Today’s post conveys a recent conversation I had with the leader of a nonprofit dedicated to transforming how human services are delivered amidst these disruptions. Caroline Whistler helped found Third Sector Capital Partners in 2011 and has led the organization since 2017. Third Sector is tackling difficult and important work and doing it well, not least because it is constantly reflecting on and adapting its practices. (In the interests of full disclosure, I am not a completely disinterested observer; I serve on the organization’s external advisory board). Because we all have a stake in the ideal of an outcomes-focused government that Caroline and Third Sector are working toward, I wanted to share the following lightly edited transcript of our discussion.
DS: Much of Third Sector’s initial work focused on supporting governments and nonprofits delivering “pay for success” programs. Can you say more about how that started and how it is going?
CW: Pay for Success was the original tool we used to help government reflect on its outcomes and improve them. The pay for success model in its purest form is that government does not pay a penny unless outcomes are achieved. That created an upfront funding need for the service providers, and a public-private partnership opportunity for philanthropists or impact investors to meet that need while the provider delivered services. If they achieved the outcomes, government would then reimburse for them.
When we started ten years ago, one hundred percent of our work was focused on the pay for success tool. Now that is only about ten or fifteen percent of our work, as we’ve learned and evolved over time. As we worked with communities, we learned a lot about just how difficult it is for government to set aside funding over multiple years, particularly for one provider or at a very small scale. It’s an awful lot of legislative work to encumber future budgets in that way.
It’s a much longer conversation, but basically pay for success was great at bringing in government, philanthropy, and private investors to define the outcomes they cared about. It was less good on what the community cared about. What we wanted to do more of was involving the community and beneficiaries in that conversation. We discovered that many government leaders wanted to do this too. While some governments continue to pursue pay for success, over time, more and more of our work has kept the principle and idea of using public funding to drive change, but engaged beneficiaries of services in helping redesign how that funding can make a difference in their communities.