Doing Good Work May Not Be Good Enough

A Presidential message to US Department Heads, dubbed the Obama Memo, urging that future budget requests need to focus on outcomes rather than activity has some strong take-outs for Australian Not for Profits says David Crosbie, CEO, Community Council for Australia.

Times are tough for the budget planners.  For the past few years most governments in Australia and around the world have faced up to real budget pressures with government income stalling and pressures on expenditure increasing.  Framing a government budget that maintains services without increasing taxes has become a much greater challenge.

The stand-off in the US over debt ceilings and funding for health services may be politically motivated, but at its heart there are larger issues about how economies around the world need to respond to zero growth realities.

For the Australian Not for Profit  sector, this squeeze on government budgets is likely to have a major impact, and certainly has to be factored into future planning of NFP organisations.

There may be some positive aspects to this new reality with governments increasingly committed to finding savings in expenditure by reducing the size of their own bureaucracies and cutting service provision costs.  

In practice this is likely to mean increased outsourcing, but the shape of that outsourcing remains uncertain.

As most of us know, the outsourcing of government jobs and services to the NFP sector can be positive, but it can also bring unrealistic service expectations and increased pressure on NFPs to underwrite shortfalls in the true unit costs of service provision.

Expenditure in areas such as capital infrastructure, communications, staff development and meaningful evaluation are rarely fully factored into government service contracts.  

As the CEO of one relatively large NFP organisation commented to me recently,

‘Our income and the number of services we offer is at an all-time high, but I feel much poorer and more vulnerable than ever before.  It has become a real struggle to keep operating.’

Cutting costs may be the motive, but the other critical factor in government outsourcing has become the greater focus on performance.  These days governments are more and more interested in the outcomes and impacts an organisation achieves rather than simply seeking a description of the activity undertaken.

In the US, the Executive Office of the President issued a memorandum to the Heads of Departments and Agencies, dated July 26, 2013, in which a very strong argument is made that future budget requests need to focus on outcomes rather than activity.  

The memo commences with these two sentences:

‘The president recently asked his Cabinet to carry out an aggressive management agenda for his second term that delivers a smarter, more innovative and more accountable government for citizens.  An important component of that effort is strengthening agencies’ abilities to continually improve program performance …’

Most of this five page memo and nine pages of attachments focus on the need for evidence about effectiveness to inform government spending allocations:

‘Agencies are encouraged to allocate resources to programs and practices backed by strong evidence of effectiveness while trimming activities that evidence shows are not effective. In addition, major new policy proposals, and agency performance plans, should be accompanied by a thorough discussion of existing evidence, both positive and negative, on the effectiveness of those proposals in achieving the policy objective or agency priority goal.’

The memo talks about the need to draw on existing data and use it more effectively, to use ‘outcome focused grant designs’  and to promote knowledge sharing within and across agencies.

The attachments to the memo further outlines a range of strategies and tools to do this, including better ‘linking data across programs’, developing ‘provider scorecards’, using existing datasets and evaluation reports ‘to answer important policy and program questions’, and  adopting recommended models such as; ‘pay for success’, ‘tiered evidence grant designs’, and ‘performance partnerships and waiver demonstrations’ .

The memo also suggests that agencies undertake more program evaluation, and argues for ‘cross agency learning networks’ and ‘what works clearinghouses’.

Some Australian government agencies have already begun driving reform internally with a much greater emphasis on performance.  Others seem to have adopted the rhetoric without changing their practices.  

NSW and SA are beginning to invest in various forms of impact and outcome based funding models including pay for results approaches.  Other states are joining them.

As government funding begins to shift in emphasis, so too are other forms of investment in the sector including philanthropy.  The bang for your buck philanthropist is not just interested in how much of their donated dollar goes into activities; they are now beginning to ask if the activities are as effective as they could be in addressing the needs of the community.  They want to fund solutions not problems.

The NFP sector has enjoyed consistent growth over the past decade and many organisations have been able to grow and expand as the level of investment in the sector increases.  

Just as business and governments have to consider how they might operate in a zero growth economic environment, those of us in the NFP sector might also need to focus more of our energy on planning for a changing future.

What we are seeing in Australia and around the world is that doing good work may no longer be enough.  There is increasing emphasis on demonstrating value and return on investment, with a greater need to measure and report outcomes and impact.

Organisations that are prepared for these new challenges will invariably do better than those who ignore them.

A full copy of the memo from the President’s office is available at: http://www.communitycouncil.com.au/node/147

About the author: David Crosbie is the Chief Executive Officer of the Community Council for Australia (CCA), a member of both the Not-for-profit Sector Reform Council and the Advisory Board to the Australian Charities and Not-for-profits Commission.