How to Best Prepare Your Nonprofit for a Funding Loss
Imagine you have been tasked with solving our nation’s graduation crisis – and you would only get paid if you show results in a short timeframe. You immediately pour funds into comprehensive supports for at-risk 11th and 12th graders, increase graduation rates over the next year, and collect a hefty payday. Of course, you need to pull funds from other programs to pay for all this – so you eliminate all funding for middle schools.
Of course, nobody in their right mind would take this approach. And while this may seem like an absurd scenario, it’s merely an extreme extrapolation of “Pay For Success” and “Social Impact Bond” funding mechanisms. In these models, non-profits partner with government agencies and private investors to solve seemingly intractable social problems in ways that save the government money. Investors provide capital to non-profits to provide services; the government pays investors returns when results are achieved.
As you can imagine, an issue ripe for Pay For Success funding is high school graduation. And while nobody is suggesting we cancel the 7th grade, non-profits competing for these funds would be far better-off developing intensive short-term interventions for high-school juniors than creating long-term supports for at-risk children in middle school. Which begs the question: if all the funding naturally gravitates toward the “tail end” of the problem, who will fund prevention at its source?
Advocates argue that there is “room at the inn” for these new financial tools alongside traditional funding sources. But funds available to non-profits are finite, and it’s more likely that these funding streams will represent shifted resources rather than “new money.” As a result, many non-profits could soon feel a squeeze … and should take action to guard against funding loss:
- Invest in data collection and analysis that establishes value with funders
- Develop interim benchmarks for hard-to-measure outcomes (such as violence, drug and crime prevention) that predict future success
- Advocate strongly with funders to increase investment in general operating support
Donors don’t just want to know you’re doing good work, they demand (and deserve) results. We invest significant resources measuring the impact of Big Brothers Big Sisters mentoring, but do we really know the outcomes of our work? How many “Littles” graduate high school, go to college, and establish successful careers? These are all outcomes that we strive to achieve, but cannot measure until long after our work is done. At Big Brothers Big Sisters, we need to make the case for mentoring as a proven early-stage preventative program that builds resiliency across the lifespan. If an ounce of prevention is worth a pound of cure, surely that value can be monetized.