knowing to set aside 10 percent of their income toward savings. In total, 33 variables showed improvement as a result of the Money Matters program.

“Schwab has been patient in saying we’re going to partner with an organization [BGCA] that sees youth every day and has their finger on the pulse of what these kids want, need, the style of communication that will work,” says Aidem. “And they’re patient enough to test some things to make sure they work, and course correct when needed.”

IMPROVING THE PROGRAM

Despite their success, neither the Charles Schwab Foundation nor BGCA has put the program on cruise control. “Both organizations feel that this is an organic, living thing and that you can always educate more teens and you can offer a deeper education to really turn these youths’ lives around as it involves money,” says Aidem. Clark says that the Schwab and BGCA team meets regularly to talk about the program and refine it so that it remains contemporary and relevant, “because it’s a hard population to keep their attention.”

The team continues to create new ways to attract and engage teens. In 2011, hip-hop

mogul Kevin “Khao” Cates helped develop Money Matters Music Mogul, a rap contest for kids taking Money Matters. Kids submitted rap song lyrics that reflected the themes they’d learned from the Money Matters curriculum and set their songs to background beats created by the Grammy Award-nominated producer. “It’s one case where they brought curriculum to life in a way that an instructor sitting in the front of a classroom could never do,” Aidem says.

The five song-writing finalists each earn $500 scholarships. The winner is flown to Atlanta where Khao produces their music video. One of the contest winners now works for Khao writing educational songs while attending college in Atlanta.

The Charles Schwab Foundation and BGCA are currently researching and planning to create a financial education program for the BGCA staff itself. They hope to help all 55,000 employees around the country, many of whom were BGCA kids, work part time, and have college debt. The program should be available for employees at each club within the next year.

Schwab-Pomerantz hopes this latest venture can help BGCA employees not only have financial security in their own lives but also be better teachers. “Ultimately, when you have better programs and you have employees who are focused on being good teachers and who aren’t worried about their finances, you make a stronger nonprofit,” says Schwab-Pomerantz.

This year, Money Matters will add an online simulation game where groups of kids can play and envision the life they want to have, explore occupations, earn a virtual month’s salary, create a budget, and plan for life’s events. The goal, as always, is to keep the teens interested in the program.

“The biggest risk is that this financial literacy program would sit on the shelf and wouldn’t be used by Boys and Girls Club staff. But kids vote with their feet,” says Schwab-Pomerantz. “We are going to continue to make sure that we are relevant to kids and that we will always be the fastest growing program.” n

Photograph courtesy of camfed

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Stanford Social Innovation Review / Spring 2015

! Camfed provides high school girls, such as these in Ghana, with money for uniforms and other essentials.

Bursaries for Girls The relatively simple act of providing African girls with the money they need to stay in school has achieved significant results.

By Alicia Clegg

Photograph courtesy of camfed

A

s a little girl, Angeline Murimirwa dreamed of becoming an educated woman. When her parents, subsistence farmers in Zimbabwe, could not find the money for her school fees, her teachers smuggled her into class behind the backs of the education authorities. Sometimes teachers made her presents of pens for washing their dishes.

Despite all her setbacks, Murimirwa completed primary school with top grades in every subject. She was sure that if she continued to study, she would achieve something great. But her parents’ farm produced barely enough to feed and clothe their children, let alone pay for their education. By the age of 12, Murimirwa thought her dreams were over. Her future looked bleak.

Then the Campaign for Female Education (Camfed), a nonprofit organization dedicated to eradicating poverty in Africa through the education of girls and the economic empowerment of young women, came to Murimirwa’s village. Camfed gave her a bursary to attend secondary school; it paid for her uniform and pens and paper and enabled her to have regular meals.

“For the first time, I could be a child,” says Murimirwa. “I didn’t have to think about fetching water and firewood, or where I could get food. I could even read novels, which I never had time to do at primary school because of all the worries that had become second nature to me.”

Today, Murimirwa is a regional director of Camfed and an accomplished international speaker. Most of her primary school friends have had very different lives. Many married early and became mothers in their teens. Some “took dangerous shortcuts,”

sleeping with older men in order to scrape together enough money to continue school.

But instead of lifting themselves out of poverty, they contracted HIV/AIDS. Ann Cotton started Camfed in 1993, after returning to her home in Cambridge, England, following an academic field trip to rural Zimbabwe. There she witnessed young mothers, some in their early teens, weighed down by babies on their backs and water on their heads. Born into poverty, the girls were trapped in a cycle of economic dependence that rolled from mother to daughter.

The only educated women in the community came from the cities, and their disparity with the residents created further problems. “None of the nurses or teachers were mother-tongue speakers of the local language,” Cotton, now president, recalls.

Today, Camfed has offices in Ghana, Malawi, Tanzania, Zambia, and Zimbabwe. The national offices are supported centrally, by Camfed Intl. in Cambridge and Camfed USA Foundation in the United States. In 2013, Camfed’s bursaries enabled more than

108,000 disadvantaged rural girls to attend secondary school. Through its Safety Net Fund, Camfed provided basic school equipment to another 158,000 primary school children, boys as well as girls, whom poverty might otherwise have forced out of school.

Its former students have established CAMA, a rapidly expanding alumnae association, made up of more than 24,000 young women from poor rural backgrounds who promote education and engage in local philanthropy.

Cotton says that when Camfed began, international development experts told her that rural African families were culturally resistant to educating girls. She, however, believed that poverty, rather than prejudice, kept girls away from school. “Rural parents don’t need to be persuaded to send their daughters to school they’re already convinced. But if forced to choose which of their children to educate, they favour boys because boys have the better chance of getting paid work,” Cotton says. In 21 years, no family has refused Camfed’s offer to educate a daughter.

LED BY COMMUNITIES

Camfed relies on volunteers, recruited from within the rural communities it serves, to shape and operationalize its programs. This bottom-up model encourages local people to identify with its mission and enables it to extend its reach while keeping its salaried

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Stanford Social Innovation Review / Spring 2015

ALICIA CLEGG is a UK-based freelance writer. She contributes regularly to the Financial Times and has also written for the Guardian, Management Today, and Oxford Today.

headcount low. This is crucial if the organization is going to achieve the ambitious goal that it announced in 2014 to support 1 million girls through education over the next five years.

On entering a district, Camfed’s managers (all nationals of the country) contact the district education office and invite local leaders—government officials, school authorities, police officers, and traditional leaders—to form a district committee to oversee the delivery of the Camfed program. “Sometimes people say they want to be paid, but we say ‘No, this is voluntary,’” says Cleophas Paridzira, a retired district education officer who chaired Camfed’s district committee in Wedza district, Zimbabwe, until 2012. Most people, he adds, donate their time willingly.

The district committee’s first task is to find the schools with which Camfed will work and consult the community to identify the neediest girls, those at greatest risk of dropping out of school, to whom Camfed will offer bursaries. In tandem, Camfed staff engage in capacity building: partnering with, or creating, school management boards and encouraging mothers and fathers to join or form parent support groups. Gradually, Camfed’s staff step back until the community institutions are running its operations.

The trust that Camfed places in its volunteer activists—whom it trains in financial literacy, child protection, and the promotion of gender equality—extends to financial management. For example, the local communities specify and procure the skirts, blouses, and shoes for the bursary students. Some purchase the uniforms centrally, others commission local tailors to make them to measure.

That might sound expensive, but it can actually be less expensive and help the local economy, says Luxon Shumba, finance director at Camfed International. “The tailors sew at home, so they don’t have overheads, the girls receive a uniform that fits them, and the community benefits from extra employment.”

The possibility of money being misappropriated is a risk Camfed takes seriously. To ensure that funds are traceable, Shumba has created an accounting system— rooted in the principle of “accounting to

the girl”—into which the names and details of every bursary student are entered. The system tracks donations from the moment they are raised to the moment the partner schools account for their use. CAMA members and teachers trained to mentor the girls file reports from smartphones, provided

by Camfed, on each girl’s attendance, her academic progress, and whether she has the books, uniforms, and other items to which her bursary entitles her. The schools, in turn, are audited by Camfed’s country-based finance teams, the district committee, and Camfed’s internal auditors. Very occasionally an individual has attempted to abuse a position of trust, says Shumba. But the system’s multiple checks and balances are designed to catch such episodes early.

Lance Croffoot-Suede, a partner at the multinational law firm Linklaters, which reported in 2010, pro bono, on Camfed’s governance model, says he is impressed

by Camfed’s standards of accountability.

He also says that “by mobilizing local resources,” Camfed tackles the problems of poverty “holistically.” Paridzira describes an example. A group of older students from a remote village in Zimbabwe had to leave the village and lodge in adult accommodations for two years to attend school and study for university entrance exams. When several of the girls became pregnant by local businessmen, the father support group, using its own labor, built a school hostel, and the chairwoman of the mother support group volunteered to be the matron. “The national office provided some material assistance and finance and the father and mother support groups did the rest,” says Paridzira.

SELF-SUSTAINING GROWTH

Many of Camfed’s alumnae work as community nurses and teachers, creating role models for their sisters and daughters to emulate. Others work in cities as government planners, doctors, and lawyers, where their knowledge of rural issues, such as the vast distances that rural children often have to travel to access education and health care, is beginning to permeate service delivery.

As its model matures, Camfed is investing more in helping young women become self-reliant once they leave school. On completing her studies, a student can apply for seed money grants of between $30 and $50 to start a business. Through CAMA, they receive training in entrepreneurship, business skills, personal health, and leadership; they are also taught how to mentor each other. The support plugs a gap that Murimirwa and her contemporaries struggled to bridge. “As the first girls in our communities to have gone so far, we thought now all the struggling will end. Then we realized [our education] was merely preparation for the next hike.”

In Zimbabwe, Tanzania, and Ghana, Camfed is collaborating with Kiva, the microfinance organization, in a program through which CAMA members can apply for interest-free loans of about $500 to expand their businesses. By providing access to finance, mentoring, and skills training, Camfed aims to build the self-confidence of its alumnae entrepreneurs. The hope is that they will become active in sectors such as solar energy, sustainable agriculture, and IT, thereby bringing needed services to their communities. “We realized that there is often a resistance to new business ideas amongst young rural women … so we have designed our programs to mitigate the [perceived] risk,” says Cotton.

In return for the loans, mentoring, and training, the young women agree to mentor Camfed’s bursary students. Marvelous Mapingu, a 27-year-old alumna from Zimbabwe, is using her loan to diversify her clothing and grocery shop by adding hardware and agricultural seeds. With her profits she is educating her five siblings, two orphaned cousins, and her two sons. She has also taken on two shop assistants and become a mentor to other young women entrepreneurs and schoolgirls.

Mapingu’s situation is not unusual. On average, Camfed’s alumnae support two to three children, outside their family, to go to school. “With the support that Camfed has given me,” says Mapingu, “I’m able to help others become educated, so that one day they will be able to plough back too.” n

CAUSES DES D ER VE OO G

Using strategy and design we help organizations tell stories that engage and inspire.

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Stanford Social Innovation Review / Spring 2015

, GIVING PUB: Patrons crowd into the upstairs bar at Cause in early 2013, soon after the restaurant opened for business.

An Inside Look at One Organization

Cause for Reflection

With high hopes, and often with great fanfare, new mission-driven businesses appear on the scene at an ever-increasing rate. Less noticeably, many of them fail. The story of Cause, a “philanthropub” that closed 14 months after it opened, offers vital lessons for aspiring social entrepreneurs.

By Michael Cobb, Caitlin Rosser, & Andreas Vailakis, with Robert Tomasko

C

heers and laughter filled the room on October 24, 2012, as a boisterous crowd of people from ­Washington, D.C.’s nonprofit and social enterprise scene descended on 9th Street, in the city’s trendy Shaw neighborhood. It was opening night for Cause, the first “philanthropub” to open in the nation’s capital, and supporters had every reason to be enthusiastic.

Cause promised patrons an opportunity to be philanthropic while ­doing what they might have been doing anyway—going out for dinner and drinks. The new business had a simple, appealing model: It would operate in much the same way as a traditional restaurant and bar, but it would donate its profits to vetted social purpose organizations.

The opening of Cause arrived with a great deal of anticipation.

The new venture received early press coverage from ­Washingtonian Magazine, Washington City Paper, and Bloomberg Businessweek, among other publications. (Stanford Social Innovation Review, in fact, ­covered the establishment in its fall 2013 issue.) It also had a prime location, and it enjoyed the support of experienced restaurateurs— two ­important advantages for any effort to survive in Washington’s fiercely competitive restaurant scene. So the founders of Cause, Nick Vilelle and Raj Ratwani, had ample grounds for optimism.

Yet a mere 14 months later, Vilelle and Ratwani would shut down Cause. By then, the high expectations of that first night were long forgotten. The difficulties of managing the business had mounted, leaving customers and employees frustrated and the founders exhausted. What happened? Why did Cause—an icon of the Washington social enterprise scene—fail? Were there challenges unique to a social purpose business that might have contributed to its closure? What lessons can other social entrepreneurs glean from its brief history?

Practitioners in the social enterprise realm should not shy away from failure. On the contrary, they should embrace it. They should accept the fact that failure is always a possibility, and they should

heed the lessons that failure can teach them. “Failure is obviously really hard,” Ratwani says. “But when you’re trying something very different like [Cause], you just have to be ready to take risks.” Those who believe in the principles of social enterprise, we believe, need to apply rigorous analysis to episodes such as the rise and fall of Cause. Only by doing so can they develop and refine best practices for this field. What follows, then, is an attempt to help aspiring social entrepreneurs to understand—and, we hope, to overcome—the challenges that they will inevitably face.

START-UP

The inspiration for Cause grew out of a conversation that took place over a couple of beers. Vilelle and Ratwani were old college friends.

One night in 2006, they were catching up after Vilelle’s return to Washington from Peace Corps service in Togo. Ratwani mentioned that he’d always had an interest in social issues but found that, as a working professional, he rarely had any time to dedicate to the causes that he cared about. As he chatted with Vilelle, he posed a question: What if people could make small contributions to worthy organizations just by engaging in routine activities—by going out for a burger and a beer, for example? He brought up the idea of starting a bar that would give some of its proceeds to social purpose organizations. Vilelle quickly became enthusiastic about the idea. Such an arrangement, he noted, would be a great boon for cash-strapped nonprofits.

Over the next few years, Vilelle and Ratwani pursued their ­respective careers. Vilelle worked as a consultant for international development organizations, and Ratwani was a medical research ­scientist. Meanwhile, they continued to entertain their idea—their vision for opening a philanthropub. The philanthropub model, ­Ratwani explains, “really fit with one of our big goals, which was to reach the particular demographic that goes to bars and restaurants.

We very much wanted to hit a younger demographic that tends not to have a lot of money to donate yet is interested in social issues.”

By 2011, he and Vilelle were ready to make that vision real.

Photograph courtesy of nick vilelle

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From the start (and until the very end), Cause stayed ­remarkably true to the value proposition laid out during that first conversation between Vilelle and Ratwani: Cause would make an impact by ­enabling people to give to charity through an everyday activity; at the same time, it would provide much-needed funds to nonprofits.

Each quarter, according to the initial plan, Cause would choose four organizations and distribute that quarter’s profits to those groups.

In addition, Cause would help raise awareness of social purpose ­organizations and would serve as a community space where people could engage with issues of local and global scope.

Photograph courtesy of nick vilelle

STRATEGY

Vilelle and Ratwani spent the following year working to develop their business plan. Along the way, they made several pivotal strategic decisions. The first decision was to collaborate with professionals from the restaurant industry and to delegate restaurant-related functions to those partners. “It was never our goal to be an integral part of the day-to-day operations,” Vilelle notes. He and Ratwani, for their part, would formulate the overall direction of the venture and would take charge of working with nonprofit organizations. “We recognized that we had no restaurant experience, and we knew that to launch this idea, we would need really great partners [who had that] experience.”

Through friends, Vilelle and Ratwani connected with John ­Jarecki and Dave Pressley, two men who had operated successful restaurants—including the Light Horse, Vermilion, and Rustico—in ­Alexandria, Va., just outside of Washington. Jarecki agreed to manage

Cause’s operations while continuing to oversee the operations of his own restaurants. (He even recruited an experienced staff member from one of those restaurants to become Cause’s general manager.)

In addition, Jarecki recruited Adam Stein, the executive chef at Light Horse, to oversee the kitchen at Cause and to create its menu. Stein served in that capacity at both locations, and the two restaurants split the cost of his salary evenly. This arrangement not only brought high-level restaurateur expertise to Cause but also allowed Cause to maintain a manageable start-up budget. “The model,” Vilelle says, “was to find people with expertise who bought into the vision of what we were trying to create and let them do their thing.”

A second key decision was to incorporate Cause as a for-profit company. Vilelle and Ratwani decided against applying for nonprofit status. Because the primary function of Cause was to serve food, not to carry out charitable activities directly, qualifying for tax-exempt status would have been difficult. Even if the founders had structured Cause as a nonprofit, moreover, its food and alcohol revenue would likely have been subject to taxation as unrelated business income.

For-profit status also gave Cause greater flexibility in donating funds to organizations (such as other social enterprises) that might not be nonprofits or to international NGOs that do not have US tax-exempt status.1 “The decision was around operational and logistical issues, and not a philosophical debate,” Ratwani says. Vilelle concurs: “We felt that it didn’t really matter at the end of the day, as long as we were transparent in what we were doing.” (He and Ratwani had resolved, for example, to publish quarterly financial statements for their business.)

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Michael Cobb, Caitlin Rosser, and Andreas Vailakis are all master’s candidates in social enterprise at the School of International Service at American University. Cobb is managing director of a small family foundation. Rosser is a budget and financial management analyst at the US Department of Justice. Vailakis is founder of Beyond Volunteering, a mission-driven business based in Peru.

That choice of legal structure contrasts with the choice made by another philanthropub. The Oregon Public House, a nonprofit restaurant and bar in Portland, Ore., opened in May 2013. Its operating model involves giving away all of its net profit—that is, its revenue after expenses—to other nonprofit organizations. In that respect, the model resembles the one that Cause adopted. Unlike Cause, the Oregon Public House is still in business. In its first year, it donated more than $25,000 to groups and causes. (Various factors may ­account for its relative success. Its leaders, for example, were able to draw on about $50,000 in grant funding to provide start-up capital.)

FINANCE

Equally important were decisions that Vilelle and Ratwani made about the financial structure of Cause. They adopted a bootstrapping approach that aligned with an assumption that was built into their model: Overhead costs should remain as low as possible in order to maximize the profits that the restaurant could give away.

Toward that end, they vowed not to take a salary from Cause until the business had attained regular profitability. (Both of them would keep their day jobs throughout the life span of Cause.)

Another crucial decision was to build the restaurant—and then to run it—on a lean budget with limited start-up capital. Vilelle and Ratwani opted to remain the sole owners of Cause, and they supplied the majority of its capital by taking out a $100,000 business loan.

That sum was far less than the industry average: Comparable new restaurant ventures typically raise two to three times as much capital before they launch, and the restaurant industry standard for reserves calls for keeping six months’ worth of payroll and expenses on hand.2 Cause raised additional funds through a campaign on the crowdfunding site Indiegogo. In the campaign, Vilelle and Ratwani raised $23,576 from the general public by offering prizes and incentives, such as T-shirts, bar stools engraved with donors’ names, and the chance to have a beer at Cause. The Indiegogo campaign not only brought in capital but also helped to cultivate customer loyalty ­before Cause even opened. “Early on, we didn’t see a huge need to look for outside investors,” Ratwani says. “We did fundraising, and we put in a fair amount of capital ourselves, so it wasn’t critically important for us to find outside capital.”

Vilelle and Ratwani also set up a separate legal entity, Cause ­Properties, which purchased the building on 9th Street where the restaurant would be housed for $930,000. They bought the property from an existing restaurant—a move that helped them save thousands of dollars in build-out costs. They then rented the space to Cause at about 20 percent below market rate, thereby allowing the restaurant to lower its overhead costs.3 In addition, Cause was able to leverage various pro bono services (carpentry and construction, graphic design, legal consulting) from supporters in the Washington area.

Even as they took these steps to operate Cause in a lean fashion, the founders were aware of the overwhelming odds against them: At least 60 percent of new restaurants fail, and most full-service restaurants

Robert Tomasko is director of the Social Enterprise Program at the School of International Service at American University, where he also teaches graduate courses in corporate social responsibility, activism, leadership, nonprofit management, and social entrepreneurship.

Tomakso supervised the research that led to the writing of this article.

take at least a year to get out of the red.4 All the same, Vilelle and ­Ratwani were confident that their social value ­proposition—their ability to generate free publicity by capitalizing on trends such as “conscious consumerism”—would provide them with a foundation for success. For the first year of their venture, they projected revenues of $1.2 million, a profit margin of 10 percent to 20 percent, and an overall profit of $100,000.5 (According to one local food industry expert, restaurants rarely make any profit in their first year, and a first-year profit margin of up to 20 percent would be a rare and difficult achievement.6) “People wanted it to work,” Vilelle recalls, and that sentiment “probably contributed to hopes that we were going to beat industry standards in terms of turning a profit.”

SETBACK

In one sense, Cause did well in its first quarter. Its reported financials indicated that the restaurant generated $220,000 in revenue and had a loss of about $8,000.7 For an ordinary restaurant, these results would be seen as promising—as a sign that the business had real potential. But for Cause, that loss presented a problem. If there were no profits in the first quarter, how would the organization be able to make donations to nonprofits? If it gave away no money, would it be violating its promise to customers and to people in the nonprofit community? (“We should have been smarter about our projections,” Vilelle says. “We were putting ourselves in a pretty tough position.”) In an effort to keep that promise, Ratwani and Vilelle decided to donate a small amount of cash to selected organizations ($8,445 in total) and to count sponsored events and other in-kind contributions as a form of charitable giving.

That move signaled a deeper problem with the founder’s underlying strategy. For Cause, the pursuit of a core mission was not an intrinsic feature of its business; it was a byproduct of its success. If its mission had centered on promoting the local organic food market or on employing at-risk young people, for example, then the mission would have been built into its operations. In that case, Cause would have achieved social impact just by staying open for business. ­Ultimately, of course, any social enterprise needs to succeed financially in order to have an enduring impact. But because of the way that Vilelle and Ratwani had structured their social benefit model, Cause not only had to succeed, it had to succeed quickly.

This problem also made another strategic problem harder to overcome. The founders’ decision not to solicit capital from outside investors had locked Cause into a lean operating mode. As a consequence, it was largely unable to engage in capacity-building efforts— a substantial marketing campaign, for instance, or an investment in hiring top-tier restaurant management. Similarly, the obligation to direct any profits toward charitable donations would prevent Vilelle and Ratwani from reinvesting those profits in the enterprise. “Raj and I probably should have been more aware of just how tough it was going to be for us to generate the revenues that we would need, given the amount of start-up capital that we had,” Vilelle acknowledges.

Stanford Social Innovation Review / Spring 2015

Mission: Possible The path followed by Cause isn’t the only one that ventures of its kind can pursue.

Washington, D.C., is home to a pair of food-related social enterprises that illustrate how entrepreneurs—by integrating their organization’s social mission into their dayto-day operations—can develop a productive relationship with their staff.

or Ratwani, and over time they came to feel overworked and underappreciated. oped a reputation as a center of community activism. As Cause did when it opened, Early financial challenges, Vilelle acknowledges, Busboys and Poets attracts people from Washington’s activist and nonprofit commuput additional pressure on a staff that was already nities, and it offers itself as an event space for members of those communities. Unlike “spread unbelievably thin.” Employees, meanwhile, Cause, however, Busboys and Poets pays its staff members a living wage and provides noted that customers who attended events hosted benefits—paid time off, health insurance, and matching 401(k) contributions—that by nonprofits often spent very little money and go well beyond what most restaurants offer. It has also developed an arrangement required a lot of time and effort to serve—a situthrough which employees who work during community events get paid a flat rate ation that proved to be especially frustrating for ­instead of relying on tips. In addition, Busboys and Poets makes space available at staff members who depended on tips to generate a no cost to a nonprofit bookstore that donates some of its proceeds to social purpose decent income. Morale plummeted, and the quality ­organizations. Today, after less than a decade in operation, Busboys and Poets has of customer service declined with it. four locations in the Washington area.

The leaders of Cause failed to make the resA second organization, DC Central Kitchen, provides training in culinary skills to at-risk taurant’s mission a central component of its and formerly homeless adults in the Washington area. DC Central Kitchen, a nonprofit, organizational culture. One benefit of running also runs two social enterprise efforts that employ graduates of its training program: a a ­mission-driven organization is that it can tap catering business and a school lunch service. Both enterprises are self-­sustaining, and into the pro-social motivation of its employees. profits from those initiatives help to support the organization’s non-­revenue-generating In a work setting, pro-social motivation—the work. Like Busboys and Poets, the organization pays its employees a living wage and desire to help other people or to contribute to provides them with paid time off. “We never want to think so much like a business that a social cause—can generate positive outcomes we forget our mission,” says Mike Curtin, CEO of DC Central Kitchen. “Even if we’re just such as personal initiative and organizational breaking even, we’re still winning because we’re accomplishing that mission.” commitment. Yet in their relationship with staff members, the founders and managers of Cause made little effort to leverage its mission in that way. (See “MisMANAGEMENT sion: Possible” at left.)

Internal organizational challenges soon began to compound the challenges related to Cause’s mission-based strategy. Gaps emerged between the restaurant’s visionary founders and those who came MARKETING on board to execute their vision.

Vilelle and Ratwani envisioned a bar in which customers would be The decision to work with restaurant experts like Jarecki and to able to determine their own level of engagement with its social mission. “We knew that the concept alone would get people there once,” employ experienced restaurateurs to run operations at Cause worked Ratwani explains. “But to establish a customer base and to get repeat well initially. The experts, like the founders, put in a great deal of work customers, you have to have a product that they like and an environfor the organization and received no compensation for their efforts.

But that arrangement was not sustainable, and Vilelle and Ratwani ment that they’re comfortable in.” Cause, the founders believed, should came to rely too heavily on the goodwill of people who were donating be a place where you could walk in off the street without knowing their time. They developed expectations about managerial roles and anything about the bar and still have a great experience. The misoperational philosophy that differed from those of the professional sion of Cause would be part of its identity, but the mission wouldn’t restaurateurs. “One of the big challenges was ensuring that the com­define that identity. Vilelle and Ratwani, in short, were clear about the plete management team understood the [lean] model, and I think that type of bar that Cause would not be. But what type of bar would it be? was an area where we failed,” Ratwani says. As a consequence, the resOver its 14-month life span, the establishment adopted a diverse artaurant professionals began to shift their priorities away from Cause. ray of identities: It was a community space, a sports bar, a brunch spot, Relations with members of Cause’s kitchen and wait staff detea comedy club, a venue for live music, a happy-hour destination, a place riorated as well. In the early days of the venture, Vilelle and Ratwani to engage in board games and trivia contests, and more. “As we saw that assisted with the staff hiring process. They screened applicants to we weren’t getting the revenue that we anticipated, we started to try lots of different methods to increase business,” says Ratwani. Testing find employees who were passionate about the mission of Cause and various promotions and looking for new ways to bring people into the who would help to create a unified and friendly team. “When we started, we did a good job, I think, of conveying to the staff what bar were necessary moves for the Cause team. But experimenting with we were attempting to do, and we had a really motivated staff,” so many different food and entertainment offerings led to the emergence of an indistinct brand image. As a ­result, Cause never stuck in Ratwani says. But over time the glow of running a restaurant went away, and the founders became more and more disconnected from customers’ minds as anything other than “a bar with a mission”—which operations. Staff members would go weeks without seeing Vilelle is exactly the identity that its founders had wanted to avoid.

Busboys and Poets, a certified B Corporation, is a restaurant chain that has devel-

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Lessons on Tap The Cause story offers a set of clear lessons for aspiring social entrepreneurs.

Begin with a sound financial plan. Having a substantial capital reserve is ­critical to the launch of any venture. So leverage the tax structure of your enterprise to

No less important than having a strong brand ­ensure access to sufficient capital. If you’re starting a nonprofit, then pursue grants identity is having a clear understanding of who or program-related investments from foundations. If you’re starting a for-profit one’s customers are. Cause leaders, in effect, ­business, then seek funding from impact investors or from investors who specialize in your industry. Building connections with investors will also provide you with access sought to target three distinct market segments: to expertise and to networks of important stakeholders. young professionals who didn’t have time to focus on social causes but who did have ­disposable Integrate your mission into your operations. Structure your enterprise so that income that they spent at bars and restaurants; your social mission is woven into the day-to-day running of your business. That way, members of the NGO community in ­Washington; achieving your mission will not depend on whether you turn a profit. Building a sense and local bar-goers or restaurant patrons. The of mission into your staffing arrangements, moreover, can enhance your ability to lack of a clearly identified primary market and a motivate employees. tendency to blur the lines between those market segments reinforced the sense that Cause leaders Know your business. You don’t need to be deeply familiar with the industry that you decide to enter, but you must either learn that industry or partner with somewere pursuing a haphazard branding strategy. one who understands it well. In any case, avoid the temptation to remain detached In particular, Cause failed to attract a sigfrom the primary operations of your enterprise. Even if you decide to hire professional nificant local clientele, and its inability to adapt ­managers, make sure that you clearly define their roles—and yours. to the needs of that customer segment strongly ­affected its core business. Cause became a desCreate a cohesive identity. Customers aren’t very forgiving, particularly with tination spot—a great place to go once, or for a ­respect to new ventures, and their view of your business will reflect the first experispecial occasion—but for most patrons, it never ence that they have with you. So be clear about your value proposition, and avoid any became a place to go regularly. “We didn’t sucpossible confusion about who you are and what you have to offer. Don’t waste time, ceed in getting a regular crowd,” Vilelle says. effort, or money on trying to be all things to all customers.

“We did fairly well during the week but were Clarify your target market. Identify a target market and work to understand the falling short on the weekends.” For that reason, needs and limitations of customers in that market. Strive to understand their behavthe venture consistently struggled to develop ior and expectations, and design your product or service with them in mind. the kind of customer base on which most restaurants depend. 8 Know that your mission won’t carry you. A sense of mission makes very little The founders of Cause also overestimated ­difference when it comes to the basics of sound business strategy. Your mission how much members of their primary target may help you market your product and garner publicity, but only a quality product market would be willing to spend. “We came or service will result in enduing customer loyalty. to realize that members of the nonprofit community—the first people to fall in love with Cause—weren’t exactly what you’d call big spenders. And who can CRISIS blame them? Making $35,000 a year and living in DC isn’t easy,” Perhaps the most telling example of Cause leaders’ misunderstanding of Vilelle noted later.9 Consequently, the restaurant failed not only to their target market came in the summer of 2013. The air-­conditioning get enough people in the door but also to generate enough revenue unit in the restaurant was malfunctioning. In a city known for its once customers had arrived. hot and humid climate, that was no small problem. At this point, Cause leaders faltered in their relations with another ­crucial Cause still had not achieved profitability and was dipping into its customer segment: nonprofits, NGOs, and other community already limited cash reserves to stay afloat. The restaurant’s leaders needed a solution, and they needed it quick. Vilelle and Ratwani had ­organizations. Aligning with those groups was central to the founders’ vision. Yet restaurant managers struggled to articulate a clear successfully tapped into community support to help the restaurant policy on using the Cause facility for sponsored events. Some cusopen, and they thought they could do so again. They set up another tomers assumed that Cause, given its social mission, would make crowdfunding campaign on Indiegogo, offering coupons for food and its space freely available to worthy organizations. In one case, the drink (redeemable once Cause re-opened) in exchange for donations. representative of a prominent social enterprise group—an organiThis time, however, the crowdfunding led to a backlash. The local blog zation that had been an early ally of Cause—got into a dispute with DCist labeled the request a “bailout.”10 One nonprofit leader, who had supported Cause earlier, recalls losing faith in the venture: “I saw the Cause managers after they insisted that the group had to meet a first campaign as an investment in building capacity and was happy minimum spending requirement for an event. The Cause model, after all, ­required the venture to generate steady revenue from its to support it. But the second campaign seemed to indicate, ‘Okay, operations. The way that Cause pursued that goal, however, confused the infrastructure is falling apart.’ At a certain point, it’s a question of whether the place can be sustainable on its own.” and alienated would-be supporters of the business.

Stanford Social Innovation Review / Spring 2015

Visit ssireview.org to learn more about the Cause story.

3“Nick and Raj Are Changing Philanthropy, One Beer at a Time” video 3“Cause: A Timeline” graphic 3“Cause: First Quarter Financial Snapshot” table

The crisis that summer had a more direct impact on the frontline staff of Cause. While working to solve the air-conditioning problem, the restaurant’s managers shut down the establishment for nearly a month. Vilelle and Ratwani informed employees of the closure via email several days beforehand. For Cause staff members, it was another example of ineffective communication. Effectively forced into unemployment with less than a week’s notice, most of them decided to quit. Comments about Cause from the period before the closure tell a story of overworked staff members who were inattentive to customers: “I love the charity aspect of Cause, but that’s no excuse for a major failure of customer service. I’ll go back to cooler, friendlier venues and give a little more to charities of my choice,” one Yelp reviewer wrote in August 2013.11 Cause reopened in September 2013 with a crew of new ­employees and a new general manager, but by then the damage to its reputation had been done. Two months later, it closed for good. It had survived for 14 months—which is roughly the typical life span of a failed restaurant in Washington. Successful restaurants, in fact, usually take much longer to achieve long-term stability and profitability. Industry experts might argue that Cause was on a normal track but simply didn’t last long enough to realize its potential.

But for Vilelle and Ratwani, it was too late. The temporary closure of Cause, together with the subsequent resignation of most of its employees, had dealt a powerful blow to their enthusiasm for the project. “We could continue to put money in, but ultimately we didn’t see a path forward,” Ratwani says.

LEGACY

Cause started as a D.C. do-gooders’ dream, a space where people could contribute to important social causes just by sitting down and enjoying a meal together. But a little more than a year after its launch, the positive energy and good intentions that gave rise to the venture had all but drained away. Despite initial support from the local and national media, from the nonprofit and social enterprise communities, and from many neighborhood residents, Cause officially shut its doors in December 2013. In a message posted at the Cause website and on its Facebook page, Vilelle and Ratwani wrote: “It is with deep sadness that we report that CAUSE has closed for business. ... Despite a great response from people around the country, CAUSE has not been able to achieve regular profitability, and thus not been able to generate the donations that were the reason for starting the restaurant.”12 The biggest misstep that Vilelle and Ratwani made was to ­assume that their mission would sustain them. In fact, they made this ­assumption explicit in that closing Facebook message: “We knew going in that it was a very difficult industry, but we hoped that the mission behind CAUSE would help carry us to success.”13 Today, the founders of Cause readily note the limitations of that perspective.

“You’ve got to put the warm-and-fuzzy side away and make sure that the nuts and bolts are in place, or else you’ll just never achieve the impact that you’re going for,” Vilelle says. To thrive as a social

entrepreneur, he adds, one must invest emotionally in the work ­itself: “One of the more personal lessons that I took away from Cause is the need to be passionate about whatever is it that you’re doing. I was really passionate about the model and about the mission, but bars and restaurants are not an area of passion for me. If you don’t want to be doing the nitty-gritty everyday [tasks of your business], then it’s probably not going to work, or it’s less likely to work.”

Back in 2011, at Cause’s opening celebration, Jarecki had ­recalled his initial reaction when Ratwani approached him with his and Vilelle’s idea about launching a restaurant and bar: “I said, ‘Well, what experience do you have?’ And he said, ‘None.’ So I said, ‘Do me a favor, take what money you had for opening this bar, and flush it down the toilet. You’ll thank me in five years.’” 14 It may be true that Vilelle and Ratwani would have been better off had they decided not to start Cause: They took a huge personal risk, and it didn’t pay off.

And yet, for the social enterprise field, the story of Cause and its failure leaves behind something of genuine value. It provides a compelling illustration of several principles that social entrepreneurs should keep in mind as they organize their own efforts. (See ­“Lessons on Tap” on page 24.) Indeed, the next time that a group of social entrepreneurs get together to brainstorm over a few beers, they’ll be able to draw on those principles as they plot their new venture. n N OTE S

1 Jessica Sidman, “Charity Case: Can a Restaurant That Gives Away All Its Profits ­Succeed in DC?” Washington City Paper, November 1, 2012, http://www.washington citypaper.com/blogs/youngandhungry/2012/11/01/charity-case-can-a-restaurantthat-gives-all-its-profits-away-succeed-in-d-c 2 Ibid.; Michael Curtin, personal interview, March 20, 2014.

3 Sidman, “Charity Case.”

4 Ibid.; Kerry Miller, “The Restaurant Failure Rate Myth,” Bloomberg Businessweek.

April 16, 2007, http://www.businessweek.com/stories/2007-04-16/the-restaurantfailure-mythbusinessweek-business-news-stock-market-and-financial-advice 5 Sidman, “Charity Case.”

6 Ibid.

7 Jessica Sidman, “Cause ‘Philanthropub’ Lost Nearly $9,000 the First Quarter, But Still Gave to Charity,” Washington City Paper, August 9, 2013, http://www.washing toncitypaper.com/blogs/youngandhungry/2013/08/09/cause-philanthropub-lostnearly-9000-the-first-quarter-but-still-gave-to-charity 8 Abha Bhattarai, “Unable to Attract Regulars, D.C. ‘Philanthropub’ Closes After 14 Months,” The Washington Post, January 5, 2014, http://www.washingtonpost.com/ business/capitalbusiness/unable-to-attract-regulars-dc-philanthropub-closes-after14-months/2014/01/05/db8c95b2-73c9-11e3-9389-09ef9944065e_story.html 9 Nick Vilelle, “When Mission Doesn’t Matter (Enough),” Stanford Social Innovation Review website, January 13, 2014, http://www.ssireview.org/blog/entry/when_ mission_doesnt_matter_enough 10 Benjamin R. Freed and Sarah Anne Hughes, “Restaurant That Gives Away All Its Profits to Charity Asks Public to Buy It an Air Conditioner,” DCist, August 2, 2013, http://dcist.com/2013/08/restaurant_that_gives_away_100_perc.php 11 Yelp page for Cause DC, http://www.yelp.com/biz/cause-the-philanthropubwashington 12 Cause Facebook page, www.facebook.com/CauseDC, December 27, 2013.

13 Ibid.

14 Sidman, “Charity Case.”

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Initiatives to develop the economic potential of women are becoming a staple of corporate activity in

, many parts of the world. But companies often overlook an important set of would-be partners—locally

rooted organizations that promote a multi-faceted approach to women’s empowerment. Here’s a guide to cultivating partnerships that yield lasting value.

Empowering

at the Grassroots

By Marissa Wesely & Dina Dublon

I

Illustration by Stephanie Wunderlich

n 2006, the Economist proclaimed that women are “the world’s most underutilised ­resource.”1 Since then, a growing body of research has reinforced the idea that the economic empowerment of women can significantly boost productivity, reduce employee turnover, and promote the sustainable development of consumer markets.

A Booz & Company study published in 2012 estimated that raising female employment to male levels could increase GDP by 34 percent in Egypt, by 12 percent in the United Arab Emirates, by 10 percent in South Africa, and by 9 percent in Japan. 2 The UN’s Food and Agricultural Organization has projected that giving women the same access as men to resources such as fertilizer and farm equipment could increase their productivity by 20 percent to 30 percent and, in turn, boost agricultural output in developing countries by 2.5 percent to 4 percent. 3 Findings of this kind have spurred an increasing number of global corporations to create programs designed to empower women economically.

Through such programs, corporate leaders aim to improve the quality of their supply

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chains, enhance their access to talent, and increase the productivity of their workforce.

Economic empowerment is, to be sure, a crucial aspect of any significant push to make women full and equal participants in their ­communities. Strengthening the economic role of women is also critical to reducing poverty, improving health and education outcomes, and achieving other broad development goals.4 And the programs created by corporations in recent years to support this kind of ­empowerment—programs that provide women with skills, mentoring, access to networks and markets, and financial resources—have no doubt had a meaningful impact in many parts of the world.

Yet there is a growing recognition among development experts of the need to link economic empowerment to programs that address women’s empowerment in a more fundamental way.5 “Overcoming gender inequality will not result from specific isolated programs, but from a comprehensive approach that involves multiple sectors and stakeholders,” write the authors of “Gender at Work,” a report issued in 2014 by the World Bank.6 In a similar vein, a recent report commissioned by the Oak Foundation recommends an “integrated approach” to confronting “the underlying human rights issues that prevent women from realizing their full potential as economic agents.” Such an approach, according to the report, requires the development of eight “building blocks”—sources of empowerment that include not only “access to equitable and safe employment,” but also “voice in society and policy influence,” “access to and control over reproductive health and family formation,” and “social protection and childcare.”7 These insights should prompt corporate leaders to consider a ­vitally important question: How can they most effectively deploy the millions of dollars that they are spending to broaden opportunities for women? If their goal is to enable sustainable and transformative change in women’s lives, they cannot focus exclusively on economic empowerment. Instead, they must adopt approaches that take into account the social, cultural, legal, and political barriers to full ­gender equality—approaches that have the potential to shift gender norms in ways that extend beyond the world of work and business.

One way that they can do so, we believe, is to work with a group of non­governmental organizations (NGOs) that corporations often overlook: grassroots women’s organizations (GWOs).

The term “grassroots women’s organizations” encompasses ­locally based and (in most cases) women-led NGOs that have a mission to empower women and advance women’s rights on multiple fronts. In our use of the term, GWOs are distinct from international NGOs (INGOs)—most of them based in the Global North—that work in fields such as economic development and human rights.

Some INGOs have local offices in developing countries and play a critical role in addressing issues of women’s empowerment, but they often lack the deep local knowledge and the experience with a wide array of gender issues that characterize GWOs. Most GWOs operate in a single country or in a single region of a country, and their work typically involves one or more of the following activities: education about legal rights and political participation; skills training for economic empowerment; education about, and access to, reproductive and maternal health care; access to collective savings and credit programs; and advocacy with regard to issues such as sexual violence and property rights.

Marissa Wesely is a global fellow at the Woodrow Wilson International Center for Scholars, where she is affiliated with the center’s Global Women’s Leadership Initiative.

In 2014, she was a fellow in the Advanced Leadership Initiative at Harvard University.

Previously, she was a partner at the international law firm Simpson Thacher & Bartlett LLP. Wesely also serves on the board of directors of the Global Fund for Women.

Dina Dublon is a member of the board of directors of Accenture and PepsiCo Inc. and a member of the supervisory board at Deutsche Bank. Earlier, she served as chief financial officer at JPMorganChase. In addition, she was a senior lecturer at Harvard Business School and a member of the board of directors of the Global Fund for Women.

Recognizing the interconnectedness of issues related to gender equality, some corporations are now partnering with GWOs to ­extend the scope and enhance the impact of their economic empower­ment programs. (Although GWOs can vary dramatically in size, those that are suitable partners for corporations tend to be relatively large and relatively well established.) By looking at a sample of successful corporate-GWO collaborations and by considering lessons that have emerged from those collaborations, we intend in this article to chart a path that corporate leaders and their NGO counterparts can follow to develop mutually beneficial partnerships.

GENDER EQUALITY AND SHARED VALUE

Today, much of the corporate funding for women’s empowerment work comes from corporate foundations. As a result, that work tends to reflect a donor-recipient relationship that limits its effectiveness.

By contrast, through partnerships with GWOs, companies can move their women’s empowerment programs beyond corporate philanthropy and embed those programs in their core business. They can initiate a strategy of “shared value,” in other words—a strategy of “creating economic value in a way that also creates value for society by addressing its needs and challenges,” as Michael E. Porter and Mark R. Kramer explain in the 2011 article that introduced that concept.8 In a shared value partnership, each party brings different skills and resources to bear on developing programs that are more powerful than any program that either partner could develop alone.

To date, corporations have tended to pursue shared value strategies in the context of environmental sustainability. But some companies, such as Unilever, have begun to see the empowerment of women as an equally important element of a sustainable business model. When Unilever launched its Sustainable Living Plan in 2010, the initial focus of the initiative was on reducing the environmental impact of its operations. But starting in 2014, the company added several targets related to increasing opportunities for women to the plan. That shift built partly on the model of Project Shakti, an initiative of Hindustan Unilever that engages women in the company’s sales force in rural India.9 The World Bank, in its report “Gender at Work,” has also recognized the value of applying a shared value model to private sector efforts to empower women. “Given emerging evidence on the business case, the pursuit of gender equality by private sector firms is increasingly understood as a win-win for women, companies, and their communities. The payoffs imply that companies’ involvement in this agenda is about more than philanthropy or corporate social responsibility,” the authors of the report argue. “When companies help train, prepare, and support vulnerable women and men to thrive in the world of work, they foster a kind of economic value that can promote both company success and social progress simultaneously.”10

Stanford Social Innovation Review / Spring 2015

Company leaders, meanwhile, are learning that GWOs offer many advantages as partners in shared value initiatives.

Trusted community members | GWOs have developed broad and deep networks in the communities where they operate and a high degree of trust among members of those communities.

Strategic, culturally grounded players | GWOs understand the cultural, social, political, and religious obstacles to creating change, and in many cases they have been working for years on strategies to lower those barriers.

Experienced navigators | GWOs have extensive experience in steering their way through local and national politics and in securing the support of those who wield power.

Ancillary program providers | GWOs have a deep appreciation of the multi-faceted issues that can affect the ability of women and girls to become full participants in society, and they often offer programs that address those issues—programs that cover skills development, violence prevention, education about legal rights, and access to ­maternal and reproductive health care, among other topics.

Cost-efficient partners | GWOs are highly efficient service providers, especially in comparison with most American and European INGOs. They operate within the cost structure of their home country, and they often effectively use local volunteers to supplement the work of paid staff members.

MULTINATIONAL COMPANIES AND LOCAL PARTNERS

By partnering with GWOs in programs designed to create shared value, corporations increase the likelihood that their programs will be not only financially and operationally sustainable, but also transformative for women. Through their work with GWO ­partners, ­corporate leaders are learning the value of listening to women in the communities where they operate. Inspired by what they hear, moreover, many of them are moving to expand their women’s ­empowerment programs in ways that go beyond an exclusive focus on economic issues. As the following examples illustrate, such corporate-GWO partnerships can take a wide range of forms.

Nestlé in the Ivory Coast | The Nestlé Cocoa Plan, launched in 2009, is part of an effort by Nestlé to create shared value in its cocoa supply chain. The goal of the plan is to improve the lives of cocoa farmers while also improving the quality of Nestlé’s products. In 2010, for example, the company began working with COPAZ, a women-run cocoa cooperative in the Ivory Coast that has about 600 members.

Agathe Vanier, the head of COPAZ, had led a campaign to demonstrate that the inclusion of women in cocoa farming could have a positive impact on their families and on the country as a whole.

(Vanier is also the head of the Association of Female Coffee-Cocoa Producers of Sud-Bandama, an organization in the Ivory Coast that works to end traditions that limit women’s access to land.) The advocacy and the efficiency of COPAZ impressed Nestlé executives, who undertook a partnership that involves providing the cooperative with high-yield, disease-tolerant cocoa seedlings and a truck to facilitate cocoa deliveries, along with technical assistance and financial advice.11 In early 2014, Nestlé announced that it would expand its investment in women’s empowerment in the Ivory Coast. That move came in response to a survey by the Fair Labor Association of issues that affect Ivory Coast women who work in Nestlé’s cocoa supply chain.

As part of this new effort, the company intends to pursue an impressive range of activities. These activities include training on gender issues at all cooperatives that take part in the Nestlé Cocoa Plan, promoting local women’s associations that are affiliated with the Nestlé supply chain, registering the wives of male cocoa farmers as members of cocoa cooperatives, and helping women to produce more food crops both for their families and for sale.12 Abbott Laboratories in Afghanistan | Since 2005, the health-care company Abbott Laboratories and the Abbott Fund have worked in partnership with two organizations—the Afghan Institute of Learning (AIL), a GWO founded in 1995 by Sakena Yacoobi, and Direct Relief, a US-based nonprofit that delivers medical assistance globally—to support the delivery of education and health services to women and children in Afghanistan. Over that period, Abbott has contributed nearly $5 million worth of medicine and nutritional products to AIL, and the Abbott Fund has awarded more than $1.3 million in cash grants to the organization.

Those contributions have helped AIL to achieve a big impact.

To date, the organization has provided health education to nearly 1.5 million Afghans and quality medical services to nearly 1.5 million patients; it has also offered in-depth workshops on women’s health to more than 8,000 people. One AIL program, for example, trains Afghan women to become midwives and health-care providers for infants and children.13 Katherine Pickus, divisional vice president for global citizenship and policy at Abbott, notes the broad benefits to women and communities that have resulted from that program: “What we found within a year of their completion of training is that each and every midwife had a job and was making money for her family, investing that money in their girls’ education, and really developing a cycle of empowerment.”14 Coca-Cola in the Philippines | In 2010, Coca-Cola launched 5by20, an effort to support the economic empowerment of 5 million women entrepreneurs who are part of the company’s global value chain. The Sari-Sari Store Training and Access to Resources program (STAR) in the Philippines, implemented as part of this initiative, is a multiyear partnership between Coca-Cola Philippines; Coca-Cola FEMSA, its local bottling partner; and the Technical Education and Skills Development Authority (TESDA), a Philippine government agency. Also involved in the program are women’s NGOs, microfinance institutions, and local government entities—more than 20 partners in all.

Filipino women have a strong presence in the small-scale ­retail outlets, known as sari-sari stores, that make up one of Coca-­Cola’s main sales channels in that country. In recognition of that ­presence, the STAR program offers three years of support to women who operate such outlets. Local NGO partners provide much of that support, and it has three basic components: training in both business skills and life skills, access to resources such as micro­finance and merchandising, and peer mentoring to help the women ­develop skills and build confidence. Those NGO partners include GWOs such as the Negros Women for Tomorrow ­Foundation, a women-led organization that delivers microfinance and insurance products, along with health and education services, to its predominantly female clients.15 According to Coca-Cola, the STAR program reached more than 15,000 Filipino women in its first three years of implementation.16 The company benefits from the program as well. In a report on

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the 5by20 initiative issued by the Corporate soccer (football) as a vehicle for promoting social change. A third project funds a rock ­Social Responsibility ­Initiative at the Harvard Visit ssireview.org to learn more about grassroots ­Kennedy School, the report’s authors note the festival—organized entirely by women—that women’s empowerment.

3“Gender at Work” report value that corporations like Coca-Cola receive highlights themes related to women’s rights 3“The Business Case for Women’s Economic and domestic violence prevention. from this kind of partnership: “NGOs can Empowerment” report Through ELAS, Avon is also helping to offer market insight, advisory services, and 3“Advancing Women, Changing Lives” report fund capacity building at grantee organizacapacity-building for women entrepreneurs and other underserved segments.”17 tions. Last year, for example, ELAS organized Kate Spade & Company in Rwanda | In early 2014, Kate Spade & a National Dialogue on Domestic Violence, a three-day meeting that convened representatives from each of the 31 GWO grantees that Company announced “on purpose,” a initiative in which the comAvon has funded. The meeting focused on communication training pany is partnering with a group of 150 artisans—most of them and institutional development, and it featured wide-ranging converwomen—in Masoro, Rwanda. The aim of the initiative is to supsations with journalists, experts on violence prevention, and leaders port the development of a women-led business that will become a from donor organizations. At the end of the meeting, the grantees profitable supplier to the company’s apparel and accessory brands.

The initiative centers on training the artisans in how to import jointly developed a strategy to use during 16 Days of Activism Against raw materials and in how to create, pack, ship, and invoice for Gender Violence, a global campaign that took place in late 2014.19 ­finished products. But the effort extends beyond business issues.

In response to focus groups with the artisans, the company plans FINDING THE RIGHT PARTNER to offer English language training, along with programs in reproHow can a corporation develop effective partnerships with GWOs? Company leaders who seek to create programs that will empower ductive health and nutrition. Another participant in the partnership is a local NGO that is training a local woman to counsel people in women in an integrated way face three essential tasks: locating Masoro who may suffer from post-traumatic stress disorder. (The ­organizations with which to collaborate, building a framework legacy of the Rwandan genocide of the 1990s continues to affect for collaboration, and assessing the results of that effort. (See many residents.) “We have a fundamental belief that women are ­“Partnership Tips” on page 31.) agents of change in their communities,” says Craig Leavitt, CEO The first challenge for a corporation is to identify one or more of Kate Spade & Company.

GWOs with which it can partner. In many instances, the key to To evaluate the impact of this initiative on the Masoro artisans success involves finding the right intermediary to help identify and their village, Kate Spade & Company is collaborating with the those GWO partners. Each collaborative effort is distinct, involvAkilah Institute for Women, a college with campuses in Rwanda ing a specific country or a specific region, as well as specific strateand Burundi. Ten Akilah students, selected on the basis of both gies and goals. The right intermediary will be one that has strong ­academic performance and financial need, are conducting a comconnections to GWOs that have credibility with women in the communities that a corporation wishes to reach. Although large munity ­impact survey in Masoro. Employing these young Rwandan development-focused INGOs can sometimes serve as connectors women facilitates data collection for the company and also helps to GWOs, there are limits to how effective they can be in that role. them improve their fieldwork skills. In addition, the company is In fact, GWOs and INGOs may even regard each other as competipaying the women’s school fees for one year. “Our work in Masoro tors. Local INGO staff members, for instance, are often unwilling is not about us,” Leavitt says. “It’s about creating a new model that to cede control over programs to GWOs. In certain regions of the we strongly believe is transportable around the world.”18 world, moreover, local residents may view INGO staff members as Avon Products in Brazil | Avon Products and its foundation have long been active in addressing two issues of particular interest to unwelcome “outsiders”—a status that can undermine their effective­ the women who make up most of its customer base and most of its ness and, in extreme cases, threaten their safety.

Women’s funds make up one important group of potential sales force: women’s health and domestic violence. A recent part­intermediaries. The long-standing collaboration between Johnson nership between Avon and Fundo ELAS, a Brazilian women’s fund, & Johnson and the Global Fund for Women (GFW), a US-based illustrates the use of corporate-GWO collaboration to confront the nonprofit that has funded GWOs for more than 25 years, offers a second of those issues. (Avon became aware of ELAS, and its experience in working with Brazilian GWOs on projects related to domestic notable example of such a relationship. For the past seven years, this violence prevention, through UN Women.) In the partnership, ELAS partnership has focused on helping mothers to survive childbirth and runs a competitive process for selecting projects designed by GWOs, to have healthy newborns. “We choose to work with GFW because of its ability to connect to hard-to-reach women through their netand Avon then finances those projects. To date, the partners have awarded grants to 31 GWOs. work of GWOs and community-based programs,” says Chunmei Li, The selection process has favored a wide variety of innovative senior manager for worldwide corporate contributions at Johnson & ­approaches to the problem of domestic violence. One project aims to Johnson. “Global Fund for Women has an excellent record of helping GWOs develop the capacity to grow and be sustainable.” In the create income-generating opportunities for women by professionalizing activities (raising poultry, for example) that they already perform. past four years alone, this collaboration has enabled J&J to support As a supplement to this economic empowerment work, the project also 12 GWOs that in turn have trained nearly 4,000 traditional birth attendants in eight countries with high maternal mortality rates: includes workshops on how to reduce gender violence. Another project integrates information on domestic violence into programs that use Bangladesh, Burkina Faso, Burundi, Ghana, India, Mexico, Nigeria,

Stanford Social Innovation Review / Spring 2015

, Partnership Tips Although there is no single model for partnering with GWOs, there are several steps that corporate leaders should consider taking as they head down that path.

Work with an intermediary. Engaging an intermediary that has a deep familiarity with the work of proven GWOs can add significant value to women’s empowerment initiatives. Organizations such as women’s funds, for example, can facilitate a connection with the most effective GWO for a given program. They can also assist with ongoing communication and evaluation for that program.

Spend time on structure. Devoting time upfront to developing trust and to building a partnership around clearly defined roles, goals, and metrics will yield longterm benefits. Corporate leaders should therefore seek opportunities to meet with representatives of both GWOs and intermediaries. In that regard, foundations and academic institutions can provide a safe environment where those parties can discuss common goals and develop personal relationships.

Move beyond corporate philanthropy. Funding the work of GWO partners through a corporation’s philanthropic arm can have a positive impact. But partnering with GWOs on a fee-for-service basis will often have a more enduring effect

Kate Spade & Company, similarly, drew on the assistance of the Rwandan Ministry of Trade & Industry to locate the community of artisans in Masoro. (Working with government ­agencies— particularly those that have a mandate to advance women’s rights and opportunities—can be beneficial. But doing so also carries the risk that political pressures will limit the range of potential GWO partners.)

Large regional NGOs and NGOs with a specific industry focus can also act as intermediaries, provided that they apply a gender lens to their work and that they have deep connections to grassroots organizations. Root Capital, a US-based nonprofit agricultural lender, for example, launched an initiative called Women in Agriculture in 2012, and through that initiative it supports a number of women’s agricultural cooperatives and other women-run agricultural programs in Latin America and Africa.21

than relying on the grant-based model of corporate philanthropy. In general, the more thoroughly a corporation embeds its women’s empowerment programs in its

BUILDING THE RIGHT STRUCTURE

The framework of an effective corporate-GWO partnership has much in common with the structure of a successful collective impact initiative.

Measure results that reflect real impact. Developing rigorous criteria for In their Stanford Social Innovation Review article ­measuring the success of a women’s empowerment program is essential. Those on such initiatives, John Kania and Mark Kramer criteria should go beyond merely counting the number of women “touched” by a posit five conditions for achieving collective improgram. Indeed, the purpose of such criteria should be to enable an evaluation of pact: a common agenda, shared measurement the program’s full impact on women’s (and men’s) lives. Such nuanced evaluation systems, mutually reinforcing activities, conwill make it possible not only to conduct an internal assessment of the program, tinuous communication, and backbone support but also to formulate best practices that leaders can share with others. organizations.22 The collaboration model that we propose here generally does not require a separate backbone organization, but the first four of these and Tanzania. Through that effort, J&J and its GWO partners have conditions are critical to the success of a corporate-GWO partnership. directly reached more than 35,000 women.20 Developing a common agenda is especially important—and by no means easy. The partners in a collaborative effort must develop Organizations such as GFW are able both to identify local women’s groups and to vouch for them. They typically conduct extensive a nuanced understanding of program goals, and they must establish due diligence on their grantees, and they often have many years an approach to communication and implementation that draws fully of experience in working with certain GWOs—not just as funders on each partner’s skills and talents. According to Kania and Kramer, but also as partners and advisors. For that reason, they are in an a collective impact structure works “by encouraging each participant ideal position to assess the capacity of those GWOs to engage in to undertake the specific set of activities at which it excels in a way that supports and is coordinated with the actions of others.”23 To work with a corporate partner. Other women’s funds that support GWOs include Mama Cash, based in the Netherlands, and regional reach that point, partners need to develop mutual trust and respect, women’s funds such as the African Women’s Development Fund, and that process may take a considerable amount of time to unfold.

Semillas (based in Mexico), and the South Asia Women’s Fund. The Kania and Kramer note that the lack of a common vocabulary can hinder the development of a common agenda—a problem that latter groups, like Fundo ELAS, function both as GWOs in their may be particularly salient in a corporate-GWO collaboration. own right and as connectors to GWOs in their country or region.

A “women’s rights” vocabulary, and the associated emphasis on Sometimes, multilateral agencies can play an intermediary role, changing gender norms, may be unfamiliar to corporate leaders as UN Women did in connecting Avon and Fundo ELAS. In other who see building women’s income-generating capacity as an end cases, a government partner may prove to be a valuable connector to in itself. Ongoing collaboration with intermediaries such as GFW, GWOs. In Coca-Cola’s 5by20 program, for example, the ­Philippine Fundo ELAS, and other global or regional women’s funds can help government agency TESDA has helped link Coca-Cola with local women’s NGOs and microfinance organizations. TESDA also jointly to bridge that gap. External assessments may also help corporations manages the program with Coca-Cola Philippines and contributes and their GWO partners to frame issues and strategies at an early training services, meeting facilities, and staff time to the effort. stage in a way that resonates with both parties. In undertaking the long-term business strategy, the more likely those programs are to be sustainable and transformative.

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, Gaining an Edge

Nestlé Cocoa Plan, for instance, Nestlé asked the Fair Labor Association to assess women’s role in its cocoa supply chain.

When it comes to environmental issues, the use of independent certification How corporations compensate their GWO schemes to evaluate corporate activity is now widespread, and some of those partners for services is another matter on ­efforts—the RA Cert auditing process of the Rainforest Alliance, for example— which both parties must agree in advance. In have become highly influential. Will efforts to certify the effectiveness of corporate Coca-Cola’s STAR program, for example, the performance in the area of gender equality gain a similar stature? As yet, certificacompany’s Filipino NGO partners received tion work in this area remains limited, but interest in such initiatives is growing. training, mentoring, and access to micro­ Among the more notable of these initiatives is EDGE, which bills itself as the finance services, but did not receive a fee for “Global Business Certification Standard for Gender Equality.” Launched in 2011 at their work in facilitating the program. With the World Economic Forum in Davos, the EDGE program has a stated mission to other programs in the 5by20 Initiative, how“[foster] equal career opportunities for women and men in the workplace.” It’s not ever, Coca-Cola used a fee-for-service model. clear whether the EDGE certification process includes metrics that reflect not just In a recycling program in Brazil, for instance, workplace equality but also improvements in corporate supply chains or changes the company paid its local NGO partner to proat the community level. So far, six companies (including Compartamos Banco vide coaching and monitoring services for the Mexico and L’Oreal USA) have received EDGE certification. According to its website, recycling collectives that joined the program.24 the EDGE organization is currently “working with” 60 companies that represent 29 Similarly, in a partnership between Chevron countries and 14 industries. and Fundo ELAS in Brazil, the latter group reAnother organization, Oxfam, has undertaken an effort that resembles the cerceived a fee to deliver a set of related services: tification of corporate performance on gender issues. Oxfam issues a report called Along with helping to develop small, women“Behind the Brands” that includes a ranking of what it calls the “Big 10” food and owned businesses in which Chevron could beverage companies, and “women” is one of the seven categories on which it bases invest, ELAS managed grantmaking to those that ranking. In its 2013 report, Oxfam explains how it approaches this category: “The businesses, provided training and mentoring, Behind the Brands scorecard examines whether the policies of the Big 10 promote and conducted monitoring and evaluation women’s welfare and encourage their inclusion in the food supply chain on equal of the entire effort. Avon, in its Brazil-based terms. The scorecard also looks for policies which guarantee a discrimination-free initiative, is funding ELAS to provide comworkplace.” In a version of the scorecard that Oxfam issued in 2014, the highest score munication training, assistance with instituin the “women” category—on a 1-to-10 scale—was a “6,” and only two companies tional development, and other forms of capac(Coca-Cola and Unilever) received that ranking. ity building to grantees. In compensation for those services, ELAS retains a small percentage of that funding. 25 As a rule, partnerships with GWOs appear to work best when they involve a fee-for-service and interpersonal skills to women garment workers. Through PACE, arrangement that can provide GWOs both with an income stream participating workers acquire communication, time management, and with clear incentives to implement and enhance a program. and decision-making skills, as well as knowledge about topics such as legal rights, financial security, and reproductive health. By including EVALUATING THE RESULTS content related both to women’s work and to their personal lives, the Also critical to the success of a corporate-GWO partnership is upprogram addresses the issues that women face in an integrated way. front agreement on how, and over what time frame, the parties will From 2009 to 2013, ICRW conducted evaluations of the program measure the impact of their efforts. In most cases, the best evaluat six Gap-affiliated factory sites in five countries. Its research went ation method will be one that measures not only the number of beyond simply counting the number of women who participated in PACE, and it focused on answering two questions: How is the women affected by the program, but also changes in attitudes and program changing women’s personal lives? And how is it affecting behavior, as well as how those changes affect women’s personal and their ability to contribute to the businesses that are part of Gap’s professional lives. (See “Gaining an Edge” above.) supply chain? The evaluation found that workers’ self-esteem and The International Center for Research on Women (ICRW) is one their sense of being able to meet personal goals had both increased group that works to evaluate the impact of programs to empower women. Consider, for example, ICRW’s evaluation of PACE (Personal significantly since the start of the program. Workers’ belief in their Advancement and Career Enhancement), a program launched by ability to produce quality work, to perform new tasks, to work as a team, and to communicate with supervisors had increased as well.

Gap in 2007. Partners in the PACE effort include the Swasti Health Resource Center—an Indian NGO that provides program content, ICRW attributed the success of PACE to three factors: The program implementation design, training, and quality assurance—and the is holistic; it is designed to foster collaboration across sectors; and humanitarian organization CARE, which serves as an implement(largely as a result of the first two factors) it is sustainable.26 ing partner. The program began in India, and it now reaches more In gauging the results of a corporate-GWO partnership, the than 20,000 female garment workers in seven countries. structure and sequencing of evaluation can matter a great deal.

PACE, a relatively early example of the shared value model, is a What is the right baseline to use in measuring what a program has achieved? Which short-term metrics will serve best as indicators workplace education program that teaches managerial, organizational,

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of longer-term changes in gender norms and behavior? And no less important, when should evaluators begin their work? There is much truth in the corporate maxim “If you can’t measure, you can’t manage,” but sometimes a carefully staged approach to evaluation is in order. Leaders of Coca-Cola’s 5by20 initiative, for instance, decided to wait until the third year of the STAR program in the Philippines before implementing a monitoring and evaluation system for that program. That system is now in place, and evaluators are gathering information on the program’s social impact. According to an early report on the initiative, evaluators planned to track not only the number of women entrepreneurs who are receiving various types of support, but also “broader measures” that reflect “decision-making power, multiplier effects on family health and education, and the ability to give back to the community.”27 COLLABORATE LOCALLY, EMPOWER GLOBALLY

As companies like Avon, Coca-Cola, and Nestlé are discovering, working with GWOs can be a powerful way to align corporate economic empowerment programs with efforts to advance women’s rights at a grassroots level. By working with these organizations, corporations can enhance their ability to work in a holistic way on the challenges that prevent women from realizing their full potential. In taking this approach, moreover, a company can magnify the impact of its women’s empowerment programs not only on the lives of women but also on the long-term well-being of their families and their communities.

Moving to a more integrated approach to empowering women globally may not be easy for many corporations. The social and cultural issues that affect women’s ability to benefit from economic empowerment programs may seem to lie outside their core business expertise. In addition, those issues may appear to be too political for a large multinational company to confront. But by listening to the women they seek to empower, many corporate leaders have come to appreciate the relevance of those issues to the goal of economic empowerment—and therefore to the goals of their business.

Programs designed to empower women have enormous potential to help companies increase their access to talent, enhance their productivity, and improve their supply chains. By embedding such programs in local communities through partnerships with GWOs and by approaching women’s empowerment in a multi-faceted, ­integrated way, a company can make an investment in women that has the potential not just to affect individual lives but to have a transformative, long-lasting effect on gender norms.

To date, more than 800 corporations have signed on to the ­Women’s Empowerment Principles—a set of seven principles ­developed by UN Women that offer guidance on advancing the rights and opportunities of women in the workplace, in the marketplace, and in their community. In recent decades, more and more corporate leaders have found that their employees and their customers expect them to adopt ­environmentally sustainable practices throughout their supply chains.

Likewise, many stakeholders (including impact investors who apply a gender lens to their investment choices) now place a high value on a company’s efforts to empower women in all parts of the organization, from the factory floor to the boardroom. As stakeholders did in the case of environmental sustainability, employees, customers, and others are urging leaders to promote women’s empowerment both because of its business value and because it’s the right thing to do. n

N OTE S

1 “A Guide to Womenomics,” The Economist, April 12, 2006, http://www.economist. com/node/6802551 2 Booz & Company, “Empowering the Third Billion: Women and the World of Work in 2012,” cited in the World Bank Group, “Gender at Work: A Companion to the World Development Report on Jobs,” 2014, p. 8, http://www.worldbank.org/content/dam/ Worldbank/document/Gender/GenderAtWork_web.pdf 3 Food and Agriculture Organization of the United Nations, “The State of Food and Agriculture 2010-11: Women in Agriculture: Closing the Gender Gap for Development,” 2011, p. 5, http://www.fao.org/docrep/013/i2050e/i2050e.pdf 4 See the World Bank Group, “World Development Report 2012: Gender Equality and Development,” 2011, https://siteresources.worldbank.org/INTWDR2012/ Resources/7778105-1299699968583/7786210-1315936222006/Complete-Report.pdf 5 See the World Bank Group, “Voice and Agency: Empowering Women and Girls for Shared Prosperity,” 2014, http://www.worldbank.org/en/topic/gender/publication/ voice-and-agency-empowering-women-and-girls-for-shared-prosperity 6 “Gender at Work,” p. 10.

7 Oak Foundation, International Center for Research on Women, Dalberg Global ­Development Advisors, and WITTER Ventures, “The Business Case for Women’s Economic Empowerment: An Integrated Approach,” 2014, http://dalberg.com/ documents/Business_Case_for_Womens_Economic_Empowerment.pdf 8 Michael E. Porter and Mark R. Kramer, “Creating Shared Value: How to Reinvent Capitalism—and Unleash a Wave of Innovation and Growth,” Harvard Business ­Review, January-February 2011.

9 See “Sustainable Living,” Unilever website, http://www.unilever.com/sustainableliving-2014 10 “Gender at Work,” p. 8.

11 See “Women’s Empowerment,” Nestlé website, http://www.nestle.com/csv/what-iscsv/women-empowerment 12 “Nestlé Action Plan on Women in the Cocoa Supply Chain (Update 2014),” Nestlé website, http://www.nestle.com/asset-library/documents/creating-shared-value/­ responsible-sourcing/nestle-action-plan-women-in-cocoa-supply-chain-july-2014.pdf 13 “Sakena Yacoobi Earns Champion for Women’s Health Award,” Direct Relief website, February 22, 2014, http://www.directrelief.org/2014/02/sakena-yacoobi-earnschampion-womens-health-award 14 Remarks by Kathy Pickus (lightly edited with her permission) at a panel discussion, “Our Shared Opportunity: A Vision for Global Prosperity, Panel 3: Deepening U.S. Government Engagement With the Private Sector on Development Efforts,” Center for Strategic and International Studies, Washington, D.C., March 4, 2013, http://csis. org/files/attachments/130315_Panel_3_Transcript.pdf 15 “Negros Women for Tomorrow Foundation, Inc. (NWTF),” Kiva website, www.kiva. org/partners/145 16 Information provided by the Coca-Cola Company.

17 Beth Jenkins, Kara Valikai, and Piya Baptista, “The Coca-Cola Company’s 5by20 Initiative: Empowering Women Entrepreneurs Across the Value Chain,” Corporate Social Responsibility Initiative at the Harvard Kennedy School and Business Fights Poverty, 2013, http://www.hks.harvard.edu/m-rcbg/CSRI/CSRI_BusinessFights Poverty_5by20Report_September2013.pdf 18 “Kate Spade & Company Launches New, Trade-Based Initiative to Empower Women in Rwanda,” Kate Spade & Company website, May 8, 2014, http://www.katespade andcompany.com/web/guest/2014news/-/journal_content/56/10123/24735764/2; “Akilah Students Partner With Kate Spade New York, Akilah Institute website, July 8, 2014, http://www.akilahinstitute.org/kate-spade; additional information provided

by Kate Spade & Company.

19 Information provided by Fundo ELAS. 20 Information provided by Johnson & Johnson and the Global Fund for Women.

21 “Applying a Gender Lens to Agriculture: Farmers, Leaders, and Hidden ­Influencers in the Rural Economy,” Root Capital, 2014, http://info.rootcapital.org/applying-­ gender-lens-to-agriculture 22 John Kania and Mark Kramer, “Collective Impact,” Stanford Social Innovation Review, Winter 2011.

23 Ibid.

24 Jenkins, Valikai, and Baptista, “The Coca-Cola Company’s 5by20 Initiative.”

25 Information provided by Fundo ELAS. 26 “Advancing Women, Changing Lives: A Comprehensive Evaluation of the Gap Inc. PACE Program,” the International Center for Research on Women, 2013, http:// www.icrw.org/files/publications/PACE_Report_PRINT_singles_lo.pdf 27 Jenkins, Valikai, and Baptista, “The Coca-Cola Company’s 5by20 Initiative.” p. 26.

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Rapid advances in technology are changing philanthropy in fundamental ways—making it potentially

, more rational, effective, collaborative, transparent, and democratic.

Disruption for Good

By Laura Arrillaga-Andreessen Illustration by John Hersey

ntil recently, someone making a small gift—whether placing a few dollars in a collection basket, sending a check in response to a mail solicitation, or donating via a credit card—felt like he was putting money into a black hole. Tracing how the money was spent was almost impossible, as was measuring the impact of those dollars. Enter technology.

Although giving into the black hole still happens virtually through the many “donate now” buttons, a new generation of digital-savvy nonprofits is enabling donors not only to go online to donate a few dollars anywhere, any time, but also to receive direct feedback (including photographs, videos, data, or messages from the recipients themselves) on how their gift is helping transform lives or solve social problems.

It is hard to underestimate the extent to which technology could improve philanthropy. Managing donations electronically and transparently is just the start. Through crowdsourcing, anyone with access to the Internet can contribute ideas. On social media anyone can launch a global advocacy campaign. Digital data make it affordable for nonprofits of all sizes to assess social problems and track their progress toward solving them.

Of course, nonprofits must be willing, equipped, and able to use the data they collect. And new channels for giving do not in themselves create more philanthropists or increase impact. Having access to technology and using it for good are two different things. Online excitement about a cause is not always easy to translate into realworld action. (In fact, it turns out that gestures of support such as

Facebook “likes” actually lower the chances of someone donating to a cause1 because users feel satisfied with a public endorsement.)

But for committed givers, technology can enable greater impact.

Whether participating in problem solving or getting real-time feedback on the impact of a program, everyone now has levels of access once available only to major donors and large organizations. Technology now reaches people who might never have thought of themselves as philanthropists, engaging a new generation of change makers.

Gaining access to these new technologies does not require substantial investments in software, platforms, apps, or systems.

Open-source code, online procurement, and off-the-shelf customer relationship management software—low-cost technologies on which industries from retail to travel rely—can all increase philanthropy’s efficiency and effectiveness. By increasing access and lowering barriers to entry and innovation, technology is enabling the democratization of philanthropy.

Although technology is a powerful force for change, this change does not take place easily or at the same rate throughout society. The advertising and entertainment industries, for example, have quickly harnessed the disruptive forces of the Web browser, mobile devices, social media, big data, and cloud computing. The philanthropic sector, however, is only starting to tap into technology’s potential.

Historical, cultural, emotional, behavioral, regulatory, and organizational barriers—rather than technological ones—are often what stand in the way of progress. Change can be unsettling— particularly in a sector like philanthropy where accountability is almost entirely self-imposed. For example, it would be relatively easy to build an online hub where donors and nonprofits could pass on lessons about strategies that have not worked, but a litigious culture, as well as the very human resistance to admitting failure or to “snitching” on colleagues, might limit the number of people who are willing to use it.

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To understand the ways in which technology can change philanthropy and the barriers to that happening, I’ve created a framework that looks at technology’s impact in four broad areas, what I call “gateways”: greater access to information, greater access to networks, lower barriers to entry, and lower barriers to innovation.

(Of course, in reality there is a great deal of overlap between the four gateways. Take, for example, the Jolkona Foundation, which allows people to make small donations online to people living in low-income communities around the world. Jolkona gives lenders information about and access to tens of thousands of potential beneficiaries; creates a community of donors; lowers barriers of entry by reducing the cost of philanthropic transactions; and by allowing donors to receive photos and e-mails showing how their money is being used, increases accountability.)

For each of the four gateways, I’ve examined the challenges and obstacles to creating greater efficiency and access in philanthropy, how technology is overcoming these challenges and breaking down these obstacles, and the challenges to implementing these technologies in philanthropy and how they might be surmounted.

Greater Access to Information

Charitable donations are often referred to as “investments.” Yet donors rarely embark on the same amount of due diligence and analysis they undertake when buying stocks, investing in a start-up, or buying into a mutual fund. Too often, giving is based on emotion. A study

by Hope Consulting found that only 35 percent of individual giving decisions were based on research, and of that 35 percent, only 3 percent of donors did research to find the “most effective” nonprofit.2 To be most effective, philanthropic decision-making requires critical thinking as well as empathy. Would you have more impact, for example, by funding a seven-year-old Namibian girl’s education for a year, or by donating to a large NGO working with Namibia’s government to achieve universal access to secondary education?

Making such decisions requires sophisticated understanding of problems that are extremely complex, as well as taking an analytical approach to your own philanthropic risk tolerance.

One of the reasons that philanthropists don’t undertake a rigorous analysis of their giving is that the information needed to do that is often hard to come by. Comparing nonprofits in the same way that consumers compare car insurance is difficult. And without insights into what works and what doesn’t, philanthropists constantly reinvent the wheel, using intuition, emotion, and personal relationships to plug the gaps that knowledge and analysis should fill.

At the other end of the giving chain, donors now seek better information on the impact that their gifts have. This is something the sector has long struggled to provide. In the absence of for-profit drivers such as stock price, market capitalization, investor pressure, and the need for product and price differentiation, philanthropic accountability has been extremely limited, with nonprofit or foundation scandals appearing regularly in the headlines. Added to these challenges, assessing social and environmental impact is much harder than measuring financial returns.

Technology helps provide a solution to these problems by opening up vast reserves of information, allowing givers to see their gifts’ impact, and helping nonprofits and foundations to provide detailed and timely feedback on how they use donors’ money.

Laura Arrillaga-Andreessen is a lecturer at the Stanford Graduate School of Business and founder and board chairman of the Stanford Center on Philanthropy and Civil Society. She is also the founder and chairman emeritus of the Silicon Valley Social Venture Fund (SV2), the founder and president of the Laura Arrillaga-Andreessen Foundation, and the co-founder and president of the Marc and Laura Andreessen Foundation.

Arrillaga-Andreessen is the author of Giving 2.0: Transform Your Giving and Our World.

Disclosure: Laura Arrillaga-Andreessen’s husband, Marc Andreessen, is an investor and a co-founder and general partner in the venture capital firm Andreessen Horowitz. Personally, and as a partner in his firm, Andreessen has invested in some of the companies mentioned in this article, including Facebook, Airbnb, LinkedIn, Box, Lyft, and NationBuilder.

Donors can now find online most research reports produced by large foundations, as well as their financials and nonprofit evaluations. It is essentially like having free access to the best money managers’ analysis. Once-scarce information about the funding portfolios of family foundations is also going online, with foundations such as Good Ventures and the Case Foundation leading the way.

Meanwhile, online evaluators are doing valuable legwork for donors. GuideStar International provides information on millions of nonprofits in the United States, the United Kingdom, Belgium, India, and Israel. GreatNonprofits develops tools that allow people to identify, review, and share information on effective charities.

GiveWell compares the impact and relative cost of different nonprofit organizations and makes recommendations to donors, helping them decide where to give. And a relative newcomer, the Social Impact Exchange’s S&I 100 index, uses third-party evaluations to assess nonprofits’ impact and scalability. Armed with this kind of knowledge, donors can make far more informed decisions about where to distribute resources.

As useful as these information resources are, they have their limitations. Ratings organizations approach assessments in different ways. Some offer data gleaned from nonprofit tax returns, such as spending on overhead (which may or may not correlate with impact), whereas others provide more nuanced ratings.

The inconsistencies in assessments of nonprofits are understandable. Measuring social change is a complicated business. One can count the number of foster youths mentored or HIV patients given medication, but it is harder to assess the impact of an advocacy group working to raise awareness of domestic violence or preventing first-time incarceration. In addition to immediate program results, donors need to understand intermediate and long-term outcomes.

And the sheer volume of data that technology generates demands new ways of analyzing and filtering.

Technology provides many ways to gather and assess data, but human intelligence remains a critical part of measurement. Online ratings systems are a starting point rather than a comprehensive solution to philanthropic due diligence.

Donors also need to be encouraged to invest time in understanding why certain strategies failed and others worked and how this knowledge can help them increase the impact of their giving.

One solution might be to create a donor hub—a dedicated website, Facebook group, or other social media forum—where donors could discuss why they did or did not fund an organization and which resources proved most useful in helping them make their decision.

Organizations such as the Council on Foundations, the Association of Small Foundations, or Social Venture Partners International

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could create online networks through which members could share lessons. Some are already doing this—the William and Flora Hewlett Foundation and the Irvine Foundation post stories about their failures on their websites. Other foundations could follow their example.

Even so, there are many barriers to information sharing, from lack of transparency and legal considerations to concerns that highlighting poor performance might drive donors away from an organization. Again, the human element comes into play. After all, who really enjoys talking about failures, mistakes, financial inconsistencies, and shortcomings? And who wants to denigrate publicly an organization with good social-change intentions? Technology can take us only as far as we are willing to go.

Greater Access to Networks

There was a time when it was difficult for philanthropists to connect with one another. The lack of time and the lack of close physical proximity hampered donors’ ability to share their passions or learn from each other’s experiences. For nonprofits, building donor databases was time-consuming. Responding to requests, thanking donors, and updating them on progress involved individual letter writing and labor-intensive mailings (not the electronic kind).

Without robust donor networks, funds tend to move in one direction—from an individual to a nonprofit or foundation—rather than flowing peer-to-peer (a donor giving directly to the ultimate beneficiary) or collectively, from groups of donors to other organizations (peer-with-peer).

Today the Web, donor management software, email, social media, and mobile communications have revolutionized the way donors and beneficiaries interact. Nonprofits can post images and videos online or exchange them via smart phones, narrowing the gap between those who give and the people they want to help. This means giving is no longer purely a top-down process, with large nonprofits, foundations, and wealthy donors acting as the philanthropic sector’s leading players in driving social change. Technology allows donors to interact directly with beneficiaries and play a more hands-on role in creating solutions to global problems. DonorsChoose.org, for example, has tapped into the hunger of donors to make their own philanthropic decisions by creating an online education marketplace: teachers post projects that need funding—from books to field trips—and people can go online to choose which projects to fund.

Collective giving is also powered by technology, allowing individual givers to pool their resources online in virtual giving circles.

For example, Change Gangs unites a group of giving circles donating to pets, poverty alleviation, and veterans. As people reach out to their networks, donors who don’t otherwise know each other can coalesce around a cause or issue.

Some collective giving movements achieve remarkable scale.

Take Giving Tuesday, which unites the US philanthropic community for a day of giving at the start of the holiday season. Partners create projects and spread the word via social media. Results have been impressive. In 2013, about 10,000 companies and charities participated, 3 generating about 500,000 tweets with the Giving Tuesday hashtag. According to Blackbaud, between 2012 (when Giving Tuesday launched) and 2013, the average gift size increased by 40 percent, and the total amount of gifts Blackbaud processed increased by 90 percent, from $10.1 million in 2012 to $19.2 million in 2013.4

Yet given the potential connective power of technology, it’s surprising that the philanthropic sector has been slower to adopt it than have other sectors. After all, consumers regularly share thoughts about products or services with one another when shopping (from Amazon ratings to Yelp comments). One might think donors, who want to improve lives, would have a greater incentive to share knowledge. If it is worth sharing thoughts on a new running shoe, why not share them when you are developing solutions to eradicate malaria?

With so much more at stake, digital networks have the potential to increase our impact, connecting us with givers from diverse communities and taking our giving across geographical boundaries.

Of course, the advent of online networks does not in itself generate new waves of giving. Social media excitement is not always matched by gifts. A recent study in the journal Sociological Science found that only 0.24 percent of people who “liked” the Save Darfur Cause on Facebook actually donated to the organization. 5 And a recent study by Blackbaud found that only about 1 percent of online fundraising occurred through social media; just 2 percent of American nonprofits raised $10,000 to $25,000 through Facebook; and a mere 1 percent raised $25,000 to $100,000 on Facebook.6 Creating networks of people to give collectively or share information is one thing, but without formal organizations with ambitious goals and stated missions, it is hard to develop robust strategies.

This is the next challenge for the sector. More effective collaboration tools are needed. How might technology allow geographically dispersed people to tackle a social issue together? And could algorithms analyzing social media’s ripple effect create evidence to inspire deeper commitments and help campaign leaders to guide supporters on which actions to take?

When new ways are found of harnessing the good intentions expressed online, technology will be able to turn virtual support into tangible action, with social media giving individual donors the power to effect a disproportionate amount of change. In ancient times it was Archimedes’ lever that could move the world. In today’s philanthropic world, technology is one of the most powerful levers in our hands.

Lower Barriers to Entry

As has long been the case with early-stage businesses, social change organizations (such as advocacy groups, nonprofits, and foundations) have faced significant, if not prohibitive, start-up costs in financial, intellectual, and human capital. Without technology, nonprofits struggle to identify and manage volunteers, just as volunteers struggle to track down opportunities.

Achieving the necessary scale to implement the systemic solutions needed for widespread impact is also challenging. It requires gathering data and integrating evaluation into programs at every step, creating data for proof of concept, maintaining constant program iteration, building awareness, sustaining interest, and igniting followers to act—processes that are costly and difficult without technology.

With technology, however, the playing field is leveled, allowing change makers of all backgrounds, resources, and ages to enter the marketplace and scale up their solutions. Of course, it still takes a serious investment to create a staffed foundation or nonprofit. But the connectivity of the Web and social media means anyone can launch a giving movement or an advocacy campaign, informing and inspiring thousands of people at relatively low financial cost.

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For example, in 2011, a group of Ecuadorian women created an online petition on Change.org to close a network of “clinics” that were torturing lesbian patients. More than 100,000 people joined the movement, prompting the Ecuadorian government to take action to eradicate these clinics, free the women trapped inside, and launch a national campaign to fight homophobia.7 The Web is also doing for volunteering what job boards have done for employment searches. For example, LinkedIn Board Connect uses the networks and connections that nonprofit board members (and aspiring board members) have on LinkedIn to find board members with the right skills and acumen.

On Catchafire, a New York City–based social business, users can browse online to find organizations whose needs meet their skills (it also calculates how much money a certain number of pro bono hours will save the organization). A much larger organization, VolunteerMatch, allows users to enter their charitable interests and zip code and search for volunteer opportunities. For young people, DoSomething.org matches people with opportunities that do not require money, a car, or an adult—and everything is done via mobile.

When it comes to the more practical side of running a nonprofit, technology also plays a powerful role. Gone are the days when donor care meant sorting through Rolodexes and stuffing envelopes.

Organizations can become almost entirely paperless. PayPal and other online payment systems mean donors can give to most organizations via a website or mobile site.

Software services such as Eventbrite, MailChimp, Salesforce, and SurveyMonkey allow foundations and nonprofits to manage mail-outs and events and gain a clearer picture of who their donors are, what segments they fall into, and where their passions lie. The cloud-based philanthropic programs of Box and Dropbox also enable increased efficiencies for the nonprofit world. Donors can even create and manage their own fundraising pages, something charity: water, a nonprofit that brings safe, clean water to people in developing countries, offers its supporters.

Nonprofits can lower costs by connecting online to share resources such as computer equipment or office space or to get group discounts when purchasing supplies. Nonprofit-share, for example, is developing a platform though which nonprofits can find other organizations that are working on issues similar to theirs and are located near enough to share resources. And NationBuilder, an online community organizer tool, enables nonprofits to reach and manage large populations of supporters, donors, and activists.

Many of the cost-saving services powered by the Web are not specifically targeted at the nonprofit sector. Nevertheless, as the sharing economy expands, the potential savings and efficiency gains are tremendous, whether nonprofits use TaskRabbit to outsource errands and administration, Airbnb to find inexpensive accommodations while traveling, or Lyft to find background-checked community drivers.

Cost savings and increased efficiency benefit donors, too. With lower transaction costs and leaner operations, a higher percentage of philanthropic dollars can flow into programs and services, ultimately improving the lives of many more people.

Although access to many online services and social media is free, it is worth remembering that skilled employees are needed to make the best use of them. Often, these workers expect higher salaries than nonprofits can afford to pay. Because their skills can be well

worth the money, the nonprofit sector needs to find ways to attract this talent. Organizations can also tap into the pro bono services of the corporate sector. Much of the technology that could help nonprofits advance their missions already exists—organizations just need the talent to use it effectively.

Meanwhile, as more and more of our lives exist online and in the cloud, technology poses privacy and security risks. When nonprofits store donors’ addresses, email addresses, and financial information digitally, they become susceptible to hackers. And if technology has made it easier for nonprofits to establish an online presence, it has done the same for the scammers pretending to be these organizations.

To secure the trust of donors and volunteers, nonprofits must develop robust security systems that protect the information of donors, volunteers, and beneficiaries, and they must help donors to distinguish legitimate nonprofits from the scams.

Finally, by lowering barriers to entry, technology creates a new problem—overload. As fundraising campaigns and volunteer opportunities flood email inboxes and social media sites, quality becomes diluted and it becomes harder for donors and volunteers to choose which organization or cause to support. Maintaining quality and helping people navigate the many ways of getting involved will therefore become increasingly important for the sector.

Lower Barriers to Innovation

The complexity and severity of the world’s social problems demand experimentation and innovation. That is why philanthropy is often described as society’s risk capital. You would think that, free from the shackles of government bureaucracy and shareholder pressure, philanthropists would find it easy to be innovative and take risks. Far from it.

For nonprofits and foundations managing funds donated by others, the risk-taking needed to solve social problems often runs up against the relative paucity of donor dollars. Most nonprofits lack the capacity or funds to use beta testing, prototyping, or data analytics to generate insights that inform better decisions. Often working in isolation, nonprofit leaders find it difficult to bounce ideas off one another, harness collective wisdom, or access external sources of innovation.

For individual philanthropists the challenges are similar. Creating innovative giving strategies is hard if they can’t tap into the wisdom of others. Forums and sources of advice do exist. Conferences and workshops—such as the Stanford Center on Philanthropy and Civil Society’s Philanthropy Innovation Summit—bring together networks of donors, and private banks offer advice through their family offices. But such events can be expensive or limited only to clients, and not every donor has the kind of wealth required by private wealth management firms.

Most philanthropic funding, however, comes from ordinary people with extraordinary generosity, not from the millionaires and billionaires who appear in the mass media. And to be effective in their giving, these ordinary people also need access to communities in which they can exchange ideas and sources of innovation.

Social networks are beginning to transform the way that individual philanthropists collaborate with one another. The matchmaking power of the Web creates networks of donors who would otherwise have no way of finding one another.

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For organizations, technology is no less powerful a tool. By using technologies such as 3D printing, computer modeling, and simulation, nonprofits can create prototypes and test the effectiveness and practicality of social interventions and shift course as necessary. Feedback loops can be embedded into social service programs at greater scale, speed, and accuracy. With multiple choice assessments or quizzes for each module, online learning gives teachers real-time feedback on whether or not content and methods are proving effective.

Using mobile technology, communities themselves can report directly on local challenges and come up with their own solutions.

Take Crisis Text Line—the brainchild of social entrepreneur Nancy Lublin, CEO of DoSomething.org. Using this service, teens can reach a counselor 24/7 via text. Crisis Text Line has also tapped into the power of data. An algorithm gathers every word used in the texts and gives real-time prompts to counselors, suggesting that they ask certain questions and provide specific information.

If, for example, a teen uses the words “scared,” “unsafe,” and “home” in a series of texts, a counselor is given information on potential child abuse and can follow up to provide support and coaching on a regular basis.

The Web also allows nonprofits and foundations to tap into the wisdom of crowds. Innovations can be sought from individuals and organizations living anywhere in the world and from any sphere of life—often through competitions and games. The “Make It Your Own Awards,” launched by the Case Foundation in 2007, was one of the first competitions to use the Internet to apply a “citizencentered” approach to solving social problems. It invited individuals or groups to submit ideas online, with the top 20 finalists each receiving a grant of $10,000.8 New ways of finding ideas bring challenges, too. The excitement of working within a limited time frame during an online competition means people may come together to collaborate on a project they might not have the time to implement over the long term. And although everyone is looking for sources of innovation, it is worth remembering that plenty of good ideas already exist and could be scaled up, rolled out across multiple markets, or piloted from within an existing nonprofit.

Without mechanisms for sifting good ideas from bad and turning online enthusiasm into real-world impact, crowdsourcing and social media could lead to over-innovation at the expense of focusing on scaling up proven solutions and achieving measurable change.

Moreover, while digital data give nonprofits new insights into the challenges they are trying to overcome and the progress they are making, organizations run the risk of “data overload.” As the volume of data collected increases, new ways of filtering the information that is gathered will be essential. Palantir, which builds software to glean insights from large sources of data, is at the leading edge of these efforts. Through the company’s Philanthropy Engineering team, it partners with nonprofits on initiatives ranging from the allocation of medicines that are about to expire to the coordination of efforts among volunteers in the wake of a natural disaster. Palantir offers its services at no or very low cost (“low bono”), but not all nonprofits have the knowledge or data infrastructure to partner with the company. Here again, translating online innovation into tangible progress on solving problems will require offline support (for this reason Palantir provides its nonprofit partners with human support as well as its software).

Call to Action

Empowered by technology, philanthropy is in the nascent stages of what could be a significant transformation—moving from relying on good intentions to achieving greater scale and measurable impact.

Yet technology can do only so much. At every stage of disruption, cultural and historical barriers (combined with institutional and individual inertia) erect hurdles to progress. The absence of the market forces that motivate the private sector to embrace change has also slowed philanthropy’s adoption of technology.

To be clear, the barriers to adoption are not technological—the systems needed to transform philanthropy exist today, and tapping into them requires relatively modest financial investment. For philanthropy to embrace technology and the advances it brings, it will take a change in mindset among both philanthropy professionals and individual givers.

Time and the changes in demographics it brings will affect the adoption of technology. In 2017, Millennials will surpass Baby Boomers as the group having the largest purchasing power in the United States,9 and this new generation will make up almost 50 percent of the workforce by 2020.10 Besides being more comfortable with technology than their elders, Millennials have grown up with a greater global awareness and a global sense of community.

If Baby Boomers can make the mental and organizational shifts necessary to embrace technology, however, these tens of millions of “digital immigrants” could play an even greater role in solving the world’s greatest problems, combining their knowledge and experience with the passion, digital savvy, and enterprise of the Millennials.

As online platforms democratize giving and pressure mounts to find new, measurable models of change, harnessing technology could dramatically increase our ability to develop scalable solutions to some of the world’s biggest problems. All the technology tools we need are in our hands right now. What are we waiting for? n N ote s

1 Kirk Kristofferson, Katherine White, and John Peloza, “Observability of an Initial Act of Token Support Affects Subsequent Prosocial Action,” Journal of Consumer Research, vol. 40, no. 6, April 2014.

2 Hope Consulting, Money for Good: The US Market for Impact Investments and Charitable Gifts from Individual Donors and Investors, 2010 http://hopeconsulting.us/pdf/ Money%20for%20Good_Final.pdf 3 https://nonprofitquarterly.org//policysocial-context/23349-giving-tuesday2013-more-infrastructure-more-money-more-groups-in-the-mix.html 4 http://www.forbes.com/sites/tomwatson/2013/12/04/ inside-the-givingtuesday-numbers-will-american-philanthropy-grow/ 5 Lewis, Kevin, Kurt Gray, and Jens Meierhenrich, “The Structure of Online Activism,” Sociological Science, 1:1-9. Accessed Aug. 1, 2014. http://www.sociologicalscience.com/structure-online-activism/ 6 Tom Held, “Charities Like Facebook for Rallying Support but Not Much for Fundraising,” The Chronicle of Philanthropy, July 13, 2014: http://philanthropy.com/article/ Charities-Like-Facebook-for/147639/ 7 http://www.change.org/petitions/ecuador-minister-of-health-close-remaining-exgay-torture-clinics-in-ecuador 8 http://casefoundation.org/case-studies/make-it-your-own-research and http://case foundation.org/projects/make-it-your-own-awards 9 Randy Hawthorne, “Understanding What Motivates Millennials to Give to Your NPO,” Nonprofit Hub, 2014. http://www.nonprofithub.org/featured/ understanding-motivates-millennials-give-npo/ 10 http://www.upworthy.com/by-the-year-2020-almost-half-of-the-workforce-will-bemade-up-of-these-people-5

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Bringing innovation to the public sector is famously—and perhaps inherently—difficult. But efforts that

, open up the public sector value chain to citizens, frontline employees, and other stakeholders can

deliver impressive results.

in Government N RECENT YEARS, the method of organizational change

known as co-creation has spread rapidly in the business sector. In a co-creation effort, multiple stakeholders come together to develop new practices that traditionally would have emerged only from a bureaucratic, top-down process (if, indeed, those practices would have emerged at all). Change, moreover, occurs not just at the level of an organization, but also across an entire value chain. Can public sector managers apply the same method to the seemingly intractable institutions that they oversee? We believe so.

To demonstrate what the co-creation method can achieve, let’s first consider how it has begun to transform certain parts of the business world. Take, for example, the agriculture and food value chain. In the traditional model, each link in that chain is essentially transactional: At every stage of production and distribution—from selling seeds to retailing packaged foods— the interaction between participants remains limited to the buying and selling of products or services, and the role of each participant stays within welldefined boundaries. In the past 15 years, however, some of these participants have developed new forms of interaction that blur the boundaries between them and turn a transactional process into an interdependent

BY FRANCIS GOUILLART & TINA HALLETT ecosystem. In doing so, they are following the path of co-creation. A few Illustration by DARREL REES companies, in fact, have taken that path as a matter of deliberate strategy.

In 2001, the Agribusiness Division of the Indian conglomerate ITC launched a co-creation initiative called “e-Choupal” (which means “electronic marketplace” in Hindi) as part of an effort to improve ITC’s access to high-quality soybeans. The idea behind e-Choupal was to replace the traditional sourcing process with an approach that involves assembling farmer groups in each village and providing each group with digital tools that deliver timely market data as well as locally relevant information on agronomic best practices. For farmers, this approach resulted in significant yield improvements and improved economic conditions. Use of the e-Choupal platform also led to a dramatic boost in the volume and the quality of soybeans available to ITC. (The company later extended the platform to cover wheat and other commodities.) Since its launch,

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moreover, the e-Choupal initiative has helped ITC’s Agribusiness Division to become a $1.2 billion operation.

Taking a cue from ITC’s effort to help farmers sell their output, BASF Agriculture Solutions in India has pursued a similar approach on the farm input side. The company initiated a community-based farmer education and engagement program called “Samruddhi.” (“Samruddhi” means “prosperity” in Sanskrit.). Through the program, it works with participating farmers to identify the right mix of seeds and chemicals to use on their crops. In addition, farmers receive coaching on new agronomic practices that help them both to optimize their yield and to become better stewards of their land.

An impact assessment study by the consulting firm PwC showed that participating farmers increased their yield by 25 percent and their net income by 36 percent. Thanks in part to this program, BASF has grown significantly faster than its competitors in India over the past 10 years and has become the Indian market leader within its industry.

After their early successes with the co-creation model, ITC and BASF combined forces to create One Million Smiles, a program that integrates input and output strategies to help drive productivity gains for farmers. Recently, they have begun to invite other companies (including financial services firms and telecom providers) to join the program.

As these examples illustrate, the essence of co-creation is the formation of new relationships. Co-creation starts from the experience of each actor and strives to discover new modes of interaction that will improve the experience for all actors simultaneously.

That process often leads to a reconfiguration of roles: Recipients of services become service providers, and vice versa. To develop and sustain these new modes of interaction, participants typically ­create special platforms for community engagement (many of which incorporate supporting technology tools).

In the public sector, adoption of the co-creation method is a fairly recent development. Nonetheless, we have found ample evidence that co-creation holds real promise as a way to facilitate innovation in government. In this article, we will show how co-creation differs from the traditional model of how government operates, provide examples of public sector entities that have overcome challenges to pursuing co-creation, and draw lessons from those examples.

OF, BY, AND FOR STAKEHOLDERS

In the traditional model of government, a public entity receives ­resources through a budgetary allocation and then uses those ­resources to deliver services to stakeholders through a set of work processes—filing a form, responding to a customer request on the phone, and so forth. The people at the receiving end of those processes are largely passive. They might rate the quality of service they receive through a survey, for example, or they might indirectly communicate their evaluation of the service through the support or rejection of an incumbent government’s policies. But they do not actively shape the design or delivery of the service.

Over the past 35 years, public sector entities have gone through several waves of change theory and change practice, all of it aimed at reconfiguring work processes. They went through Total ­Quality ­Management, business process reengineering, and “work-out” ­methods in the 1980s. They adopted Six Sigma methods in the 1990s.

Francis Gouillart is president of the Experience Co-Creation Partnership, a ­management education and consulting fir­m in Concord, Mass., and co-author (with Venkat Ramaswamy) of The Power of Co-Creation: Build It With Them to Boost Growth, Productivity, and Profits (2010).

Disclosure: Francis Gouillart and Tina Hallett have worked on a consulting basis with several of the organizations that they discuss in this article. Gouillart has consulted to Jobcentre Plus, La Poste, and URSSAF. He is also an investor in Co-Creation Ventures LLC in Malden, Mass.

Hallett has worked with Jobcentre Plus.

Tina Hallett is leader of government and public sector industry for PwC UK (formerly PricewaterhouseCoopers).

The authors wish to thank the following people for their cooperation in developing the article: Damian Riley of PwC UK, Raman Ramachandran of BASF, S. Sivakumar of ITC, John Paul Marks of Jobcentre Plus, Julien Tétu of La Poste, JeanPaul Lejeune of URSSAF Picardie, and Pierre Lebon of the General Secretariat for the Modernization of Public Action (URSSAF project).

And they have pursued Lean Management techniques over the decade and a half since then. These methods have one important feature in common: They focus on improving the work-process efficiency.

Because most government entities had previously not been subject to rigorous financial scrutiny, these methods have served the useful purpose of bringing the cost structure of government organizations more in line with that of their private sector counterparts.

But when it comes to productivity gains, there is growing evidence that public sector organizations have now harvested most of the proverbial low-hanging fruit. To make further gains in performance, public sector leaders need to shift their focus away from work processes (which revolve around tasks to be performed) and toward human engagement processes (which revolve around the people who do those tasks).

In a public sector co-creation initiative, a public sector entity opens its value chain to the stakeholders whom it serves. In effect, it outsources to its constituents some of the work—and hence some of the cost—of designing and delivering certain services. Stakeholders, typically organized in communities of interest, insert themselves into the public service value chain and become active participants in it. As a result, public sector employees and stakeholders essentially co-create the public sector value proposition. In its optimal form, co-creation has the dual benefit of reducing public sector costs and increasing stakeholder satisfaction.

The application of the co-creation model to public sector entities raises specific challenges. Those entities tend to be large and ­complex, and their leaders typically manage them from the top down. Few public sector executives are willing to take the risk of adopting a new organizational model—especially one that relies heavily on the bottom-up engagement of employees, customers, and other stakeholders. Politicians and senior public servants rarely have the patience to launch an experiment and then wait for it to unfold. ­Instead, they usually prefer to implement well-defined policies through standard administrative channels.

Alongside those obstacles, there are challenges that will affect any effort to bring innovation to a public sector organization.

Laws and regulations—the very stuff of government—often hinder change by freezing standards, policies, or processes in place.

At the level of personnel, those who gravitate toward public service tend to care less about transforming government than they do about serving their fellow citizens and maintaining a decent quality of life for themselves. Unions can also stand in the way of

Stanford Social Innovation Review / Spring 2015

Early in 2013, a new manager arrived at JCP Harlesden with a new view of what the role of a local JCP office should be. Working with consultants from PwC and people from Making the Leap, a nonprofit organization that fosters social mobility for disadvantaged populations, the manager formed a core group of employees and gave that group a mandate to pursue a change of direction. She STEPS TO FOLLOW envisioned her JCP office as a venue where employees and outside In our model of co-creation, leaders and participants make their service providers—along with the constituencies that they serve— way through a series of five steps. To illustrate those steps, we could develop new community-based approaches to the challenge of turn our attention to a successful co-creation effort that took place unemployment. With that vision in mind, the group embarked on its ­recently in the United Kingdom. That effort involves a pilot project five-step co-creation project. (See “The Path of Co-Creation” below.) conducted in the Harlesden office of Jobcentre Plus (JCP), a public Identify target communities | The first step of any co-creative initiasector ­organization that deals with unemployment. tive is to select communities and sub-communities whose members John-Paul Marks, who was director of JCP for the greater London will take part in that effort. region at the time, chose Harlesden as the site of a co-creation effort In Harlesden, the new manager and her group held workshops to because of the many challenges that the community confronted. map out the community of stakeholders whom they serve. The group Harlesden, a suburb in West London, experienced high unemployment identified three broad populations: JCP employees, claimants and members of claimants’ support systems, and potential employers. in the wake of the global financial crisis and the recession that followed.

Looking at this map, the group realized that there were numerous It also has a large immigrant population that faces linguistic and culforms of interaction between members of those communities that tural barriers to employment, and it has had law enforcement problems that complicate the unemployment challenge. In Marks’s view, JCP could attempt to facilitate—or, if necessary, to repair. Many of JCP Harlesden also had significant potential for local service reform. those interactions (the office-based interaction between claimant Traditionally, JCP offices had defined their work as consisting and advisor, for instance) were notoriously antagonistic and had of three major processes. First, frontline employees help jobless been the subject of multiple large-scale reengineering efforts. Yet none of those efforts had succeeded. people either to find a job or to receive job training, usually in conThe group also recognized that any attempt to improve those junction with qualifying claimants for unemployment payments interactions at the level of a whole population was doomed to and managing the payment process. Second, a smaller group of fail. Instead, the group focused on identifying a sub-community JCP employees try to generate job opportunities for claimants whose members had a specific problem to solve. Because the rate by working with potential employers. Third, another group of of un­employment among young Somalis was particularly high in ­employees work with external service providers—people from nonprofit organizations, for example—to prepare claimants for ­Harlesden and because many JCP Harlesden advisors were eager to employment or education opportunities. support at-risk Somali young people, the group quickly converged on a decision to target the Somali community.

Implementing that decision proved to be difThe Path of Co-Creation ficult, because public sector entities in the United Kingdom have traditionally put a premium on Step Description Jobcentre Plus inter­acting with all constituents in the same way.

The suggestion that some claimants might get A public sector entity identifies specific JCP Harlesden leaders decide to Identify target communities (or sub-communities) focus attention on specific stake-­ special treatment caused some people in the JCP communities with which it wants to engage holder groups, including JCP staff bureaucracy to raise objections. Staff members at members, Somali benefit claimants, the Harlesden office, therefore, had to campaign and Somali employers for the right to craft a specific approach for young Build engagement The public sector entity develops one The JCP Harlesden group creates platforms or more engagement platforms that the Somali Community Desk, hosts Somalis. But ultimately, with the help of Marks, will attract community members a bimonthly community forum, and they received permission to proceed with that plan. holds other outreach events Choosing sub-communities, we have found, is Foster interactions Community members use the Using the newly created platforms, both an analytical process and an emotional proamong platforms to explore new ways of claimants receive back-to-work stakeholders interacting with each other and with support from JCP Harlesden advisors cess. The analytical part involves forming a rational other stakeholder groups and develop new relationships with hypothesis about how a given sub-community can potential employers help generate new value for a public sector entity.

Enable individual By interacting in new ways, community Somali claimants find it easier and That hypothesis provides the business case that experiences members and other stakeholders more satisfying to access employ­generate experiences that are ment support, and JCP Harlesden senior government managers are likely to require ­intrinsically valuable staff members find it easier and more before they will approve a co-creation project. But satisfying to deliver that support co-creation is also an emotional process that occurs Assess new value The public sector entity is able to JCP Harlesden leaders verify that they when the employees of a public sector organization show that it has gained measurable have increased their rate of putting economic value as a result of its efforts claimants to work while reducing the develop an interest in certain communities or cercost of working with claimants tain issues. Passion is the currency of co-creation, innovation by, for example, insisting on their right to negotiate over the adoption of new approaches.

Despite these inherent challenges, we believe that co-creation offers a practical response to the innovation imperative that most public sector organizations face today.

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and the energy that comes with allowing employees to engage with members of a specific community can be powerful. A government entity should not be a faceless collection of hyper-rational technocrats. Instead, it should be a place where employees feel free to propose (and lead) co-creation initiatives.

Build engagement platforms | The second step is to provide targeted communities with physical or virtual platforms where community members can engage with each other.

Once the JCP group had opted to focus on the Somali community, the group started exploring how it could bring together the disparate members of that community. To achieve that goal, the group needed to provide a structure in which local Somalis could collaborate on ways to solve shared problems. In other words (to use the language of co-creation), the group had to create an engagement platform for that community.

After holding a series of workshops with Somali community members, the JCP group concluded that linking disparate populations would be crucial to solving the problem of Somali youth unemployment. Many young Somalis, for example, have a history of gang activity, and their judicial record makes it difficult to find employers who will hire them. Harlesden, meanwhile, is the site of several small, Somali-owned craft shops that could provide training or employment opportunities. What if JCP Harlesden could help bring together those young people and the owners of those shops?

Members of the JCP group also knew that local Somali groups could provide coaching to Somali claimants and advice to service providers. The problem, in short, was not a lack of support but a lack of connection between various parts of the Somali community.

Today, JCP Harlesden hosts the Somali Community Desk—a dedicated area within the agency’s office where people from a local community group deliver an array of services. The Community Desk serves as a liaison between claimants with limited English-language skills and JCP staff members. It also functions as a clearing-house for services available from other Somali support groups. (The JCP team identified a half-dozen such organizations in the Harlesden area. Thanks to the co-creation effort, those groups began to form connections to one another that did not exist previously.) Members of the JCP team credit the Community Desk with building trust, breaking down communication barriers, and encouraging claimants to take advantage of the services offered by JCP and by the local Somali organizations.

Engagement platforms can take other forms. At JCP Harlesden, staff members put on a community forum at the agency every two months, and they regularly hold outreach events with Somali organizations at other locations.

Foster interactions among stakeholders | In the third step, participants use the new engagement platform (or platforms) to enable new kinds of relationships.

Instead of reengineering existing forms of interaction between unemployed Somali young people, JCP employment advisors, and other stakeholders, the JCP group in Harlesden worked to facilitate new forms of interaction between those populations. The group put an emphasis, for example, on building more effective connections between claimants and employers. On the claimant side, that effort involved helping job candidates to articulate their skills and work experience, coaching them on issues related to physical ­appearance and personal presentation, and engaging them in practice interviews.

On the employer side, this work entailed explaining the law enforcement complications faced by some candidates, motivating ­employers to hire at-risk young people, and offering support to deal with any post-hire issues that might arise. By coaching both claimants and employers, JCP Harlesden fundamentally changed the nature of the claimant-employer interaction.

Enable new experiences | The fourth step involves ensuring that new interactions lead to valuable experiences for all stakeholders— experiences that intrinsically improve the quality of their lives.

At JCP Harlesden, customized outreach to young Somalis through the Somali Community Desk has led to a significant growth in their willingness to work with job advisors. Encouraging members of this population to engage with the UK social system had historically been a major challenge, but advisors are now able to hold regular meetings with them. Many of them, moreover, have now found jobs (often with the help of elders in the local Somali community). Overall, there has been a measurable increase in the levels of satisfaction among Somali claimants, who feel a greater sense of engagement with JCP, and among JCP advisors, who have a greater sense that they are doing useful work.

Assess new value | The fifth and last step of co-creation is to verify that the sponsoring organization has generated new value—­ measurable economic value, in particular—as a result of its effort.

(The idea here is that an organization should be able to compute a return on the investment made in its co-creation project.)

With the co-creation initiative at JCP Harlesden, the evidence of value took the form of two important data points: There was a significant increase in the center’s rate of back-to-work success, and there was a modest but promising reduction in the unemployment benefits that the center paid out. Those achievements, in turn, allowed leaders at JCP Harlesden to conclude that they should deploy the co-creation model in other areas of their organization.

Toward that end, those leaders have put in place several additional engagement platforms. The purpose of the Staff Autonomy platform, for example, is to develop a new model of interaction between claimants and JCP advisors. Using this platform, advisors can select two claimants who they believe are particularly motivated to find work.

They then provide each claimant with customized support, even ­going so far as to call employers directly to find work for the claimant. Each advisor collaborates with a selected claimant to develop an action plan. Together, the advisor and the claimant follow that plan until the claimant gets a job. Because advisors and claimants choose to take part in the program, both parties have an investment in ­ensuring that it succeeds. In fact, according to JCP Harlesden, the Staff Autonomy platform has helped many claimants find new jobs within just a few weeks of starting their action plan.

The School Engagement platform, meanwhile, is preventive in nature. It tries to instill a desire to work in high-school-age students who might otherwise assume that they will drift into unemployment after school. Through this platform, JCP advisors persuade local merchants to provide brief work experience opportunities to those students. (An additional benefit is that students develop skills that they will need to seek employment later.) The Skills-Matching platform aims to align the training that claimants receive from ­local nonprofit service providers with the job skills that employers actually require. And the High-Barriers platform helps advisors deal with

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difficult claimants (those with law enforcement issues, for example) by providing an integrated, case-specific support system that brings in probation officers and service providers who specialize in working with populations of this type. The latter two platforms, in particular, have helped to produce an increase in the number of claimants who are able to find work.

OBSTACLES TO OVERCOME

Those who seek to apply the co-creation model to government entities must reckon with challenges that rarely apply to private sector co-creation initiatives. Here, we will focus on four such challenges.

In each case, we will draw on examples of co-creation projects to show that it’s possible to surmount these obstacles.

The rigidity of government | Public sector entities have a duty to ensure compliance with laws and regulations, which are by definition non-negotiable. Government agencies are statutorily barred, for example, from paying unemployment compensation to unqualified claimants or from offering a favorable deal to a specific taxpayer. The terms of any given law are cast in stone. Still, our work shows that ample opportunity exists for co-creation in the application of such laws.

Consider the French social security administration—the Union for the Recovery of Social Security and Family Support ­Contributions, which is known by its French acronym, URSSAF. Its mandate is to collect social security taxes from employers. Those taxes feed the French system of subsidies for health care, retirement, housing, and unemployment, and the French state sets the employer contribution rates by law. URSSAF officials are proud of their group’s reputation as the toughest agency in the French government when it comes to collecting taxes. Today, URSSAF is conducting a co-creation experiment that focuses on the trucking industry in the province of Picardy. Through that experiment, the agency aims to transform itself from a hard-nosed, complianceoriented organization into a promoter of local business.

Trucking is one of the main industries in Picardy. (A heavily ­traveled highway that links Paris to northern Europe passes through the region.) In the past, the importance of that industry—or of any industry—had no influence on how rigorously URSSAF would ­apply the law. As a result, the agency often played a win-lose game in which over-zealous collection efforts risked causing a company to shut down. But with its new, more collaborative approach in Picardy, URSSAF has begun to put less emphasis on enforcement than on helping the local trucking industry grow. For URSSAF, after all, a growing industry is likely to yield increased tax revenue.

Along with the trucking trade association, URSSAF conducted a series of co-creation workshops that brought together agency ­employees and trucking company managers. (Also supporting this effort was the General Secretariat for the Modernization of ­Public Action, a consulting arm of the French government.) URSSAF ­employees discovered that many of those managers found it hard to understand the agency’s complex compliance requirements. When a driver receives a reimbursement for the cost of lunch, for example, does it count as a “premium” or as an “indemnity”? (The state taxes those forms of payment differently.) Managers of small trucking companies also divulged that the very thought of interacting with URSSAF intimidated them. Previously, their only interaction with URSSAF had taken the form of audits that almost invariably resulted

in fines. Indeed, persuading these managers to attend the workshops in the first place had proved to be a big challenge.

Following the workshops, URSSAF and the trade association ­began working with trucking company managers to develop a series of Internet-based tools that guide companies through their interactions with the agency. Managers, for instance, can now seek advice from URSSAF on how to handle the changes in reporting requirements that come with expanding their business. URSSAF and the trade association have also approached other government agencies (including the French unemployment office and local branches of the national retirement pension fund) about jointly developing a new system that would support each company through the various stages of its life cycle.

The experiment in Picardy is just beginning. But early results suggest that there has been an improvement in the experience of taxpayers, who report that URSSAF now supports their efforts to grow and no longer takes a narrow compliance-oriented view of its role.

URSSAF agents, meanwhile, say that being able to serve as a partner in economic development gives them a higher sense of purpose.

The problem of politics | In any attempt to bring innovation to government through multi-stakeholder collaboration, the reality of partisanship and ideological division looms as a potential barrier. At a time when that reality seems to preclude any form of across-theaisle cooperation, is it possible for politicians to support—rather than ­hinder—co-creation? In fact, there is evidence that co-creation initiatives can bring politicians and citizens together around common goals.

One example of that dynamic is a co-creation initiative currently under way in Malden, Mass., a city just north of Boston. In late 2012, a small group of investors—some of them ardent Democrats, others passionate Republicans—came together to test whether they could create a bipartisan agenda on a local scale. They created a fund called Co-Creation Ventures (CCV) and identified Malden as a good place to conduct their experiment. The city, they noted, is a melting pot that encompasses both Democratic and Republican constituencies. It has a fairly high poverty rate (15 percent), as well as a diverse population that includes many immigrants. Both its mayor and its US congresswoman are Democrats, as are most other local elected officials. But Malden also has a powerful contingent of Republican-leaning business­ people who have built successful enterprises in the city.

A team hired to run CCV identified food service as a potential economic engine for the city. With the aim of helping to create a new industry cluster around food, the CCV team ran a series of workshops that brought together stakeholders from multiple communities over the course of a year. Malden was already home to a commissary (shared kitchen) that served many of the food trucks that plied the streets of Boston. Largely thanks to earlier waves of Irish and Italian immigration, the city also had thriving traditions related to baking, meat preparation, and coffee making. In addition, more recent immigrants from Asia, Latin America, and elsewhere had brought their food traditions with them, making Malden a ­culinary destination that embraces a variety of cuisines.

The CCV initiative incorporates two platforms—one physical, the other financial. First, under the umbrella name Stock Pot Malden, CCV has invested in the development of two commissaries where food truck operators and food product entrepreneurs prepare their food side by side. Second, CCV manages a fund that takes a minority equity position

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in some of those enterprises. Through these platforms, participating entrepreneurs also receive guidance from the CCV team on how to develop their business plan. In addition, they collaborate with each other by exchanging best practices, sharing staffing resources and sourcing arrangements, teaming up at catering events and food truck festivals, and jointly running certification classes for new employees.

Today, the shared kitchen is the largest food truck hub in the ­Boston area, with 20 food truck businesses and a roughly equal number of food product entrepreneurs under its roof. Democrats and Republicans alike, both in Malden and elsewhere in Massachusetts, have praised the CCV effort. The Malden experiment shows that, at least at a local level, use of the co-creation model can facilitate a project that combines a traditional Democratic goal (promoting diversity and economic opportunity) with a traditional Republican approach (relying on private capital and free-market forces).

The matter of scale | Pursuing co-creation in, say, a single employment agency office is one thing. But doing so in a city- or statewide fashion, and in a way that involves stakeholders as a whole, is something else. Many people are understandably suspicious of any government’s ability to engage large groups of citizens in co-creation projects. In that context, it’s useful to consider that there are two types of engagement platforms that come into play in public sector co-creation. The first one involves town meetings, workshops, and other forms of in-person

discussion. The second involves deploying technology to accommodate civic participation on a large scale. Well-publicized government failures—the early malfunctioning of the website developed for the US Affordable Care Act, for example—raise doubts in this area. Yet some governments are successfully using technology to implement large-scale co-creation efforts.

The state of Rio Grande do Sul in southern Brazil, for example, uses technology-based platforms to engage citizens in co-constructing an economic agenda. Through the state’s Digital Cabinet initiative, citizens work with public sector managers to establish development ­priorities.

They can interact with the state government via four channels. The first one, called Collaborative Agenda, is a live process in which the governor of Rio Grande do Sul visits several cities and conducts workshops that allow open-ended discussion with citizens. The second channel is The Governor Asks, an online tool through which the governor formulates a problem in the form of a question; citizens then use the tool to propose potential solutions. The state also invites selected ­respondents to meet with the governor to discuss their proposals and to participate in the design of the chosen solution. The third channel, called The ­Governor Responds, provides answers to questions posed by citizens. In some cases, the governor answers a citizen’s question in a video clip and, where appropriate, announces measures to deal with the matter raised by that question. The fourth channel, The Government

Principles of Co-Creation Co-creation projects, by necessity, will vary from one case to the next. Yet there are five broad

gone through a painful or exhilarating

rules that leaders should bear in mind as they apply this approach to public sector entities.

­experience while interacting with a govern-

take a broad view. The wider the scope

in one or two locations and then roll it out

of a co-creation initiative, the more likely

to other locations to achieve buy-in. In a

that effort is to unleash powerful forces

co-creation project, by contrast, people at

of co-creation. To achieve real and lasting

each location develop their own operating

change, leaders should formulate a broad

model, and scaling up occurs through the

economic, social, or environmental agenda

peer-to-peer sharing of locally generated

that captures people’s imagination. Man-

ideas and practices.

agers at JCP Harlesden, for example, could have viewed their problem narrowly as one

Trust the process. Public sector execu-

of removing people from the town’s cur-

tives need to suppress their instinct to con-

rent unemployment benefit roll. But had

trol every step of the co-creation process.

they done so, they would not have been

To be sure, that process is not random:

able to launch programs that aim to shrink

Leaders need to identify which communi-

the pool of future benefit claimants. Those

ties to engage and which platforms to use in

programs, after all, do nothing to reduce

mobilizing those communities. But the goal

immediate costs for JCP.

of a co-creation project is not to arrive at a

Work from the bottom up. In a public sector co-creation project, transformation takes place mostly at the front lines.

Success arises from a series of discrete initiatives in which communities of stake-

predetermined result. Real human ­beings, acting as a community, have a way of g ­ oing in unpredictable directions. Indeed, they ­often achieve better outcomes than anyone could have anticipated.

ment entity. Some public sector managers find it difficult to accept this principle because they assume that such ideas will not be scalable at a city-, state-, or agencywide level. Typically, though, co-creation initiatives start with a small group of people, and only later do managers launch ­engagement platforms to extend them to a large community.

Leverage technology. In the early stages of co-creation, live meetings and workshops generally work best as engagement platforms. But as the number of participants and the volume of interactions increase, ­introducing some kind of digital platform becomes indispensable. The sequencing here is important: Human engagement should precede digital engagement. Early on, nothing can replace live interaction between flesh-and-blood people. Then, as momentum develops, co-creation project leaders

holders painstakingly work through local

Put people first. Co-creation is people-

should implement digital tools—­especially

issues. In the traditional model of organi-

centric, not process-centric. In many cases,

tools that have an interactive, ­social compo-

zational transformation, leaders experi-

the idea for a co-creation project comes

nent. (Co-creation, in fact, is the “killer app”

ment with the design of a new approach

from an employee or customer who has

of social software investment.)

Stanford Social Innovation Review / Spring 2015

Listens, uses social media to enable an ongoing dialogue that helps the governor and his team to identify emerging issues.

The co-creative use of technology also occurs at the city level.

Porto Alegre, the capital of Rio Grande do Sul, has been a pioneer in participatory budgeting since 1989. Through a process that combines live and technology-based platforms, the city enlists citizens to help allocate about $200 million per year in discretionary spending. Most of that amount goes toward construction projects. City managers provide a line-by-line description of each project, its cost, its potential benefits, the disruption that it is likely to cause, and its estimated schedule for completion. Citizens can then provide guidance on project selection or suggest project modifications, either live at local town meetings or electronically through the city’s website.

Using this input, city managers continuously update their plans for each project. The live meetings mobilize about 50,000 people annually (out of a population of 1.5 million), and the proportion of citizens who take part in them grows every year. Studies by the World Bank and other institutions have credited the Porto Alegre participatory budgeting process with helping to reduce inequality in the city— by, for example, facilitating the construction of schools and sewers in the most disadvantaged areas of the city.

The role of unions | In many countries, unions have a significant presence in the public sector. Do strong unions make it difficult, or indeed impossible, to pursue co-creation in government? Conflict between agency managers and union leaders clearly presents a big challenge. But we have found that even when labor relations are tense, co-creation can still work.

The transformation of La Poste—the French post office—is a case in point. In 2008, La Poste initiated a large-scale co-creation effort.

Faced with a dramatic reduction of mail volume, the agency needed to reduce costs while also increasing its parcels and banking businesses.

By the end of 2012, La Poste had reduced the average wait time for purchasing a registered letter from 8.3 minutes to 1.4 minutes, it had increased the number of hours when local post ­offices are open for business by 40 percent, and it had raised the level of customer satisfaction with wait times from 50 percent to 79 percent and overall customer satisfaction from 82 percent to 94 percent. Remarkably, moreover, the number of La Poste employees dropped by nearly 10,000 during that four-year period.

La Poste has long been a bastion of strong, and occasionally ­militant, unions. Why did the unions of La Poste go along with this transformation? The principles of co-creation, as it happens, also apply to the management of unions: Members of a union, given a platform to engage with peers and customers, will transform the ­operating model of that institution. Simply put, they will challenge the rigid, top-down logic of their union in the same way that ­employees will challenge the rigid, top-down logic of a large corporation or government agency for which they work.

In the co-creation project undertaken by La Poste, senior ­managers gave local post offices four broad goals for service and financial performance, and local employees could use their ­discretion to develop measures to achieve each goal. Throughout that process, people at the local level relied on a tool called “the co-created strategy map and scorecard.” The project also empowered employees to make changes to the physical layout of their post office and to make decisions on allocating resources to various customer segments.

Employees can now help to determine, for example, how many ­tellers will serve regular consumers and how many will serve business customers at any given time. These operational details, as it turns out, were often more salient to employees than the issues—such as working hours and pay levels—that had been a source of conflict at the national level for years.

When La Poste initiated its transformation program, the effort focused on three post office locations in southeastern France, including one in the center of Lyon that was known for being the site of hard-core union activism. As employees at that post office started engaging with their managers on how that facility should operate, local union representatives simultaneously began selling union managers in Paris on the merit of the co-creation approach.

Over time, the breadth of issues tackled by the co-creation project expanded dramatically. At first, for example, La Poste managers prohibited any discussion of when local branches would be open for business. That issue, they assumed, would be too politically sensitive for unionized employees. But when those employees started talking with customers about ways to improve service, they discovered that increasing the number of hours that a post office was open was at the top of many customers’ wish list. Employees then went to their managers and suggested scheduling changes to accommodate those customer requests. Many employees also offered to adjust their own schedules to provide coverage during extended hours of operation.

Union managers were originally reluctant to compromise on the ­issue of working hours—an important bargaining chip at the national level—but ultimately they yielded to the views of their members. With their support, La Poste and its employees co-created a new schedule under which employees work during evening hours and on weekends.

MORE WITH LESS

Public sector organizations face a huge innovation challenge. Trust in government is at an all-time low in many countries, and the resources allocated to public sector entities have been steadily decreasing for years. At the same time, those entities are expected to play an everlarger role in driving economic growth. Simply put, people in government must aim to do more with less. Now that the public sector has largely tapped the productivity gains that are feasible through workprocess reengineering efforts, its greatest source of value lies in using the imagination of frontline and back-office employees—and in inviting them to engage with stakeholders (clients, customers, citizens) in new ways. Managers will have to let go of their control over government processes, and public employees will have to take responsibility for their own future. Making that shift will require the adoption of new structures and new tools, but mostly it will require an unwavering commitment to co-creation as an indispensable method of innovation. (See “Principles of Co-Creation” on page 46.)

The need to do more with less requires a profound ­transformation of the role of the public sector. The practice of co-creation can provide a powerful response to this challenge by enabling government entities to migrate from a process-centric operating model to a people-centric model. Public sector leaders must overcome significant obstacles in order to develop and sustain effective co-creation platforms. Ultimately, however, when men and women in the public sector are able to embark on a joint quest for the creation of new value, there is no limit to what they can accomplish. n

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Conservationists have devised numerous ways to use financial incentives—such as conservation ease-

, ments and pollution credits—to preserve nature. But a more sophisticated approach can help conserva-

tionists do an even better job of targeting ecosystems and industries where they can have the biggest impact.

Using Economic Forces to Conserve Nature

By John Reid, Aaron Bruner, & Alfonso Malky

N

ature conservation is fundamentally about making people’s behavior less destructive to the earth’s ecosystems. A purely scientific approach to conservation might carve the world into various zones, preserving ecosystems that are vital to biodiversity conservation and designating others where human activity can most easily be absorbed. But no country, let alone the world, is run by a benevolent biologist-dictator who can unilaterally preserve great swaths of the planet. Conservation goals must be pursued within economic systems where market forces and politics have a great deal of influence over decision-making.

In recent decades, conservationists have made significant strides in finding ways to marry environmental and economic interests. In the United States, for example, they have harnessed the internal revenue code, creating conservation easements that have preserved 22 million acres of land in return for breaks on income and estate taxes.1 As effective as efforts like these have been, conservationists need to be much more strategic about the choices they make and the behaviors they attempt to change. Conservationists have limited time and money. They need to focus on opportunities where they can make the biggest difference for the planet.

The first step in developing a conservation strategy is to identify which ecosystems are most outstanding for their diversity and uniqueness and should be, when feasible, priorities to protect. This has largely been done.2 Norman Myers published his first list of global “Biodiversity Hotspots” in 1988, and since then every major green group has produced a map of conservation targets. More recently, researchers have added maps that go beyond biodiversity to show the importance of places for “ecosystem services,” things like water supply and climate stability.

The next step in developing a conservation strategy is to identify which human behaviors conservationists should try to change, and how best to use economic forces to alter human behavior to preserve endangered ecosystems. This, for the most part, has not been done. Conservationists know which ecosystems should ideally be protected, but they have yet to marry that knowledge with

, Fisheries are notoriously difficult to manage ecologically. That’s because there is little incentive for fishermen to conserve a natural resource that is freely available to all—a market inefficiency known as the tragedy of the commons. But some fishermen do excercise restraint and use conservation practices, such as those aboard the 149-foot pollock trawler Pacific Prince in the Bering Sea off Alaska.

Photograph by Corey Arnold

Stanford Social Innovation Review / Spring 2015

a full understanding of the role of economic and political forces in determining which of those ecosystems can realistically be saved.

Nature is threatened by human pressure that comes in economically diverse forms, including logging, mining, oil and gas extraction, farming, dams, and the networks of wires, tubes, roads, and canals built to enable all these businesses. Trying to conserve nature without understanding this diversity and the economic forces that drive each of them makes protecting ecosystems into more or less a matter of luck and intuition. The industries threatening nature vary in both their profitability and the efficiency of the markets in which they operate. This article examines how conservationists can be more effective in preserving nature by using conservation economics to understand both of these dimensions and use that understanding to shape their strategy.

Understanding Opportunity Costs

Conservation economics uses various branches of economics—such as environmental, agricultural, energy, transportation, and natural resources—to make effective plans and strategies to achieve conservation goals. One of the core concepts of conservation economics is “opportunity cost,” the price (or at least a large fraction of it) of conserving stuff, measured as the potential profits that would have been earned by enterprises that were prevented from operating because they are incompatible with conservation. Individuals, and society as a whole, give up those potential profits when they conserve.

For example, soybeans and oil palm, both highly profitable on certain lands, threaten to sweep away vast areas of forest and grasslands in the Amazon River Basin. The opportunity costs of preserving that land in its natural state are the potential earnings that soybeans and oil palm

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would generate, minus the value of the other types of economic activity that the region generates in its natural state, such as eco-tourism.

One of our research projects in the Ecuadorean rainforest found that oil palm profits could be as much as ten times those from other crops.3 It turns out that outbidding soybeans or palm is the most costly proposition possible. Foundation and development agency funding for Amazon conservation averaged $206 million a year from 2007 to 2013.4 Brazil’s soybean harvest in the 2012 to 2013 growing season was projected to have a gross value of about $41 billion.5 Profits are, of course, a fraction of that towering figure, but still likely to be a factor of 10 larger than all government conservation spending in the region.6 If going after the most profitable economic activities (i.e., the ones with the highest opportunity cost) doesn’t make sense, what about going after the least profitable causes of pollution and environmental degradation? Intuitively that might make sense, but it raises the risk of spending political and financial capital conserving areas that aren’t subject to any threat. The voluntary payment for an ecosystem service program in Costa Rica, for example, has been criticized precisely for handing out money to people who have no intention of converting land to other uses.7 The Costa Rican scheme pays landowners a fixed sum per acre of forest preserved. According to economists, however, much of the land covered is so steep, remote, or infertile that it has an opportunity cost of zero—it would yield no profits if converted to agriculture.

To generalize, ecosystems whose conservation opportunity costs are moderate—high enough to be threatened, but not so high as to be unaffordable—are good targets for preservation. Unthreatened areas whose opportunity costs are likely to become positive in the near future are also worth conserving now, because conservation can’t be bought piecemeal at the margin on an annual basis at the point when opportunity costs are at some sort of optimal value.

Protecting ecosystems is a “forever” proposition. As long as the arrangements through which it’s done match that timeframe, conserving land that will become threatened soon is smart.

Beyond Opportunity Costs

Although opportunity costs are an important factor for conservationists to consider when deciding when and where to intervene, they are not by themselves adequate. That’s because opportunity costs are measured on a single, quantitative scale that treats all threats to the ecosystem as qualitatively equal. They’re not. The economy doesn’t operate as smoothly and efficiently as many economists theorize. In fact, industries are subject to all sorts of inefficiencies—open-access, externalities, policy distortions, and monopoly.

Conservationists can exploit these inefficiencies to make better use of their limited resources to preserve habitat and stop pollution.

Where there are inefficiencies there are constituencies for change, because relatively large groups of people are losing more than they’re gaining from those industries. Take, for example, the case of a proposed Brazilian federal highway in the state of Amazonas. The road would have directly benefited only a small number of settlements, but it might have caused widespread deforestation and, because of its high cost, lost more than $100 million. The high financial cost of the road created broad opposition to the project, well beyond the small number of dyed-in-the-wool conservationists, leading to its eventual cancellation.

Three types of inefficiencies in particular can be exploited to

John Reid is founder and president of Conservation Strategy Fund, an organization focused on bringing economics skills and analysis to conservation professionals and organizations. He has been working as a conservation economist for 20 years in a variety of tropical countries and in his native Northern California.

Alfonso Malky is Andes technical manager for Conservation Strategy Fund, overseeing the research and analysis program across four tropical Andean countries. He is based in La Paz, Bolivia. Malky previously worked in the governmental Unit for Social and Economic Policy Analysis in La Paz, a think tank within the Treasury Ministry.

Aaron Bruner is a senior economist at Conservation Strategy Fund, where he is in charge of economic research. He is based in Washington, D.C. He was previously director of economics and planning at Conservation International.

further conservation. The first two are market failures, whereas the third stems from government distortion of markets that might otherwise be efficient. The first inefficiency is open access to common resources, known as the tragedy of the commons. It is called a tragedy because groups of people hurt themselves in the long run by overusing something—such as fish or antibiotics—in the short run.

The second type of market inefficiency is externalities. This term refers to effects people have on other people, effects that don’t cost (or benefit) the person who causes them. They can be either positive or negative. Think of second-hand cigarette smoke or keeping bees that pollinate someone else’s crops.

The third type of inefficiency is government failure. The state sometimes interferes in otherwise efficiently functioning markets with subsidies, restrictions on trade, or other policies that cause people to produce more of something than they would otherwise.

Sugar subsidies have caused Florida real estate that the free market would have left in the Everglades to be used for cane production.

Greening the Commons

One of the best-known inefficiencies is the tragedy of the commons.

Groups of people, acting independently and in their own self-interest, often behave in ways that are destructive to the long-term interests of everyone in the group, including themselves. Take fishermen, for example. In general, fishermen have insufficient incentives to steward fish stocks because they can’t own wild fish. If a fisherman leaves a fish in the water to let it grow and reproduce, someone else is very likely to catch it. So people fish and fish and fish, until fish are so scarce that the cost of catching them dips below the price they’ll fetch. If fishermen notice they’re no longer making money, they will desist.

Low stocks, high costs, and zero profits characterize this equilibrium.

There are two well-known alternatives to this effort-maximizing level of fishing. One maximizes fish and the other maximizes profit.

The first is known as maximum sustained yield. It corresponds to a medium-sized fish stock that grows at the maximum possible rate.

That growth, or annual yield, is what fishermen can harvest year after year. The highest growth occurs when there is a lot of reproducing stock, but not so much that the biological niche the species occupies becomes saturated.

As good as maximum sustained yield sounds, it maximizes neither human nor environmental well-being. If people, as a group, fish less, their cost per fish caught falls because fish are more plentiful and easier to catch. The extra profit more than compensates for the smaller volume harvested until an optimal, profit-maximizing level of effort (maximum economic yield) is reached. At that point, target

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species, and species vulnerable to by-catch, are more abundant, contributing to ecosystem function and to (sometimes monetizable) services in addition to that of feeding people.

Making fisheries sustainable is a matter of limiting fishing. These limitations take several forms: designating certain areas as no-take reserves; setting overall catch limits, often with rights to shares of the catch distributed to fishermen in tradable quotas; and seasonal closures to enhance reproduction and restrictions on the sort of gear that can be used. What distinguishes the inefficiency of common-pool resources is that correcting it increases benefits to the resource users, not just to the environment-appreciating public at large. Reducing effort from the collapse-inducing level to that of maximum sustained yield or, better, maximum economic yield, makes fishermen richer and the environment healthier. It is a true win-win.

Researchers estimate that $50 billion could be saved annually by avoiding overfishing and related inefficiencies.8 But just because something’s a good idea, one that delivers benefits to the protagonists and to society at large, doesn’t mean it will happen. Fisheries are devilishly hard to reform. Some people lose when fishing is cut.

Cheating is especially rewarding when most of the community is laying off the stock. So managing fisheries requires lots of community cohesion and monitoring. And waiting. There’s a lag between when people start to fish less and when they get to catch more. Politicians often cannot sell delayed gratification. In the face of the opportunity for the win-win of fisheries reform, they commonly wrest defeat from the jaws of victory, enacting policies such as subsidies for boats and gear that push fish stocks closer to collapse.

Minimizing Negative Externalities

The second type of inefficiency is externalities, the additional costs (or benefits) of an organization’s economic activity, such as pollution, that are not paid for by the organization that created them. In other words, the costs are passed off to others: “externalized.” One of the primary positive roles that government plays is managing the externalities to the benefit of society and of business.

Overfishing, as we said, has both internal financial inefficiencies and external environmental ones. Fishermen suffer along with the rest of us from their environmentally destructive behavior. But what happens when those destroying the environment do so at little or no cost to themselves? Clearing a forest to generate profits from wood, food, and fuel involves costs, such as lost game, beauty, building materials, and carbon storage, that fall on other people. The logger’s levels of production are inefficiently high from a social perspective, but entirely sensible from his own. In these situations, the logger isn’t a natural member of the constituency for change.

Of course there are some win-win opportunities. Energy efficiency investments, for example, reduce the need for an input that is both financially and environmentally costly. It’s unclear what share of national and global conservation goals can be achieved without any cost, but we venture to say that it’s small. Sooner or later, curbing externalities is a zero-sum game. Miners have to spend real money to reduce air and water pollution. Farmers must forgo profitable planting to set aside biological corridors. In order to make those choices voluntarily, the miner or farmer needs to be convinced that a worse alternative is in store if she doesn’t act: that either the market or the government is going to punish her for generating externalities.

Because the polluter has no economic interest in resolving the problem, she must be either forced or incentivized to make a change.

That is the role that the government plays, either by enforcing standards or by creating incentives. Coercion can be affected through a performance, technology, or ambient standard. Using the example of pollution, a performance standard specifies how much of a pollutant can be emitted, a technology standard mandates the gadget by which emissions must be controlled, and an ambient standard dictates the air quality that must prevail in a certain location. In the case of a dam, a performance standard would mandate the minimum flow of water that has to be sustained downstream of the barrier, a technology standard would require a fish ladder, and an ambient standard would specify the minimum fish population to be maintained.

Incentives can take the form of subsidies to companies for accomplishing the standards rather than requiring them outright, or by collecting extra taxes if these conditions aren’t met. Government can also require companies to possess a permit to emit contaminants. Incentives can also be offered by one private party to another, as in many payments for ecosystem service schemes. The advantage of incentives over uniform standards is that they encourage those people to deliver environmental performance who can do it least expensively, so the overall financial pain society endures to keep a clean environment is minimized. The main pitfall is that it’s so inexpensive for some people to conserve habitat that the incentive is actually wasted on them because they had no plans to develop their land or emit pollutants.

As an alternative to regulating externalities, environmental advocates can partner with companies, urging them to do the right thing voluntarily. There are several common reasons firms take on environmental costs voluntarily. One is to dissuade the government from imposing even more costly regulation. A second and related reason is to lead regulation by innovating and showing by example what the new regulation should be. The first business to do this can create a competitive advantage by making its own technology the industry standard.

Further, capital-intensive environmental protection measures can create a barrier to entry in the industry, favoring large incumbents.

A third reason that companies partner with environmentalists is that some company owners, not just executives, genuinely want to protect the environment. Public companies sometimes have activist shareholders who campaign for better environmental performance.

And among private companies there are ample examples of familyowned firms with an environmental ethic that drives company policy.

Private timber companies such as Collins Pine and Lyme Timber, for example, were among the first big US landowners to embrace forest certification, which can impose additional costs associated with growing older, more biodiverse forests.

Voluntary corporate practices can shift industry culture over time so that market access is simply restricted to suppliers whose production is, for example, free of deforestation and child labor, or certified by one of the non-governmental systems such as the Forest Stewardship Council, Marine Stewardship Council, or LEED. Environmental stewardship can be a strategy for differentiating products, few of which are true commodities, and avoiding pure price competition. Absent regulation, however, or the threat of it, “engaged” firms will generally have insufficient market coverage to prevent other companies from destroying the environment in the process of producing soy, beef, palm oil, timber, rice, and other commodities.

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Exploiting Market Inefficiencies

Up to this point, we’ve focused mostly on ways to change corporate behavior in relatively competitive markets. But what if markets aren’t competitive? Competition is the bedrock of economic efficiency, but the inefficiency of uncompetitive or monopolistic markets can actually be exploited for conservation. In contrast to the other examples of inefficiency presented in this article, in some instances the conservation opportunity lies in the inefficiency itself, not in stamping it out.

The relevant thing about monopolists, for our purposes, is that they can control overall supply and, therefore, prices. The only checks on monopoly power are anti-trust action, used to prevent unnatural monopolies, and public utilities commissions, which regulate prices in natural ones. Because monopolists control prices, they can take on additional environmental costs without actually paying for them.

That may sound bad, but it’s really an opportunity. Yes, consumers pay these added costs, but they get the benefit too, in the form of a cleaner environment, more nature, and preserved biodiversity. Electricity is a good example. Government is the gatekeeper in setting environmental standards and prices, and it can compel society at large to pay the environmental costs caused by our consumption. In fact, government can prescribe how the cost of protecting the environment is divided among power users and utility shareholders. What’s important is that buyers of this service can’t flee the environmental costs, no matter what share is reserved for them.

Sustainability roundtables in the soy and oil palm industries, two crops that are responsible for a large amount of tropical deforestation, may present another such opportunity. Their members include growers, buyers, and social and environmental advocates, and their standards include environmental rules. In economic terms one could say they are a cartel formed to internalize environmental costs and build them into the price of their product.

Careful analysis is needed to determine whether soybeans and palm oil pass through a sufficiently narrow funnel of market concentration that leakage is contained, and are subject to a credible threat of environmental regulation. But let’s say the palm oil market is put on an entirely sustainable footing and that new lands are no longer being deforested to plant the crop. That would be a monumental conservation victory, but a fleeting one unless further steps are taken. Removing the most profitable crop as a competitor for forestland reduces pressure, but it also makes the land less expensive for all other uses, some of which may be profitable and destructive. Absent government regulation or ownership, the land is still at risk in a crop-by-crop approach.

Eliminating Government Inefficiencies

The last inefficiency is the kind created by government. We’re not referring to the daily inefficiencies that ordinary people encounter, such as excessive paperwork. Instead, we’re referring to the inefficiencies that happen when governments get involved in markets, as investors or regulators, and make them work worse, not better.

Governments don’t have to make a profit, which is a good thing.

It enables them to pay for education, health care, and national defense, collective and redistributive good works for which it’s hard to get reimbursed. But this healthy freedom from the bottom line can also be put to perverse uses, ones that are socially inefficient and environmentally destructive. To understand this concept, consider these three examples: farm, fish, and infrastructure subsidies.

To feed a larger and more affluent population, world food production will need to increase about 70 percent by 2050. This growth makes agriculture the most acute and chronic threat to terrestrial (and some marine) ecosystems over the next several decades. As problematic as this is, governments make it worse by subsidizing crops that farmers wouldn’t otherwise plant. Cheap credit, price floors, biofuel standards, input subsidies, and crop insurance are all taxpayer-funded measures that reduce the financial risks or increase the net revenues associated with farming. Such policies bring economically marginal, but sometimes biologically phenomenal lands, into agricultural production.9 Not all agricultural supports are bad. Farming is inherently risky, and crop failure is inevitable but unpredictable. Risk pooling is essential to guarantee the food supply, but there is no reason the government should pay for it. In the United States the government pays twothirds of crop insurance premiums, encouraging farmers to overbuy it for marginal lands where losses are likely. In many countries, the disproportionately loud voices of farming and ranching constituencies divert public funds to what could otherwise be fairly efficient markets. One of the most important policy priorities conservationists should pursue is eliminating farm subsidies that subtract from economic growth and from the stock of natural habitat. Fish subsidies are another example of governments making a difficult problem worse.

Researchers estimate that fish subsidies total between $25 billion and $29 billion per year worldwide.10 An estimated 60 percent of the incentives are in the form of fuel subsidies. Part of this misallocation of public money results from domestic competition for handouts and part from a drive to make a country’s fishing fleets more competitive.

The temptation for governments to misspend money on big infrastructure projects can also be overwhelming. By “misspend” we mean spending more on projects than they generate in economic benefits. Some bad projects are built in the sincere but mistaken belief that they will add to national wealth. In other cases construction firms or land speculators will successfully lobby for white elephant

The Cost of Human Activities in the Amazon Region UNSUBSIDIZED SUBSIDIZED

CONSERVATION OPPORTUNITY COSTS

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OPEN ACCESS

Responsible oil drilling

La Guitarra Dam

Illegal gold mining

Oil palm crops

Illegal logging Inambari Subsistence crops Dam

$0

Paquitzapango Dam

Pucallpa-Cruzeiro do Sul Road ENVIRONMENTAL COSTS

Stanford Social Innovation Review / Spring 2015

projects that benefit them at taxpayer expense. In still other instances local beneficiaries can win approval of government investments, such as roads and bridges, that don’t make economic sense.

A distinction should be drawn here between two of the biggest forms of infrastructure affecting natural habitat: roads and dams.

Roads usually conform to the scenario we just outlined: a few local people reap the benefits of projects whose financial and environmental costs, such as biodiversity loss and climate change, are spread widely. Taxpayers may never even be aware of the projects.

In contrast to most roads, hydroelectric dams in natural areas concentrate environmental costs on local people, flooding land and putting resources out of reach. Financial costs are paid by the same electricity buyers who get the benefits. This difference in the distribution of costs and benefits matters when conservationists devise strategies to prevent ill-conceived projects.

Targeting Conservation Efforts

To understand how conservation economics and destructive inefficiencies can help guide preservation priorities, consider the following examples from the Amazon region of Peru. The region is home to rich and diverse ecosystems, but like many other parts of the Amazon River Basin, it is threatened by an array of potentially destructive human activities, including dam building, mining, oil production, and farming.

The challenge for conservationists is to figure out where and when to intervene. One way to help is to create a chart that depicts the tradeoffs these threats pose. (See “The Cost of Human Activities in the Amazon Region of Peru” on page 52.) The environmental costs of human activities are on the horizontal axis, and the conservation opportunity costs are on the vertical axis. The precise placement of the dots is debatable, but their relative position can yield conservation insights.

At the upper right corner is illegal gold mining in the Madre de Dios region, an activity that generates huge environmental externalities in the form of permanent forest destruction and the poisoning of rivers. Its conservation opportunity cost is also high, because it generates elevated profits without the help of subsidies. Lower in both opportunity and environmental costs is oil palm, which is expanding swiftly in the San Martín and Ucayali regions, displacing forest as it goes. Small-scale cultivation of subsistence crops, such as maize and rice, can be equally destructive, because it destroys forest. Profits, however, are typically low, reducing its opportunity costs.

Three proposed dams in the region show a range of environmental and opportunity costs.11 The Paquitzapango and Inambari dams are both on the very edge of profitability, so forgoing them imposes minimal opportunity costs, but the former would inundate more than twice as much land and displace three times as many people per unit of installed generating capacity. La Guitarra dam is both more profitable and less destructive. Subsidies are not a given for these projects and would not be needed for the most profitable of them, but tax breaks and subsidized credit are common for large infrastructure investments.

Oil production is largely in the planning stages. The dot is placed to the left to reflect a scenario of “responsible” extraction in which the direct footprint of an oil operation is extremely small relative to the scale of the investment and profits. Keeping environmental costs low requires vigilance. Spills must be prevented, pipelines built safely, access roads controlled, and care taken to avoid harming local communities.

We also included the proposed road from the regional capital of Ucayali, Pucallpa, to Cruzeiro do Sul, in the Brazilian state of Acre.

Our analysis found the road to be a money-loser just on the basis of its transportation costs and benefits, and to present elevated risks of deforestation and impacts on indigenous people.

The chart reveals several things. First, it shows that there are some low-hanging conservation opportunities—avoiding construction of the road and two of the dams, and providing incentives to contain the spread of subsistence farming. These are projects that conservationists should probably target first. Illegal logging presents a possibility of bringing production within a controlled system of property rights, which exists in Peru, but is bypassed because of inadequate monitoring in the field. In contrast, the high conservation opportunity cost of curbing illegal gold mining explains why the government has used military intervention, and even then had limited success. Despite its impact on the environment, conservation efforts on this issue should be minimal compared to more “winnable” issues, such as stopping roads from opening up new areas to mining. Oil holds the potential to generate profits at a low environmental cost, but government, environmental advocates, and the companies themselves need a lot of hard work to bring this potential to fruition.

Conservation economics has a central role in directing conservationists’ time and energy to their best use in safeguarding the planet’s unique ecosystems. Finding the destructive inefficiencies in the markets driving environmental threats can steer conservationists toward the best opportunities, especially in combination with knowledge of the opportunity costs of conservation. By integrating conservation economics with insights on culture, politics, and, of course, biology, the chances of successfully preserving our planet begin to look pretty good. n N ote s

1 http://conservationeasement.us 2 Norman Myers, “The Biodiversity Challenge: Expanded Hot-Spots Analysis,” Environmentalist, 10.4 (1990): 243-256. Norman Myers, “Threatened Biotas: Hot Spots in Tropical Forests,” Environmentalist, 8.3 (1988): 187-208. Norman Myers et al., “Biodiversity Hotspots for Conservation Priorities,” Nature, 403.6772 (2000): 853-858. Thomas M. Brooks et al., “Global Biodiversity Conservation Priorities,” Science, 313.5783 (2006): 58-61.

3 M. Aguirre, D. Leguia, and A. Malky, 2013. “Costos de Oportunidad de Evitar la Deforestación en el Área de Amortiguamiento de la Zona Baja de la Reserva Ecológica Cotacachi Cayapas (RECC), Conservation Strategy Fund, La Paz, Bolivia, 2013.

4 Gonzalo Castro de la Mata and Sait Riega-Campos, “An Analysis of International Conservation Funding in the Amazon,” Gordon and Betty Moore Foundation, Palo Alto, Calif., 2014.

5 http://www.agricultura.gov.br/politica-agricola/noticias/2012/12/valor-da-producao -de-soja-pode-chegar-a-rs-104-bilhoes-em-2013 6 Carlos Eduardo Frickmann Young et al., “How Green Is My Budget? Public Environmental Expenditures in Brazil,” 2012.

7 G. Arturo Sánchez-Azofeifa et al., “Costa Rica’s Payment for Environmental Services Program: Intention, Implementation, and Impact,” Conservation Biology, 21.5 (2007): 1165-1173.

8 Kieran Kelleher, Rolf Willmann, and Ragnar Arnason, “The Sunken Billions,” World Bank, Washington, D.C., 2009.

9 Christopher K. Wright and Michael C. Wimberly, “Recent Land Use Change in the Western Corn Belt Threatens Grasslands and Wetlands,” Proceedings of the National Academy of Sciences of the United States of America, vol. 110, no. 10 (2013): 4134-4139.

10 U. R. Sumaila et al., “A Bottom-Up Re-Estimation of Global Fisheries Subsidies,” The Journal of Bioeconomics, 12.3 (2010): 201-225.

11 http://conservation-strategy.org/sites/default/files/field-file/csf_policy_brief_ 16_en .pdf

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D emyst i f y i ng c om p l ex so c i a l i s s u e s by b ri n g i n g to g e th e r th o u g h t l e a d e rs t o i nsp i re , i nfor m a n d a c ti va te re a d e rs towa rd s o c i a l g o o d .

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Stanford Social Innovation Review / Spring 2015

Insights From the Front Lines

The Embedded Enterprise To reach base-of-the-pyramid markets, entrepreneurs need to align their business models with customers’ lives.

By Ted Ladd

Illustration by Mikey Burton

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ntrepreneurs who operate in impoverished regions of the world face a quandary: Even though the need for their products and services is enormous, the challenge of bringing those products and services to market can be nearly insurmountable.

Without access to mass media or even mass communications, entrepreneurs have no ­established channels through which to reach potential customers. Few of those customers, meanwhile, are accustomed to evaluating new products. But a handful of ventures that serve communities at the base of the ­pyramid (BOP) have overcome this challenge by embedding their solutions into the circumstances that define and give structure to their customers’ lives.

Take, for example, the field of electricity. There are 1.6 billion people in the world without consistent access to electrical power. Centralized power grids, moreover, are groaning under the pressure of inadequate capacity and chronic under­ investment. In response to those conditions, hundreds of entrepreneurs have started companies that offer “distributed” electricity. These companies use sources like solar and hydropower to generate electricity and then deliver it directly to homes or even entire villages without touching a central grid.

In 2013, I began a research project with the goal of exploring business models that would explain successful ventures in the distributed electricity field. For the project, I interviewed 30 entrepreneurs who sell electricity in some form to customers in remote rural regions of Africa, the Caribbean, East Asia, and South Asia. They might offer a solar-powered lantern for a single room, for

example, or a generator that uses discarded agricultural waste to generate power for an entire village.

I started with the Business Model ­Canvas, a popular tool for teaching high-growth ­entrepreneurship to business school students. Using the tool involves a multi-step process: Define discrete customer segments.

Analyze the product benefits that will appeal to each segment. And specify the channels, revenues, and costs that will enable a venture to target those segments. As I conducted interviews, it became clear that this process did not match the experiences of BOP-oriented electricity entrepreneurs. Indeed, one entrepreneur told us that he doesn’t engage in segmentation at all; instead, he simply focuses on serving any customers he can find.

That response proved to be typical, and the logic behind it soon became evident:

Because the market for distributed electricity is so vast, new entrants can easily find unoccupied market space and therefore face almost no competition. Similarly, most people in BOP communities are already familiar with electricity and its potential to provide increased output, comfort, and safety. So entrepreneurs do not need to place a heavy emphasis on honing and communicating a core value proposition. Electricity, unlike many other products and services, already enjoys significant pent-up demand within BOP markets.

Perhaps the most unexpected insight to emerge from these interviews involved the entrepreneurs’ view on pricing. In developed markets, pricing strategies typically focus on value, cost-plus-margin, or a reference price set by competitors or substitutes. Ventures that sell electricity in BOP markets, by contrast, tend to emphasize affordability: They strive to keep prices low by making changes to their business model or their product ­design (or, in some cases, by tapping outside funding sources).

From this project, in short, I learned that theories and strategies that apply to mature markets are often ill-suited to the realities of entrepreneurship in BOP markets. After reviewing the first set of interviews that I conducted, I recalibrated my expectations. Instead of trying to verify what I already believed, I resolved to look at the interview data from a “blank slate” perspective. In that way, I was able to derive new principles for developing business models that would be relevant in a BOP setting.

NOVEL MODELS

As I analyzed the content of my interviews with social entrepreneurs in the electricity field, a theme began to emerge: Successful BOP ventures, I concluded, embed their solutions into customers’ lives in one of four ways.

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Stanford Social Innovation Review / Spring 2015

Ted Ladd is a professor of Internet and social e­ ntrepreneurship at Hult International Business School. ­Previously, he served in several technology companies, including Equilibrium Power, HOMER Energy, Palm, Inc., ­ and WIMM Labs.

Social networks | Some entrepreneurs ­ esign business models that rely extensively d on social networks to generate demand, to deliver products, to collect payments, and even to conduct post-sales service. Solar Sister, for instance, employs more than 850 women in remote villages in Nigeria, ­Tanzania, and Uganda to sell solar lanterns to their neighbors. These micro-entrepreneurs go to a central location where they purchase the lanterns from the company at a wholesale price. They then distribute those products to customers using their personal connections. Katherine Lucey, founder and CEO of Solar Sister, explains how the process works: “We help them do a map: ‘Here’s you. Now, who is in your family? How about your husband’s cousins? Draw a picture of your social network.’”

This model has some interesting benefits. The micro-entrepreneurs don’t ­follow a set script. Instead, they draw on their knowledge of a potential customer’s circumstances and tailor their marketing message accordingly. They might emphasize the value that a solar lantern provides in allowing people to work after dark, or they might stress how safe the product is in comparison with kerosene lamps. Because they live near their customers, moreover, they are able to handle repairs, returns, and other forms of post-sales service more efficiently.

Activity cycles | Successful BOP ventures don’t try to alter the daily habits of potential customers. Instead, they work to integrate their products into customers’ existing routines and activities. That’s what Jamie Yang, CEO of EGG-energy, did in rolling out an early version of his business. In the villages of Tanzania, people have traditionally purchased kerosene a few times per week: They travel to a village marketplace and refill their kerosene jug when they have enough disposable income to do so. Following that model, EGG-energy sold solar-charged batteries that consumers could connect to an electrical device at home. Each battery had enough power to last a few days, and customers would then have to return it—just as they would return an empty kerosene jug.

(Later, as customers began to understand the potential of solar energy, EGG-energy shifted its model to one that involves selling residential solar kits.)

Mental models | Effective entrepreneurs who serve BOP markets understand the need to accommodate their customers’ mental models—the preconceptions that shape how customers view and describe their needs and desires. Instead of attempting to alter such mental models, these entrepreneurs adapt their business models to fit what customers are used to. Simpa Networks, for instance, sells home solar systems in India at a very low upfront cost and then charges customers a fee for each hour of light that a system delivers. To design and sell this “light time” model, the company has drawn on the ­established model of selling cellular airtime. Simpa even borrows language from cellular carriers’ marketing and service messages to communicate with its customers.

“The closer that you mimic what either the telecom operators do with prepaid mobile airtime or the satellite TV companies do with their pricing model, the easier it is for people to understand,” says Jacob Winiecki, cofounder of Simpa.

Indeed, as the cost of residential ­solar panels declines and as the usage of cell phones increases, several firms that sell electricity services are shifting to this model.

EGG-energy (cited earlier) is one example. Another is Angaza Design, a company that has created a platform to support “pay as you go” energy products. The platform allows customers to use their cellphones to buy electricity in small, prepaid increments. Victoria Arch, director of strategy at ­Angaza, had initially expected customers to balk at adopting that payment model. But because of customers’ comfort level with using their cellphones, she reports, that has not been a problem.

Product constellation | No commercial ­offering exists in isolation. For that reason, companies that succeed in reaching BOP customers often take care to fit their solution into the constellation of products that customers already own. One firm in my study,

Bboxx, offers electricity-generating equipment that works seamlessly with electricityconsuming items that are already common in the BOP households that form its target market. Electric power on its own, after all, is worthless; only when customers also have appliances that use electricity does that service become life-altering. Bboxx provides a catalog of appliances—from cellphone chargers to refrigerators—for purchase alongside its generator products. ­Christopher BakerBrian, a cofounder of the company and its CTO, notes that high-efficiency lights, mobile device chargers, and television sets are among the more popular purchases that Bboxx customers make. “We initially focused on lighting and phone charging,” he says. “But people wanted TVs and power shavers.” The company’s largest market, he adds, includes “people who want to generate an income from these products.” Bboxx also focuses on selling generators and appliances that will be interoperable with other devices that its customers might already use.

BEYOND “BOP”

Creative entrepreneurship in BOP markets is vitally important not just because it can help lift billions of people out of poverty, but also because it generates lessons that apply to social ventures in the developed world.

Entrepreneurs everywhere, for example, should consider structuring their ventures around in-person social networks that give them access to high-value, high-touch referral systems. Instead of trying to alter customers’ habits, entrepreneurs could adapt their delivery and usage models to mesh with customers’ routine activity cycles. Marketers, meanwhile, should steer clear of newfangled terms and should instead frame their value proposition with reference to customers’ existing mental models. Designers, for their part, should develop and test new products in a context that reflects the current product constellation of their customers. In sum, even companies that operate in mature markets can improve their performance by adapting their business models to suit the habits and behaviors of their customers. n

Illustration by Mikey Burton

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Stanford Social Innovation Review / Spring 2015

Adventures in Adaptation One funder’s willingness to shift course strategically has been crucial to sustaining a decade-long education initiative.

By Anne B. Stanton & Alison Powell

Illustration by Mikey Burton

A

daptation in philanthropy is ­easier said than done. It requires funders to embrace a new way of thinking and acting. Philanthropy, moreover, lacks the kind of market-based feedback system that drives adaptation in the for-profit world. But the value of pursuing more adaptive approaches to philanthropy has become more salient in recent years. The Linked Learning initiative in California, we believe, offers useful insight into how adaptive philanthropy ­occurs in practice.

Linked Learning is a core investment of the James Irvine Foundation. Over the past decade, the foundation has invested more than $100 million in this initiative. The journey began in 2005, when Irvine started looking for ways to expand opportunities for young people in California—those from low-income backgrounds, in particular—as they make the transition to adulthood. To further that objective, the foundation fastened its attention on the Linked Learning educational approach, which combines rigorous academic work with career and technical education. (One of us, Anne Stanton, has overseen Irvine’s investment in Linked Learning. The other, Alison Powell, is part of a team at the Bridgespan Group that has provided research and consulting support for the initiative.)

The results are inspiring: Linked Learning participants graduate from high school and enroll in college at higher rates, and they earn more money in the workforce, than peers who have not benefited from this model. Linked Learning, moreover, is changing the California education system: What started as a pilot program in a

handful of schools has evolved into a broad effort to tap $500 million in competitive grants from the state of California. All along, we aspired to achieve that sort of impact. But getting to this point required us to remain flexible and to adapt nimbly to changing circumstances.

ANCHOR ELEMENTS

Implementing an adaptive strategy requires a funder to follow certain core principles. The funder must anchor its work in a compelling goal that is backed by solid research. In addition, it must identify the right role to play in advancing toward that goal.

At Irvine, our support for Linked Learning began with a research finding: It’s well known that attainment of a post-secondary degree is critical to earning a living wage later in life. This research was the basis for

setting an anchor goal for the foundation’s youth program: to enable all ­California students to earn a post-secondary credential by the age of 25. Rather than set forth a firm “theory of change” to accomplish that goal, the Irvine team invested in an array of promising approaches. That ­experimentation led us to focus on the critical importance of enabling young people to be both college-ready and career-ready. (A ­decade ago, when we began this journey, few funders in the education reform community were talking about college and career in an integrated way.)

The idea for this anchor goal originated partly from the experience of Anne ­S tanton, who joined Irvine as the new leader of its youth program in 2003. Anne had previously run Larkin Street Youth ­Services, a nonprofit that focuses on transforming the lives of homeless young people.

At Larkin Street, she had seen how education opportunities that are simultaneously rigorous and connected to career aspirations could motivate young people. She had come to believe, therefore, that any effort to transform outcomes for young people must incorporate a curriculum that links getting an education with pursuing a career. When she arrived at Irvine, Anne understood that a fundamental challenge with such an approach would be to confront the stigma associated with traditional vocational education. To do so, she and her colleagues would need to identify and support programs that successfully combine college-level academic preparation with equally challenging careerthemed education.

For Irvine, the next step was to establish a suitable role for the foundation to play in advancing the new anchor goal. How could it support leaders who were rallying around the idea of

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Stanford Social Innovation Review / Spring 2015

Anne B. Stanton is a program director at the James Irvine Foundation and has principal responsibility for its youth ­ program. Alison Powell manages the philanthropy practice of the Bridgespan Group.

The authors would like to thank Susan Wolf Ditkoff, co-lead of the philanthropy practice of the Bridgespan Group, for her contribution to this article.

“college and career readiness”? How could it help to build a strong field of organizations, all of them dedicated to pursuing this goal in California? Ultimately, for the majority of young people in the state to have access to career-themed, college-level learning, three elements would need to be in place: credible evidence that this model could enable any young person to succeed; support for schools and districts to transform their educational systems; and a statewide policy that would enable low-income young people to benefit from the model. At Irvine, leaders decided that the role of the foundation would be to serve as the “glue” (to use their word) that holds those elements together.

To determine the initial needs of this emerging field, Irvine in 2005 funded a study by MPR Associates (an ­e valuation organization that is now a part of RTI ­I nternational). MPR advised Irvine to found a stand-alone organization that would serve as a “hub for innovative practice, policy, and research.” In response to that advice, Irvine made a $6 million grant to create ConnectEd, an organization that became the anchor institution around which the field could rally.

a California public university, and to graduate from high school.

At that point, the foundation could have simply focused on adding more schools to the program. But in assessing the first phase of the initiative, it found that individual schools had attained success in spite of what occurred at the district level. There were no district policies in place that would expand Linked Learning opportunities to large numbers of additional students.

So, in partnership with ConnectEd, ­Irvine supported an initiative that ­enlisted nine school districts (with a collective student population of 115,000) to adopt the Linked Learning approach. An evaluation of this initiative showed that although performance varied among districts, the strategy as a whole was achieving positive results. But in light of Irvine’s long-term goal for the initiative, delivering good results at the scale of just nine districts would not be sufficient.

From implementation to advocacy | In 2008, Irvine established the Linked Learning ­Alliance, a statewide advocacy coalition that brings together educators, business leaders, and community organizations. In doing so, the foundation aimed to move beyond merely supporting district-level programs and to build a shared sense of purpose among alliance members. Thanks in part to the coordinated action of those members, the California legislature in 2011 created the Linked Learning Pilot, an effort to help 63 school districts (with a total of more than 600,000 students) implement the Linked Learning approach. Although the measure included no direct funding for programs, it counts as the first major statewide success for that approach.

Toward a regional strategy | To take advantage of early policy wins, the Linked Learning field needed to develop structures that could support accelerated expansion while ensuring fidelity to its proven model.

At this point, a new challenge came into view: Linked Learning seeks to promote both college and career success—yet education is organized at the district level,

PIVOT POINTS

Since launching the Linked Learning initiative, Irvine has stayed true to its goal and to its role. But along the way, the foundation also made three significant pivots that illustrate the practice of adaptive philanthropy.

From the school level to the district level | ­Irvine’s support for this field started locally,

with a demonstration project that funded a network of 16 schools, nonprofits, and ­occupational programs to deliver rigorous, career-themed education to a few thousand students. After the first year of that effort, Irvine commissioned an independent evaluation to assess what worked and what did not. The evaluation found strong results: Students who received Linked Learning support were more likely than peers who did not receive that support to pass the California High School Exit Exam as sophomores, to complete the requirements for admission to

whereas economic structures typically extend across city and county boundaries.

Leaders at Irvine and its partner organizations, therefore, concluded that a regional approach would best reflect how labor markets and industries interact with the educational system.

The push for a regional strategy paid off in July 2013, when the California Legislature approved the formation of the California Career Pathways Trust, a competitive fund that supports regional consortia in their efforts to develop systems that will prepare young people for college and career success.

The legislature initially funded the trust at the level of $250 million but later doubled that amount.

To take advantage of the newly available funding, Irvine worked with both new and existing regional Linked Learning consortia to help them submit proposals to the trust. These regional entities bring together school districts, companies, community organizations, and postsecondary educational institutions for the purpose of implementing a coordinated Linked Learning strategy.

More than 120 consortia applied for the trust grants, and 40 of them received funding in May 2014. The trust will announce a new round of grants early this year.

As we look back at a decade of grantmaking in the Linked Learning field, we might be tempted to view it as a logical progression: First test and refine the core model in a small group of schools. Then expand it to the district level. Then garner statewide support and funding. Then adopt a regional approach in order to forge real-world links between the state’s education system and its economy. But 10 years ago, we did not lay out such a plan. Had we done so, it would have been a waste of time—and it would have been counterproductive. Instead, Irvine set out to act as the institutional glue for a diverse set of partners as they collectively responded to challenges and took advantage of evolving opportunities. Looking ahead, the foundation and its partners will trust the process of adaptation to guide them. n

Illustration by Mikey Burton

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Stanford Social Innovation Review / Spring 2015

School for Scaling A highly focused effort in Kenya to treat worm infections in children delivers lessons on expanding a proven program.

By Jessica Harrison

Illustration by Mikey Burton

I

n 2009, more than 5 million Kenyan schoolchildren were at risk of parasitic worm infections. Parasitic worms compete for the nutrients that children need to survive and thrive. Worm infections can impair cognitive growth, decrease school attendance, and even affect children’s long-term earning potential. The debilitating impact of worm infections can last a lifetime. For many years, worm infections were so common among children in Kenya that people considered them to be a rite of passage. Wellintended organizations delivered deworming treatments, often in an ad-hoc fashion, to people in various parts of the country. But there had been no coordinated effort to solve the worm infection problem nationwide.

Then, six years ago, the government of ­K enya took an unprecedented step: It launched the National School-Based ­Deworming Program, a comprehensive ­effort to treat all at-risk children in the country. The program leverages the existing infrastructure of the nation’s schools and engages teachers in delivering treatment to children in the areas where soil-transmitted parasites are endemic. In taking that approach, the program built on a strong foundation. Researchers, through the use of studies that included randomized controlled trials, had established a solid evidence base for the benefits of deworming and for the cost-effectiveness of school-based treatment.

Equally important, the launch and implementation of the new program depended on a partnership that included entities from multiple sectors: the Kenyan Ministries of ­Education and Health; the Children’s ­I nvestment Fund Foundation (CIFF), a

London-based philanthropic organization; the END Fund, a group that focuses on fighting neglected tropical diseases; and the ­Deworm the World ­Initiative, a coalition that is now led by ­Evidence Action. (Last year, I joined ­Evidence Action as associate director of the Deworm the World Initiative.)

Fast-forward to 2014. That year, the school-based deworming program treated more than 6.4 million children for soil transmitted helminths (STH) and more than 890,000 children for schistosomiasis. It did so, moreover, at a cost of just 56 cents per child. The impact of this intervention was equally impressive: Over a two-year period, according to independent monitoring conducted by the Kenya Medical Research Institute, the prevalence of STH declined by 68 percent and the prevalence of schistosomiasis dropped by 77 percent.

“We are very proud of the program in this country,” says Margaret Okemo, acting director of basic education at the Ministry of Education, Science, and Technology. “It has surpassed all the targets we have set.”

Rachael Nyamai, head of neonatal child and adolescent health at the Ministry of Health, notes that partnership was the key to success: “None of us can do it alone. In [the Ministry of Health], we have the technical know-how, but the teachers know the children, and neither ministry has the resources, so we need the other partners.”

MANY PARTNERS

Multi-sector partnerships are certainly not new in international development. But the story of Kenya’s National School-Based ­Deworming Program demonstrates the potential for using such partnerships to manage evidence-based, results-oriented programs at a large scale. It shows, in particular, that the right form of collaboration can prevent the kinds of turf battles that sometimes arise in complex multi-sector initiatives. “We’ve benefitted from the willingness of our donors to collaborate, not compete,” says Karen Levy, director of global innovation at Evidence ­Action. (She served as the point person for the Deworm the World Initiative from 2009 to 2013, when it was a project of Innovations for Poverty ­Action.) Interviews with people at each partner organization yield lessons for others who aim to scale up a program that requires coordination among multiple groups.

Take a long-term approach |

The deworming program received five-year funding commitments from CIFF and the END Fund. That arrangement allowed program partners to focus on the long game, rather than having to demonstrate quick and potentially superficial wins in order to obtain funding ­every year. As a consequence, the

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Stanford Social Innovation Review / Spring 2015

Jessica Harrison is associate director of the Deworm the World Initiative, a program of Evidence Action. Evidence Action is a nonprofit organization that works to scale up proven development solutions.

partners could develop metrics for success that centered not on completing project plans or hitting pre-determined milestones, but on increasing treatment coverage. They could also make course corrections without penalty or fear of losing funding. “We could address challenges as they arose, and [we had] the freedom to adapt,” Okemo explains.

Initially, for example, the program relied on people who work as town announcers to support community mobilization. But monitoring data revealed that the announcers were not effective in that role. So the partners ­experimented with alternative approaches and eventually decided to engage community health workers in building public awareness.

That approach helped scale up treatment and also improved relations between the health and education ministries.

Support government leadership | The ­National School-Based Deworming Program is a government initiative, and government ownership of it is essential to sustaining its impact over the long term. In fact, people at the highest level of the Ministries of Education and Health are accountable for the success of the program. (The Ministry of Health now has a performance contract that takes the deworming program into account, and the ministry has begun to evaluate staff members on their ability to achieve deworming targets.) But for the program to be successful, other partners must work actively to enable government leadership. These partners’ role, Levy says, is to “help the government overcome structural barriers to implement the program effectively” and to “provide the government with technical inputs.” At the same time, the partners need to allow the government to occupy centerstage.

In a multi-sector, government-led initiative of this kind, the most suitable partners are those that combine access to resources with a willingness to remain out of the spotlight.

Use data to inform decision-making | Partners in the deworming program—both on the funding side and on the technical side—share a commitment to data-driven decision-making. “There was a commonality in our DNA from day one,” says Warren Lancaster, senior vice president of programs

at the END Fund. Levy, similarly, notes that an important role of Evidence Action today is to help officials in the Ministries of Health and Education base program decisions on solid data. As a group, the partners collect a significant amount of quantitative and qualitative data as part of their effort to improve treatment delivery. Independent monitors, moreover, evaluate both teacher training and deworming efforts in order to assess overall program quality. Their work generates data that give partners a true representation of program performance. With all of these data in hand, partners can engage in collaborative decision-making about training, community mobilization, and other issues.

Invest in governance structures | The crosssector, multi-partner nature of the program raises particular challenges. The Kenyan Ministries of Health and Education, for example, use entirely separate management information systems, have distinct budgets, and follow different planning schedules. For that reason, the partners invested upfront in governance structures that clarify the roles and responsibilities of each ministry and of each participating organization. Representatives of the funding groups, the two government ministries, and the Deworm the World Initiative developed a memorandum of understanding that delineates the efforts that each partner will undertake. To keep communication open and to ensure alignment around priorities, the partners also created two governance bodies: a steering committee that oversees the program, and a management committee that works at an operational level with several technical working groups. ­“Everything is planned out in committees, so there is transparency and accountability— and no surprises,” Nyamai says.

ONE POINT OF FOCUS

Programs like the one pursued in Kenya have a high potential for replication. Early this year, the government of Ethiopia launched a nationwide school-based deworming program in that country. Similarly, the national and state governments of India recently announced a national program that will target 241 million

children who are at risk for parasitic worm infection. As the partners in Kenya have learned, implementing a program on that kind of scale requires careful design and an efficient delivery system. It also requires a commitment to pursuing a single clear objective.

The National School-Based Deworming Program was designed to expand nationally by leveraging existing infrastructure and by breaking traditional barriers between the health and education sectors. One great success of the program is the discovery that schools can be a platform for achieving results at a large scale. Previously, few people had seriously considered the idea of training teachers to distribute a simple treatment to children in their classrooms. Today, teacher training and the distribution of deworming treatments both occur through a cascade process that starts at the national level and continues down to individual schools. Other elements of the program’s scale-oriented design are its highly focused training sessions and its practice of delivering messages to teachers that are clear and direct.

From the outset of the program, the partners worked to pursue a goal that involved a well-defined problem: Simply put, they sought to increase the coverage of deworming treatment to a point where intestinal worm infections would no longer pose a public health threat in Kenya. Early on, the partners avoided the common practice of integrating the deworming treatment with treatments for other neglected tropical diseases. Nor did they try to bundle that treatment with related interventions—delivering micronutrients, for example, or providing health education. Taking that approach has enabled the program to reach more than 6 million children in nearly 16,000 schools.

It also paves the way for scaling up more complex interventions in the future.

Focusing on a single narrow goal, rather than attempting to achieve several goals at once, has created a situation in which all partners clearly understand what success looks like. “We’re not solving every problem. We focus on what’s proven to work,” Levy says. n

Illustration by Mikey Burton

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Training in Progress A program at Credit Suisse helps high-level employees—and valued clients—to master the art of nonprofit board service.

By Lalita Advani & Julia Chu

Illustration by Mikey Burton

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ost successful companies recognize the value of motivating employees to contribute their time and talent to benefit their community. Often, however, company leaders grapple with the question of how to maximize the benefits of corporate involvement in volunteer efforts of that kind.

In 2009, the Credit Suisse Americas Foundation completed a strategic review of its various programs. One of the main findings of that review was that although the foundation had succeeded in engaging junior-level employees in hands-on volunteer projects, there was an opportunity to increase the number of senior-level, clientfacing employees who participate in volunteer efforts. To do so, the foundation would need to find a compelling way to engage those senior employees and to help them use their skills on behalf of their community.

At the same time, we and others at Credit Suisse became aware of a different (but, as it turns out, closely related) issue: Nonprofits desperately need high-quality, high-level human capital. In a survey that was part of the BoardSource Nonprofit Governance Index (published in 2010), 27 percent of nonprofit CEOs and executive directors reported that they did not have the right board members to govern their organizations effectively.

Here, we recognized, was an opportunity for our employees to meet a critical social need.

In conducting research on peer organizations, we found that although some companies offered board placement programs, very few provided robust training in how to serve on a nonprofit board. The need for such training is strong. In the 2010 BoardSource survey, only 56 percent of board members

said that they were well informed about their legal and governance responsibilities.

To help our employees overcome that knowledge gap, we launched the ­Nonprofit Board Training Program.

In developing our program, we drew on the expertise of several organizations: BoardSource, the Robin Hood Foundation, Quantum Governance, and the United Way’s BoardServeNYC program. We ­followed a two-pronged approach. One part of the program would target senior employees, and the other would serve mid-level employees.

Recognizing the different skills, motivations, and financial giving potential of these two groups, we believed, was essential to the success of the program overall.

The content of the Nonprofit Board Training Program focuses on the need for integrity and transparency. Among

the topics covered in training sessions are ­fiduciary oversight, conflicts of interest, and nonprofit financial literacy, as well as the importance of strategic planning. In those sessions, we also highlight the personal commitment that board service requires, and we encourage employees to conduct due diligence on the financial and skills capabilities that they would need before joining a nonprofit board. We also make financial grants available to employees who become nonprofit board members.

The Nonprofit Board Training Program has exceeded our expectations. We found that by aligning our volunteer programs with employees’ most valuable skills, we could equip and motivate them to make long-term, high-impact contributions as nonprofit board members. Along the way, we also learned that by extending our board training to clients, we could align our interests more closely with theirs: We could enhance the social impact of their philanthropic and volunteer work—and benefit our business as well.

ENGAGING EMPLOYEES

Today, five years after starting our program, we have trained more than 800 employees across seven cities in the Americas and have completed more than 100 board placements. (Many employees who go through the program find board placements through other channels.) According to data gathered for 2013, board service constitutes 15 percent of total hours volunteered by our employees, and nonprofit board members volunteer five and a half times as many hours as the average Credit Suisse volunteer.

We have learned some important lessons from the program. First, we learned that employees’ passion for a particular cause is what inspires them to dedicate their

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Lalita Advani is head of community engagement at the Credit Suisse Americas Foundation. Julia Chu is head of Private Banking North America Philanthropy at Credit Suisse.

Disclosure: Private Banking North America is a business in Credit Suisse Securities (USA) LLC (“CSSU”). CSSU is a US regulated broker dealer and invesment adviser. Neither CSSU nor the Private Banking North America business in CSSU is a chartered bank, trust company, or depository institution. CSSU is not ­authorized to accept deposits or provide corporate trust services, and it is not licensed or regulated by any state or federal banking authority. The information in this article is for educational purposes only and is intended to provide a general overview of the topics discussed. CSSU does not provide, and nothing contained herein should be construed as, tax, accounting, or legal advice. CSSU accepts no liability for losses arising from the use of the material presented.

time to board service. By giving our people the tools and resources to serve in this way, we are able to build a more engaged workforce and to strengthen our connection to senior, client-facing employees in particular.

Second, we have found that through their board service, employees are developing new skills that they can apply to existing or new roles at Credit Suisse. Consider Michele ­Cubic, a managing director who joined the board of SCO Family of Services, a social services organization based in New York City.

“My work on the board and its strategy committee helped me learn to take a more critical view on how a company’s strategy develops,” Cubic says. “This helped propel me to my next leadership role at Credit Suisse, as head of Americas Investor Relations.”

Joining a nonprofit board also allows employees to integrate their charitable efforts more completely into their client work. Doug Healy, for example, is a managing director who serves on the board of the Eagle Academy Foundation (EAF), which runs a network of public schools in the Greater New York Area. “I see the board training I received and the placement at Eagle as a tangible and valuable benefit that Credit Suisse has provided to me,” he says.

“My board service has also allowed me to strengthen connections with some of my senior clients, most of whom are passionate philanthropists.”

Third, we found that employees are using their business skills to steer the long-term strategy of the organizations for which they serve as board members. Many of them have taken on roles such as board president or chair of a committee that focuses on finance, development, or strategic planning. “I have been the treasurer and head of the finance committee for EAF since 2011,” Healy says.

“At Eagle, I am using the same skills as I do in my day job. I have been able to work in partnership with the staff to bring more structure to Eagle’s budgeting and reporting processes.”

In some cases, employees have helped a nonprofit to make a difficult decision.

One senior employee, a managing director,

describes the challenge that confronted him soon after he joined the board of a school: “It was clear that my organization was in steep decline and in need of a major turnaround. I led the effort to replace the current leadership and developed a transition plan to appoint a new head of school, so that we could begin the hard work of restructuring the school.”

From nonprofits, meanwhile, we have heard about the significant impact that board members from Credit Suisse are making. Take the example of Stephen Dundon, director at Credit Suisse, who serves as president of the board of Rebuilding Together NYC, a nonprofit that supports low-income neighborhoods and affordable housing preservation in New York City. “Stephen has been remarkable over the past five years,” says Kimberly George, executive director of the organization. “Under his leadership, during a two-year span from 2012 to 2013, Rebuilding Together NYC went from one staff member to eight, from a budget of $360,000 to $2.5 million, and from less than 20 rebuilding projects per year to more than 100 projects. Stephen has ensured that processes are in place to respond to the great demand for our services.”

ENGAGING CLIENTS

We learned something else: The demand for training in board service is widespread.

In conversation with Peter Skoglund, vice chairman of Private Banking North America at Credit Suisse (he also serves on the board of the Credit Suisse Americas Foundation), we discovered that the firm’s relationship managers and their clients had a deep interest in the topic of effective nonprofit board governance. Inspired by the success of our training program among employees, we extended it to serve our private clients in 2012.

The connection between our work with private clients and their board service may not be readily apparent. After all, a wealth advisor’s core capability involves the management of financial assets. In our view, however, comprehensive wealth management must also encompass the philanthropic

interests of clients—especially given the amount of time and capital that they devote to those interests. Educating clients on board governance helps them improve not only their performance as civic leaders but also the financial sustainability of the organizations they support. By offering coaching to current and prospective clients, we solidify our relationships with them.

Our board training workshops also enable our relationship managers to distinguish themselves as advisors who are committed to the success of local nonprofit organizations. More generally, our thought leadership in effective nonprofit board governance bolsters the Credit Suisse brand, reinforcing our reputation as a principled partner both in business and in the communities where we operate.

We continue to develop and expand our board training program. We plan, for example, to extend the program to private clients between the ages of 20 and 35. People in this group often express interest in impact investing and social enterprise, but they seldom have any experience or training in nonprofit board service. Understanding topics such as prudent management and long-term planning will be critical to their success in navigating the landscape of philanthropy.

In 2013, according to CECP (formerly known as the Committee ­E ncouraging ­Corporate Philanthropy), only 47 percent of companies had board leadership programs in the location where they are headquartered. (And many, if not most, of those ­programs offer only placement services.

They do not feature a training program.)

There is an opportunity for more companies to adopt this practice in order to generate greater social and business impact.

Nonprofit board service is an effective way for corporate ­employees to make a meaningful, long-term contribution using their professional skills. By extending their philanthropic activities to their clients, moreover, companies can not only augment the impact of their clients’ philanthropic ­efforts, but also improve client relationships and enhance their corporate reputation. n

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Stanford Social Innovation Review / Spring 2015

ADRIENNE DAY is a journalist based in

H I G H L I G H T S F R O M S C H O L A R LY J O U R N A L S / B Y A D R I E N N E D AY

PHILANTHROPY

If It Does Good, Feel It oes a good deed count as truly “good” if doing it makes you feel better? Can an act be genuinely “altruistic” if it’s not purely selfless? Philosophers have debated that question ever since the time of Plato. Now a team of researchers has undertaken an empirical study of that existential quandary. The question that they investigate puts a slight twist on the age-old philosophical problem: If a good deed yields positive emotional benefits for the person who does it, does our awareness of those benefits alter our perception of that person’s moral character?

Deborah A. Small, associate professor of marketing and psychology at the Wharton School at the University of Pennsylvania, says that benefiting from altruism does have a “signal value” that affects how others view an altruistic act. She and her fellow researchers make a distinction between emotional benefits (the positive feelings that arise from doing a good deed) and material or reputational benefits (receiving a tax break, say, or a flurry of Facebook “likes”). “Emotional benefits are viewed very differently from other types of benefits,” says Small. “In fact, the other types of benefits lead to a discounting of altruism, whereas emotional benefits are seen as part and parcel of what altruism is.” So the more emotion that a person brings

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to a benevolent act, the more “moral” others will deem that person to be—a finding that contradicts the common view that altruism is entirely selfless.

The researchers also studied whether different emotions send different signals about altruistic behavior. Do people, for instance, view empathy as a more positive signal than they do distress? Yes, says Small, but that doesn’t mean that they regard distress as a negative signal. On the contrary, the more distress that a person feels, the more likely other people are to view that person as moral.

“[People think] that empathy is more generous than distress, but they aren’t opposites in the way that altruism and selfishness are opposites,” Small explains. “If you’re distressed, you’re probably empathic, and if you’re empathic, you’re probably also distressed. So both [of those emotional states] are positive signals.”

To investigate this set of issues, Small and her colleagues conducted a series of six experiments. The research team recruited participants via Amazon Mechanical Turk, an online task service, and presented them with various scenarios. In one scenario, participants had to evaluate the actions of a person who, while reading an article online about hungry families in his community, was given the option to donate money to a local soup kitchen. The researchers told participants that the person would receive some kind of benefit if he made a donation. When the promised benefit was material or reputational, participants said that they would view the person as more moral if he did not expect it than if he did expect it. But when the benefit was emotional, the opposite was true: Participants attributed a higher moral character to him if he anticipated receiving such a benefit than if he did not anticipate it.

David G. Rand, an assistant professor of psychology, economics, and management at Yale University, suggests that the researchers’ findings highlight the role that positive emotions play in motivating people to help

New York City. She has written for numerous publications, including City Limits, the New York Times, and the Village Voice.

one another. “If you’re emotionally engaged with giving, you are more willing to give, no matter what. But if you are giving only for some kind of reputational or material benefit, then whether you give in the future totally depends on the situation and whether there are material benefits to be had,” he says. “You’re only a conditional helper.” ■ Alixandra Barasch, Emma E. Levine, Jonathan Z. Berman, and Deborah A. Small, “Selfish or Selfless? On the Signal Value of Emotion in Altruistic Behavior,” Journal of Personality and Social Psychology, 107, September 2014.

E D U C AT I O N

A “Value Added” Evaluation sing students’ test scores to assess the efficacy of their teachers— a method known as the “value added” (VA) approach—has become increasingly prevalent in recent years. It has also become increasingly controversial.

Critics suggest that it’s neither fair nor accurate to base teacher evaluation on the performance of students who bring widely varying skill levels to a classroom.

They also question whether having a high-VA teacher is pertinent to students’ long-term wellbeing. In a pair of linked papers, three researchers—Raj Chetty, John N. Friedman, and Jonah E. Rockoff—investigate both of those criticisms.

In the first paper, the researchers seek to determine whether the VA method captures the true effect that teachers have on students. To test the

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possibility that high-VA teachers benefit from having better students in their classroom, the research team developed a way to measure the discrete effects that teacher quality and student quality have on test scores. The researchers found that the VA method does correctly adjust for difference among students.

In the second paper the research team tackles the other issue raised by critics: Does higher teacher quality (as measured by VA) have a positive long-term impact on students’ outcomes in adulthood? Or do high VA scores for teachers simply reflect their ability to help students do well on tests? To investigate that question, the researchers used data from a large school district on students who were in grades 3 through 8 between 1989 and 2009. They then linked those data with data from tax records for the years 1996 to 2011. They were able to align about 90 percent of the school data with corresponding tax data, and that combined data set allowed them to track about one million

children from elementary school to early adulthood (age 28).

The researchers used two research methods to estimate the long-term effect of teacher quality. In one method, they looked at cross-sectional comparisons between classrooms.

In the other, they focused on the effects of teacher turnover.

(What happens, for example, when a high-quality teacher is replaced by a lower-quality teacher?) With both approaches, they found that high-VA teachers had a measurable effect on variables such as lifetime earnings, college attendance, and teenage birth rates. For students in a given classroom, for example, a one-standard-deviation improvement in teacher VA raised the probability of college attendance at age 20 by about 0.85 percentage points.

“We find that good teachers are incredibly valuable,” says John N. Friedman, a professor of economics at Brown University.

“Replacing an average teacher with a great teacher is the same thing as depositing hundreds

of thousands of dollars into the future bank accounts of the children in a class.”

Andy Baxter, vice president for educator effectiveness at the Southern Regional Education Board, calls the researchers’ two papers on teacher quality “hugely pivotal” and says that he cites them frequently. “They show that what we are doing really does matter in tangible and measurable ways that are long lasting,” he says. “The research base is probably as strong as it has ever been in supporting policies like VA and [in showing] the impact of good teaching on student outcomes as adults.”

Baxter notes that this research appears just as a backlash has taken hold against teacher evaluation approaches such as VA. “The public outcry [against focusing on test scores] is probably at its highest right now,” he says. In response to that point, Friedman cites several alternative applications of the VA method. Educators might use it to measure the quality of teacher training programs, for example. Or they might draw on VA techniques to reward outstanding teaching performance. “Traditional VA has been thought of as ‘We are going to fire the bad teachers,’ and I think there’s a role for that,” Friedman says. “But there are a ton of ways that VA can be used both to improve the quality of teaching and to recognize excellence.” ■ Raj Chetty, John N. Friedman, and Jonah E. Rockoff, “Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-Added Estimates” and “Measuring the Impacts of Teachers II: Teacher ValueAdded and Student Outcomes in Adulthood,” American Economic Review, 104, September 2014.

C O L L A B O R AT I O N

Sharing the Stage he venture philanthropy movement, although it found inspiration in Silicon Valley, took hold differently in the United States from how it did in Europe.

Venture philanthropy, or VP, applies the principles and tools of venture capital investing to the social sector. Early US-based proponents of VP quickly came into conflict with practitioners of traditional philanthropy, or TP, and made little headway in advancing their model. In Europe, by contrast, the founding of the European Venture Philanthropy Association (EVPA) in 2004 began a process that led to mutual understanding and collaboration between VP and TP practitioners.

Two scholars, Johanna Mair and Lisa Hehenberger, offer an in-depth look at how members of EVPA were able to bring together two dissimilar models that shared similar goals.

“Initially, there was quite a lot of opposition between VP and TP, as VP pretended to be a new solution and as people defending TP saw VP as a threat,” says Hehenberger, research and policy director at the EVPA. “But over time, this changed into [an arrangement of] mutual coexistence.” Hehenberger joined EVPA in 2010, after concluding most of her research on this topic. (Mair, a professor of organization, management, and leadership at the Hertie School of Governance in Berlin, is also

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academic editor of Stanford Social Innovation Review.)

The researchers studied archival data, conducted interviews with members of TP and VP organizations, attended meetings with leaders of the VP movement, and observed every event organized by EVPA over the course of nearly a decade. They discovered, according to Hehenberger, that EVPA’s ability to serve as a mediating organization was critical to the formation of spaces where proponents of the two models could work out their differences.

Instead of trying to subvert the use of TP as a philanthropic model—a tactic that may have helped derail VP efforts in the United States—adherents of VP in Europe pursued change more gradually. The result was a hybrid approach to institutional philanthropy.

At events such as EVPA’s annual conference, organizers created two kinds of “stages” for attendees. There was a “backstage,” as Mair and Hehenberger call it, where people engaged in invitation-only, behind-thescenes interactions. And there was a “front stage,” which consisted of open-to-the-public,

highly visible gatherings. In the backstage arena, Hehenberger explains, “actors” felt safe to “take off their masks” and to break down their respective models into specific operational practices. Here, VP and TP proponents would share stories of failure and success. Then, in their front-stage interactions, they would recombine those practices into a new VP model.

In essence, they co-developed that model. “This is why the resistance [between VP and TP] decreased,” says Hehenberger.

“They experimented in the backstage, and then went back to the front stage and presented [their findings to a larger audience], and then deconstructed [those findings] again in the backstage.”

Deirdre Mortell, CEO of Social Innovation Fund Ireland and former CEO of the One Foundation, has firsthand experience with representing VP organizations and working closely with TP groups in the backstage arena. Such forms of collaboration work, she contends, because they provide a safe environment where people can focus on common goals as well as personal relationships.

“What’s so powerful about this

paper is that it spans a number of years and a wide range of countries, organizations, missions, and grants,” Mortell says.

“That’s quite a data set from which to draw conclusions.”

Hehenberger suggests that scholars and practitioners can apply insights from this research to other fields in which a new institutional logic has the potential to replace an existing institutional logic. She cites, by way of example, quickly changing fields like nanotechnology and robotics. “We see that [conflict] doesn’t have to happen,” she says. “Two logics can coexist and actually work in symbiosis.” ■ Johanna Mair and Lisa Hehenberger, “Front-Stage and Backstage Convening: The Transition From Opposition to Mutualistic Coexistence in Organizational Philanthropy,” Academy of Management Journal, 57, 2014.

H E A LT H

Ends and Means ew things in life are as certain as death. Yet few topics are as fraught with uncertainty as the question of when to let a severely ill person die. At a time when the cost of end-of-life care continues to rise exponentially, a wide range of stakeholders—doctors and patients, politicians and advocates, policy wonks and academics—debate constantly over the morality of limiting end-of-life medical treatment.

Roi Livne, a doctoral candidate in sociology at the University of California, Berkeley, argues that there is no simple trade-off between the treatment of dying patients and the

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rationing of scarce resources.

Instead, our approach to this issue reflects a social development that he calls “the moralization of economic scarcity.” In a recent paper, he examines that development by focusing on the history of the US hospice movement.

Beginning in the early 1970s, according to Livne, the hospice movement emerged as a force on behalf of ideas that ran counter to mainstream views on death and the role of the medical profession. Hospice advocates, for example, emphasized the value of avoiding over-treatment and the virtue of facilitating an acceptance of death.

“Their motivations were fundamentally moral,” says Livne. “[They] were very concerned that dying patients were not treated appropriately—that doctors treated patients regardless of the chances that a treatment would succeed.” Until the early 1980s, the hospice movement was a small grassroots effort run primarily by volunteers.

Then Congress approved legislation that allowed Medicare to cover hospice services, and a new industry began to develop around end-of-life care. That shift, Livne argues, extended the argument about minimizing end-of-life treatment from a moral plane to an economic plane. “When you treat less, you spend less,” he says. Over time, the economic and moral aspects of the issue converged, making it possible for people to view financial constraints in a morally positive way.

To study this process, Livne combined historical inquiry with ethnographic fieldwork. He conducted formal interviews,

Stanford Social Innovation Review / Spring 2015

worked at a nonprofit hospice organization, and read widely about the growth of the hospice movement from the 1960s to the 1980s. He also reviewed the congressional hearings that led to the passage of legislation that, in effect, created the for-profit hospice industry.

Today, Livne notes, forprofit organizations dominate the hospice field, and that development has had far-reaching consequences. The longer a patient stays in hospice, the more money a hospice organization earns. The average length of stay for patients in for-profit hospice facilities, moreover, is much longer than it is for those who receive care from nonprofit organizations—which suggests

that some for-profit organizations cherry-pick patients in order to maximize revenue. In any event, Livne argues, the field would have evolved differently if the hospice movement hadn’t developed and promoted a moral outlook on the treatment of

dying patients. Leaders of the movement “convinced enough people that it had the answers,” he says. As a result, a consensus formed around the view that limiting investment in end-oflife care could be both economically prudent and morally sound.

J. Donald Schumacher, president and CEO of the National Hospice and Palliative Care Organization, agrees that hospice care is a fundamentally moral endeavor, but he takes a somewhat different view of how economic considerations factor into end-oflife care. “If you are providing patients and their families with the most appropriate information about the true nature of their illness, and if they dis-elect the most aggressive therapy, there naturally will be a cost savings,” he says.

“But saving money is not necessarily the goal.” ■ Roi Livne, “Economies of Dying: The Moralization of Economic Scarcity in U.S. Hospice Care,” American Sociological Review, 79, 2014.

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September 9-10, 2015 | Stanford University | ssireview.org/npinstitute “One of the best conferences I have ever attended. Nice, thoughtful mix of speakers, content (both theory and case examples), and delivery.” - 2014 Attendee

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MICHAEL WEINSTEIN is senior vice president and chief program officer of the Robin Hood Foundation. He has a doctorate in economics from the Massachusetts Institute of Technology.

REVIEWS OF NEW AND NOTABLE TITLES

Past Isn’t Always Prologue REVIEW BY MICHAEL WEINSTEIN

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his is a book about poverty and the ways in which people have made sense of it,” Daniel Immerwahr writes in the first sentence of the preface to Thinking Small.

But in the book, he has almost nothing to say about actual poverty, nor does he analyze the impact of specific poverty-fighting strategies.

Instead, he rummages through a mass of scholarly, popular, and political discourse— discourse that spans several continents and several decades—which, he contends, illuminates an epic debate between centralized and decentralized development policies.

If to the proverbial hammer, all objects take on the appearance of a nail, then to Immerwahr, every utterance—every work of fiction, every polemical message, every ideological musing—takes on the appearance of an argument about the proper scale of social and economic development. In one corner are the centralizers. They call for dams, irrigation systems, and other large-scale, top-down forms of modernization. Immerwahr actually doesn’t write much about them; instead, they serve as a backdrop to his argument.

In the other corner are the decentralizers.

They call for community organizing projects, bottom-up hygiene initiatives, and other efforts to bring “power to the people.” They are the focus of attention here.

Immerwahr takes the reader on a grand tour of (largely unsuccessful) community development experiments in India, the Philippines, and the United States between the 1930s and 1960s. Along the way, he conducts side trips to China, Vietnam, and elsewhere.

His accounts of those experiments are often fascinating, either because they cover unfamiliar territory or because they tie familiar details together in a surprising manner.

I lapped up every word of these accounts.

Indeed, the most interesting chapters in Thinking Small document examples of

THINKING SMALL: The United States and the Lure of Community Development Daniel Immerwahr 253 pages, Harvard University Press

community organizing gone haywire. In India, community development, rather than empowering the local poor, resulted in oppressive alliances between government officials and local elites. In the Philippines, community development served the purpose of counterinsurgency, not economic development.

But Immerwahr never makes clear exactly where his grand tour leads. He discusses episodes and ideas without offering any analysis to help us make sense of them. If his purpose is modest—to make readers aware of the mid-20th-century origins of community development theories that are reappearing in current debates—then he succeeds. But if his purpose is to convince readers that today’s policy discourse takes too little account of the failed infatuations of an earlier generation of policy makers, then he only partially succeeds.

That’s because he provides no test of the allimportant word “too” in “too little account.”

If readers expect to learn something about economic development or poverty alleviation, then this book will disappoint them. Immerwahr does not marshal evidence on behalf of one anti-poverty strategy or another. If cliometric historians err on the side of applying formal theory and quantitative methods, then he errs in the opposite direction—toward a reliance on theoryfree anecdotes. He presents his anecdotes

skillfully, and they are valuable in their own right. But anecdotes don’t add up to arguments. Immerwahr never clearly states and tests a proposition. Nor does he set forth facts in a way that would allow others to test or refute his take on history.

Immerwahr’s review of mid-century discourse on issues related to community development glides over a broad array of scholars, policy makers, politicians, and other luminaries. Here’s a sampling, listed in no particular order: Mahatma Gandhi. Saul Alinsky (community organizer). Jimmy Carter. Gunnar Myrdal (economist). Mary Parker Follett (social worker and organizational theorist).

Frederick Jackson Turner (historian). Max Shachtman (Marxist theorist). Frederick Winslow Taylor (management consultant).

Norman Rockwell (painter). Sinclair Lewis (novelist). Edgar Lee Masters (poet). David Riesman (sociologist). Herbert Gans (sociologist). Y.C. James Yen (Chinese educator).

Jane Jacobs (urban theorist). Huey P. Newton (cofounder of the Black Panther Party).

The sweep of these references—and there are many more—is truly stunning. But Immerwahr never explains the criteria that he has used to decide which voices to include.

Immerwahr, writing as a historian, warns us against embracing policies that have failed in the past. Fair enough. But do readers today need that reminder? No one comes away from the literature on economic development and thinks that experts in the field fall into neat camps—centralizers versus decentralizers, or dam builders versus community organizers. Readers who sift through the writings of economists such as Abhijit Banerjee, Jagdish Bhagwati, William Easterly, and Joseph Stiglitz will not conclude that any of them claims that there’s a proven way to cure entrenched poverty.

Economists who write on this subject don’t feel compelled to choose between dam building and local organizing. Some dams make sense. Others do unspeakable harm.

Some local development works. And some local development doesn’t. Life does not present policy makers with a simple choice between “modernization,” in the form of

Stanford Social Innovation Review / Spring 2015

THOMAS A. KOCHAN is the George M. Bunker Professor at the MIT Sloan School of Management and co-director of MIT Institute for Work and Employment Research.

top-down infrastructure projects, and community development. Instead, they need to ask probing questions: Which dam? What kind of dam? Which community? What kind of development? To brush aside local initiatives comes perilously close to being glib. Consider the Millennium Villages Project, an initiative that the economist Jeffrey Sachs is overseeing in sub-Saharan Africa. Sachs’s work may wind up saving millions of lives. Or his efforts may prove fruitless. Immerwahr’s treatise, operating at 30,000 feet in the air, offers no insight on how to evaluate such projects.

That said, although we don’t need Immerwahr to remind us that polices based on localism will not pave an obvious route to progress, we can nonetheless prize his detailrich historical overview of this topic. Thinking Small offers no clear argument for readers to digest. But perhaps the bounty of material that Immerwahr has gathered will become grist for someone else’s intellectual mill. ■

A More Perfect Union?

REVIEWED BY THOMAS A. KOCHAN

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n Only One Thing Can Save Us, Tom Geoghegan joins the growing chorus of voices who have called for a fundamentally new approach to empowering workers in the United States. Salvation, in his view, can come only from rebuilding the labor movement—rebuilding it from the ground up and in ways that aren’t chained to the ossified doctrines of current labor law or the bureaucratic structures of existing unions.

Geoghegan presents this argument with the passion and energy that many of us have come to expect from him. He’s a highly regarded labor lawyer and a loyal, principled warrior for worker’s rights. His vibrant, conversational style makes you feel as if you’re talking with him during a long, caffeine-fueled visit to his favorite coffeehouse. Drawing on his experience in fighting legal battles for workers, he offers thrilling

ONLY ONE THING CAN SAVE US: Why America Needs a New Kind of Labor Movement Thomas Geoghegan 255 pages, New Press

tales of success and (more often) failure.

Unlike many of his labor law brethren, he has come away from these battles not discouraged by defeat but open to new ideas.

Only One Thing starts with a call to make joining a union a civil right. Under that doctrine, the same penalties that apply to firing people because of their race, sex, or age would apply to firing people for organizing a union.

Taking this step would have several benefits.

First, it would impose real economic costs on employers who violate the law. (The remedies available to fired organizers under current labor law are practically meaningless.) Second, it would strike fear into managers because they would be subject to the court-ordered “discovery” of information about their hiring and firing decisions.

Third, it would give workers control over whether to bring legal action against an employer. (Today, they can do so only with the support of a union or the National Labor Relations Board.) This idea isn’t new. Back in 1994, when I was a member of the Dunlop Commission on the Future of Worker Management Relations, my colleagues and I discussed it. But the fierce opposition that the idea generated then—and still generates today—suggests that it has enormous merit.

The second idea that Geoghegan offers is more radical: Let the “right to work” doctrine take hold in every state. That way, labor advocates would neutralize the argument that unions force people who don’t want union representation to pay union dues. He acknowledges the problem of “free

riders”—workers who get the benefits of representation without paying for them. But he has a solution. State and federal authorities, he writes, should drop the requirement of exclusive representation, which dictates that a union can bargain for a group of workers only if a majority of those workers support it. When a union gains that status, it suffers the winner’s curse of having to represent all the workers, regardless of whether they join the union. Many labor law scholars have argued that current law permits membersonly representation. Indeed, the United Auto Workers is now pursuing that approach at the Volkswagen plant in Chattanooga, Tenn.

Another idea is to focus not on labor law but on corporate law. Geoghegan argues for testing European-style works councils, which give workers a voice in advising management, and for revising company charters to allow worker representation on corporate boards of directors. At the least, he suggests, workers should be able to sue corporate directors for breach of fiduciary responsibility.

Geoghegan also urges state and federal agencies to use their purchasing power to press companies to comply with labor standards both at home and abroad. In the 1960s, President Lyndon B. Johnson signed an executive order that requires government contractors to take affirmative steps to eradicate racial discrimination in their employment practices. Why not apply the same principle to companies that discriminate against people who want to join a union?

What’s missing from this survey of tactics? Unable to cast off his lawyer’s cloak, Geoghegan fails to see that young organizers and social entrepreneurs are using social media and other new technologies to transform the process of mobilizing people. As he notes, the traditional strike is dead. Instead, labor activism has increasingly become a matter of building public support through media—social and otherwise. But efforts to harness the power of social media for labor organizing have only just begun, and the best ideas for doing so will come not from aging lawyers (or from college professors!) but from the next generation of activists.

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Stanford Social Innovation Review / Spring 2015

PETER FRUMKIN holds the Mindy and Andrew Heyer Chair in Social Policy and is director of the Center for Social Impact Strategy at the University of Pennsylvania.

Those activists are not shackled by the constraints of labor law or union bureaucracy.

Consider the young organizers of the Restaurant Opportunities Centers United (ROC), a group that seeks to mobilize low-wage workers in the food service industry. The organizers insist that ROC is not a union—even as industry lawyers are urging authorities to designate it as one so that they can use current labor law to straitjacket the group.

None of the ideas put forth by Geoghegan is completely original. But it’s great to see a longtime defender and ally of the labor movement take them seriously. Nothing, it seems, is off-limits anymore. ■

Uncertain Legacy REVIEWED BY PETER FRUMKIN

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World of Giving, by Patricia L. Rosenfield, is a very long book that tells a straightforward story of experimentation and evolution in philanthropy. Thoroughly researched and abundantly footnoted, the book chronicles the development of the Carnegie Corporation—Andrew Carnegie’s most important institutional legacy—from its early years to the present. The corporation began with a broad mission to “promote the advancement and diffusion of knowledge and understanding,” and Rosenfield imposes a strong sense of order on the vast range of activities that have defined its work to fulfill that mission.

Rosenfield doesn’t try to be original in how she organizes the book. She does not, for example, deploy clever crosscutting themes or recurring ideas that might illuminate the philanthropic territory that the corporation has traversed. Instead, she adopts a crisp and easy-to-follow structure that breaks the Carnegie storyline into eight periods that extend from 1911 to the present. She begins by discussing some of the confusion and struggle that characterized the corporation in its early days: Carnegie

A WORLD OF GIVING: Carnegie Corporation of New York—A Century of International Philanthropy Patricia L. Rosenfield 738 pages, Public Affairs

had three presidents in its first four years of operation. Then, after moving through periods of by increasing engagement with pressing global challenges, she shifts to the story of several leaders who left their distinctive mark on the foundation.

One strength of the book is that it captures how Carnegie’s 12 presidents have shaped the foundation’s gentle evolution.

Consider Frederick Keppel (1923-1941), who pushed the corporation boldly in a more international direction, or Alan Pifer (1967-1982), who helped professionalize the foundation and open it up to a variety of stakeholders. Later, David A. Hamburg (1982-1997) and Vartan Gregorian (1997-the present) continued their predecessors’ commitment to building a global community of changemakers. Rosenfield ably conveys the importance of leadership in foundations— even though Carnegie, like most of its peers, generally operates in the world at a distance and through its grantees.

Readers who are looking for a tough, analytical approach to the history of a prominent American foundation will find the book somewhat frustrating. It reads at times like a century-long annual report produced by a longtime insider. Rosenfeld starts and ends with the claim that effective foundation giving involves four elements: “significance of mission”; “openness to risk-taking”; “willingness to make long-term investments”; and “openness to collaboration and partnership.”

For a book that devotes 738 pages to the history of one institution, that set of ideas can

only be described as a rather modest collection of takeaways.

There’s nothing wrong with Rosenfield’s narrative approach. At times, though, the book comes across as over-supportive of the Carnegie Corporation—not in a cheerleading way, but in the sense that Rosenfield never really asks tough questions about accountability.

She identifies a few obvious missteps, but on the whole her account focuses on recounting the lofty intentions, grand plans, and complex agendas that Carnegie leaders have pursued.

The book contains surprisingly little discussion of the actual outcomes that resulted from corporation giving.

Dispassionately and in great detail, Rosenfield describes the support provided by the Carnegie Corporation to a wide range of ideas, organizations, and movements: Russian studies programs, the National Bureau for Economic Research, development in Africa, international conflict resolution, the Institute for International Education, the Carnegie Endowment for International Peace, Caribbean women’s empowerment, and on and on and on. In the few cases when Carnegie engaged in active institution creation, its impact seems real enough. But in most other cases, its giving is only a drop in the river of global foundation funding.

Overall, Rosenfield treads lightly when it comes to giving the corporation credit for what its grantees have accomplished.

Another reason for doing so is that Carnegie has frequently acted in partnership with other institutions. As Rosenfield shows, the corporation has collaborated extensively with the Rockefeller and Ford foundations, along with many other funders.

The scholarship on private foundations takes various forms. There are biographies of the great donors, like Ron Chernow’s Titan: The Life of John D. Rockefeller Sr. There are critical assessments of the field and its assumptions, like Mark Dowie’s American Foundations. There are sweeping histories of the entire field, like Judith Sealander’s Private Wealth and Public Life. The history of a single institution is ultimately a more constraining form because it provides little scope for the

Stanford Social Innovation Review / Spring 2015

MARYANN FELDMAN is the Heninger Distinguished Professor in the Department of Public Policy at the University of North Carolina.

intimate details of a biography, the bite of a generalized critique, or the thematic integration of a broad historical narrative.

Within the confines of its approach, however, A World of Giving presents a solid and comprehensive account of the Carnegie Corporation’s institutional development.

Even if it never approaches being a pageturner, the book delivers a masterfully organized array of details regarding the ideas, grants, and initiatives that constitute the foundation’s pursuit of Andrew Carnegie’s open-ended mandate. ■

Misdiagnosing Science REVIEW BY MARYANN FELDMAN

T

he Creativity Crisis takes its title from a 2010 Newsweek article that noted a decline in creativity among American schoolchildren. Roberta B. Ness extends that concept to argue that American society as a whole is unable to address grand challenges because academic science has become too cautious.

The scientific community, for example, has done little to crack the problems of water scarcity, cancer, and obesity. Scientists, Ness contends, could also do more to change the food landscape by helping to improve manufacturing and supply-chain practices. “What if today’s system of science,” she asks, could enable a new generation of innovators “to overcome failures, to avoid the pressures of short-term profits, and to strive for something really audacious?”

Ness, a former dean of the University of Texas School of Public Health and vice president for innovation at the University of Texas Health Science Center at Houston, has previously written two other books on scientific creativity. The first one, Innovation Generation (2012), is a how-to guide for “thinking outside the box.” The second, Genius Unmasked (2013), recounts historical episodes of scientific discovery. Like those works, The Creativity Crisis is aimed at a

THE CREATIVITY CRISIS: Reinventing Science to Unleash Possibility Roberta B. Ness 287 pages, Oxford University Press

general audience. Most of the literature that Ness cites to make her argument is popular rather than scholarly. There is a growing body of knowledge about how to use scientific resources effectively, and references to that research are largely missing from the book.

Ness frames The Creativity Crisis as an inquiry into the organizational, economic, and social factors that inhibit creativity at universities. She organizes the book around three sources of caution that, she argues, limit scientific innovation: the influence of money, social pressure, and an aversion to risk. Each of the book’s three sections includes a chapter that describes one source of caution, two chapters that present further analysis of that impediment, and a fourth chapter that provides recommendations for overcoming it.

In the book, Ness promises to offer new thinking on the topic of scientific innovation, but I did not find much creativity either in her analysis or in her proposed solutions.

Is there really a “creativity crisis” in universities? From where I sit, as a professor who teaches entrepreneurship and innovation, the answer is no. Today, in university labs throughout the United States, there are new ideas in abundance. The word “crisis” strikes too dire a note. And the notion of “reinventing science” (to use a phrase from Ness’s subtitle) suggests a kind of hubris that seems inappropriate.

Solving grand social challenges requires input from all segments of society. More specifically, it requires orchestrated action

by leaders in government, industry, and civil society to support scientific work.

Consider the scourge of HIV/AIDS. In the 1980s, to be diagnosed with that virus was a death sentence. Today, thanks to a series of remarkable scientific advances, HIV/AIDS is a manageable condition. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, observed in 2003 that those advances “represent a model of what can be accomplished when the world’s scientific community is galvanized in a common goal.” But a clear social mandate of that kind is rare. Despite significant research findings on the causes of obesity, for example, there is little social resolve to confront that problem on a large scale.

Ness focuses on the supply side of the scientific enterprise and does not consider the entire system in which scientists must operate. Attributing all of the problems associated with lagging innovation to academic science, she fails to hold stakeholders in industry or government to account.

Although her stated intent is to promote creativity, Ness does little more than document the well-known limitations of academia.

Given that the process of innovation has become more complex and more dependent on multiple actors, dwelling on those limitations may be counterproductive.

Many of the examples in The Creativity Crisis come from the world of commercial innovation. Ness, for instance, suggests that academic scientists should be more like the automaker Henry Ford. She emphasizes his dedication to long-term technological change and his willingness to tolerate shortterm losses. But Ness ignores the fact that Ford was the leader of a for-profit enterprise, not an academic. Certainly, to any academic who is trying to run a lab—and constantly writing grants to do so—the Ford approach will sound great. But scientists respond to incentives, just like anyone else, and the current system incentivizes a preference for caution rather than bold risk-taking. To revise that incentive structure, we as a society need to provide more favorable conditions for the pursuit of careers in science. ■

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I mages that inspire

W

hen a Maasai girl is in her early teens, she participates in a series of rituals that lead to her becoming, in the eyes of the tribe, a woman. In one of those rituals (pictured below) her “girl” hair is shaved off so that her new “woman” hair can replace it. Another ritual still performed by some Maasai, though not by those in the photograph, is female circumcision. It’s a practice that is still performed in many African countries. One of the organizations trying to stop it is Amref Health Care, an NGO that offers a wide variety of health programs throughout Africa. Amref’s approach is to work closely with the Maasai in Kenya to create new rituals to replace female circumcision. One of the new rituals is a ceremony where the girls light candles and declare their dreams for the future, and the parents promise not to circumcise their daughters and to keep them in school. —Eric Nee

Becoming a Woman

Photograph by Anja Ligtenberg

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MUHAMMAD YUNUS

By William Landes Foster, Peter Kim, & Barbara Christiansen

For-profit executives use business models—such as “low-cost provider” or “the razor and the razor blade”— as a shorthand way to describe and understand the way companies are built and sustained. Nonprofit executives, to their detriment, are not as explicit about their funding models and have not had an equivalent lexicon—until now.

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And when dollars become tight, a chaotic fundraising scramble is all the more likely to ensue.1 In the for-profit world, by contrast, there is a much higher degree of clarity on financial issues. This is particularly true when it comes to understanding how different businesses operate, which can be encapsulated in a set of principles known as business models. Although there is no definitive list of corporate business models,2 there is enough agreement about what they mean that investors and executives alike can engage in sophisticated conversations about any given company’s strategy. When a person says that a company is a “low-cost provider” or a “fast follower,” the main outlines of how that company operates are pretty clear.

Similarly, stating that a company is using “the razor and the razor blade” model describes a type of ongoing customer relationship that applies far beyond shaving products.

The value of such shorthand is that it allows business leaders to articulate quickly and clearly how they will succeed in the marketplace, and it allows investors to quiz executives more easily about how they intend to make money. This back-and-forth increases the odds that businesses will succeed, investors will make money, and everyone will learn more from their experiences.

The nonprofit world rarely engages in equally clear and succinct conversations about an organization’s long-term funding strategy. That is because the different

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the case for

def • i • ni • tion

In an area outside Hyderabad, India, between the suburbs and the countryside, a young

S

ocial entrepreneurship is attracting growing

DESIGN

amounts of talent, money, and attention.

But along with its increasing popularity has come less certainty about what exactly a social entrepreneur is and does. As a result, all sorts of activities are now being called social entrepreneurship. Some say that a more inclusive term is all for the good, but the authors argue that it’s time for a more rigorous definition.

www.ssireview.org

s p r i n g 2 0 0 7 / S TA N F O R D S O C I A L I N N O VAT I O N R E V I E W

woman—we’ll call her Shanti—fetches water daily from the always-open local borehole that is about 300 feet from her home. She uses a 3-gallon plastic container that she can easily carry on her head. Shanti and her husband rely on the free water for their drinking and washing, and though they’ve heard that it’s not as safe as water from the Naandi Foundation-run community treatment plant, they still use it. Shanti’s family has been drinking the local water for generations, and although it periodically makes her and her family sick, she has no plans to stop using it.

Shanti has many reasons not to use the water from the Naandi treatment center, but they’re not the reasons one might think. The center is within easy walking distance of her home—roughly a third of a mile. It is also well known and affordable (roughly 10 rupees, or 20 cents, for 5 gallons). Being able to pay the small fee has even become a status symbol for some villagers. Habit isn’t a factor, either.

Shanti is forgoing the safer water because of a series of flaws in the overall design of the system.

Although Shanti can walk to the facility, she can’t carry the 5-gallon jerrican that the facility requires her to use. When filled with water, the plastic rectangular container is simply too heavy. The container isn’t designed to be held on the hip or the head, where she likes to carry heavy objects. Shanti’s husband can’t help carry it, either. He works in the city and DESIGNERS HAVE TRADIdoesn’t return home until after TIONALLY FOCUSED ON the water treatment center is ENHANCING THE LOOK closed. The treatment center also requires them to buy a AND FUNCTIONALITY OF monthly punch card for 5 galPRODUCTS. RECENTLY, THEY lons a day, far more than they HAVE BEGUN USING DESIGN need. “Why would I buy more than I need and waste money?”

TOOLS TO TACKLE MORE asks Shanti, adding she’d be COMPLEX PROBLEMS, SUCH more likely to purchase the AS FINDING WAYS TO Naandi water if the center alBy Tim Brown lowed her to buy less.

PROVIDE LOW-COST HEALTH & Jocelyn Wyatt The community treatment CARE THROUGHOUT THE Illustration by center was designed to proJohn Hersey duce clean and potable water, WORLD. BUSINESSES WERE and it succeeded very well at FIRST TO EMBRACE THIS doing just that. In fact, it works NEW APPROACH—CALLED well for many people living in the community, particuDESIGN THINKING—NOW larly families with husbands NONPROFITS ARE BEGINor older sons who own bikes NING TO ADOPT IT TOO. and can visit the treatment

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THINKING FOR SOCIAL INNOVATION

STANFORD SOCIAL INNOVATION REVIEW • Spring 2009 Winter 2010 • STANFORD SOCIAL INNOVATION REVIEW

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By L. DaviD Brown

WhaT’S Your endgame?

By aLice GuGeLev & anDrew Stern

The hidden PiTfallS of incluSive innovaTion

By raGhav narSaLay, LeanDro PonGeLuPPe, & DaviD LiGht

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oney is a constant topic of conversation among nonprofit leaders: How much do we need? Where can we find it?

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Unfortunately, the answers are not readily available.

That’s because nonprofit leaders are much more sophisticated about creating programs than they are about funding their organizations, and philanthropists often struggle to understand the impact (and limitations) of their donations.

There are consequences to this financial fuzziness.

When nonprofits and funding sources are not well matched, money doesn’t flow to the areas where it will do the greatest good. Too often, the result is that promising programs are cut, curtailed, or never launched.

| Illustration by Doug Ross

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PHOTOGRAPHS COURTESY OF (TOP LEFT AND RIGHT) FRIENDS OF GRAMEEN; (BOTTOM) THE SKOLL FOUNDATION

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