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Scaling Pay for Success: Powering Rapid Expansion through Local Innovation

By: Lori Kaplan

Posted February 5, 2015 on Funding for Results.

The content of this piece originates from comments made as a panelist at Scaling Pay For Success on October 1, 2014, an event announcing eight new PFS grantees by the Corporation for National and Community Service.

Pay for Success (PFS) is an exciting and important opportunity to innovatively finance interventions addressing the significant social problems in our country. Those of us on the ground testing and implementing promising models are hopeful that this new investment strategy will support solutions for some of our nation’s most pressing problems.

PFS transactions tie funding to the achievement of defined results, and government and investors correctly insist upon evidence-based achievement of concrete outcomes. But how deep does the evidence have to go before an intervention is given serious consideration by this model? Is the current drive for evidence discouraging innovation and effective approaches solely to minimize the risk of not achieving outcomes on paper?

Much of the innovation in social services occurs at the local level, where providers constantly revise approaches based on a variety of evidence of what works and on constantly evolving community needs and realities. However, for many community based non-profits, the cost of rigorous, evidence-based evaluation is prohibitive, preventing organizations from demonstrating the efficacy of their models.

As PFS expands across our nation’s communities, cities, and states, only focusing on low-risk investment opportunities will hinder us from creating a robust pipeline of solutions. Large national service provider models offer efficiency and proven evidence collection about outcomes, but are not always as nimble or as effective as local providers. We must be careful not to simply scale the one set of models – those of large providers – nationwide with the unintended consequence of limiting the pipeline. We must be willing to allow a variety of models to enter the PFS process at different points of the evidence review. To drive innovation, we should support a broader spectrum of risk and return that will allow for more experimentation and local innovation in achieving target outcomes. PFS must offer multiple points of entry, with varying levels of investor risk. If we are to genuinely drive innovation, we should think about a broader spectrum of risk and return to allow for more experimentation and local innovation in achieving target outcomes.

We must always be percolating and cultivating social innovation and new solutions. As conditions change, as communities change, as employment opportunities change, as school systems change, we must be flexible and nimble in our response. Can PFS models encourage innovation? Yes, if PFS itself can be nimble and accept varying approaches to measure success. Perhaps we should look to the over 200 non-profit organizations currently in the Social Innovation Fund pipeline.

PFS is a long-term strategy that can help solve our nation’s deepest social problems. To address many of our nation’s toughest issues, a shorter-term model may not be the answer. There is no “quick fix” to address our nation’s most pressing social issues. The beauty of a PFS model is that it can address both longer term, more impactful outcomes, as well as short-term scale and replication models. PFS models can support short-term, single outcome models involving large numbers of participants and longer term, deeper impact models that require a longer time horizon and affect not one or two, but multiple outcome areas.

If we take these considerations into account, those of us on the ground, in the field, testing and implementing promising models can be hopeful that PFS will chart a course as an investment strategy that supports solutions for some of our nation’s most pressing problems.

Lori Kaplan is the President & CEO of the Latin American Youth Center (LAYC), a subgrantee of the Social Innovation Fund. She has lead LAYC to its national prominence as an award-winning network of youth programs in Washington DC since 1987. Under Kaplan’s direction, LAYC has helped guide thousands of low-income youth to better opportunity, while creating pioneering organizations and schools. Kaplan serves on the board of DC Alliance for Youth Advocates, and Youth Radio and Youth Media International, and she has served on the board of Leadership Washington, the Nonprofit Roundtable, and served as an advisor to the Clinton Global Initiative conference and as a panelist on the Reconnecting Youth work group. Kaplan has received numerous awards including Washingtonian of the Year in 1997, the Lewis Hine Award for her work on child labor issues, and most recently the Community Champion Award from the Hispanic Heritage Foundation and being named one of Washington’s 50 influencers by the Washington Informer Charities. Follow her on Twitter @Lorilayc.

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