The Challenge of Moving Beyond Metrics – Part I

The attention lavished on the Social Innovation Fund (SIF) this week has been far from positive. Building on posts by the Nonprofit Quarterly and Paul Light, Stephanie Strom’s New York Times article in today’s edition cites possible conflicts of interest by SIF Director Paul Carttar and Corporation for National and Community Service CEO Patrick Corvington and calls into question whether these pre-existing relationships affected the selection process.

In actuality, I believe that these possible conflict of interest issues are matters of perception instead of reality. As noted by Marta Urquilla, a senior adviser for the SIF, in the New York Times article, these conflicts of interests were anticipated and addressed in advance. For example, Steve Goldberg well-researched letter to the Nonprofit Quarterly, meticulously documents how the Corporation made sure to avoid any conflicts of interest. I can understand why people are fixated on these conflict of interest possibilities, but I think that's somewhat misguided and potentially harmful.

On December 1, 2009, a major shift in assessing nonprofits was announced by Charity Navigator, GuideStar, GiveWell, GreatNonprofits, and Philanthropedia. The announcement (PDF) aimed to repudiate the myopic focus on nonprofit overhead ratios and executive compensation as metrics to measure their effectiveness. The five oversight organizations also set out a course to establish and embrace new ways to evaluate nonprofits and identify nonprofits.

Yesterday’s the U.S. Department of Education’s announced the selection of “49 school districts, nonprofit education organizations and institutions of higher education” as Investing in Innovation Fund (i3) finalists. Selected out of pool of nearly 1,700 applicants, the finalists have until September 8 to secure match commitments for up to 20% in order to receive actual funding. While also releasing the names of the finalists, the Department of Education also released a treasure-trove of information in an amazing step in transparency.

The Department of Education’s approach to transparency contrasts sharply with the Corporation for National and Community Service’s approach to the Social Innovation Fund (SIF). The calls for transparency have been out for some time (both Sean Stannard-Stockton and I wrote about this in April – here, here, and here.) and were significantly heightened by the Nonprofit Quarterly this week. The information released by the Department of Education yesterday highlights the different transparency approaches applied by the two federal agencies.

One of the interesting comments I received on my Social Innovation Fund (SIF) posts came from Steve Goldberg, who participated in the proposal review process. He writes, “by selecting the best intermediary proposals irrespective of extraneous considerations like geography and social issue, the SIF fosters a more coherent and intelligent nonprofit capital market.” I tend to agree with Steve’s statement and don’t believe I called into question the geographic or priority issue distribution. My post earlier this week focused more on noting the absence of innovation and health-focused funding – a theme that echoed results from the recent Social Impact Exchange conference – and the current distribution of SIF subgrantee funding in the northeast.

Steve’s second point about fostering a more coherent and intelligent nonprofit capital market is true. But here, I think that’s the case only to a limited degree. The way the SIF has been established and managed has resulted in a list of both intermediaries and subgrantees (which will expand as more are identified) that warrant additional growth capital and investments.