The Case for Outcomes-Based Growth

Should social organisations pursue growth, and if they do, how should they do it, asks strategy and innovation consultant Dale Renner.

“Growth” can be a controversial word in the social sector. Social service leaders sometimes say “our job is eventually to go out of business”, implying that in some unspecified way, social problems will be solved and will remove demand for assistance. Yet, as the sector moves from grant-based to individualised funding, it becomes important to have a view on what growth means to social services organisations.

The ethical case for growth

Growth in this context doesn’t mean growing the amount of money spent on social programs in the aggregate. The focus is on growth at the program, or possibly organisation, level.

To understand the case for growth, agreement is first needed on what outcomes the community desires – many are obvious such as reducing crime, family violence, homelessness and Indigenous disadvantage. It is also important to understand what programs are proven to achieve that outcome for a certain cohort of people (noting there are levels of proof from anecdote through to randomised controlled trial). Growing the reach of those proven programs to benefit a greater number of people is surely an ethical pursuit as it reduces human suffering and harm. So at first blush, if a program is successful, for example, in helping to improve universal child literacy, it has a prima facie case for growth.

However, given we live in a world of limited resources and trade-offs, it is necessary to factor in the cost of that program. Ideally, the organisation has the comparative data to identify the program that is proven to best deliver outcomes that the client wants to achieve, at the lowest cost. So if one program can deliver the same result (eg reduce chronic homelessness) at a 30 per cent lower cost than another program, it has a greater claim to be scaled. The opposite is also true: assuming the cost of programs is the same, the program or solution that has the comparatively greater impact on outcomes is a candidate for growth. We call this outcomes-based growth.

Applying the principle

This principle can be applied to a social service organisation’s portfolio of programs and initiatives. Organisations should regularly review their portfolio of programs with this outcomes-based growth lens. Of course, this requires an outcomes measurement system – deciding what handful of metrics best approximate desired outcomes (including from a client point of view), and then measuring and comparing the results of different programs or interventions. It also requires understanding unit costs – what does it cost, including all overheads and program expenses, to deliver that measure of outcome improvement over what period of time. Once we have the data, growth and improvement goals can be set.

A social services organisation might ask itself these questions:

• Have we or others tried more than one solution to the problems we are tackling? If so, which solution proves itself to be superior to others, given the cost? (see the work of Esther Duflo and the Poverty Action Lab).
• How do our outcomes compare with other providers? Are we the best placed organisation to provide this solution?
• Which programs do we need to wind down or pass to other, more specialist organisations?
• Which programs do we need to grow? What options for growth do we have?
• Given the clients we serve and their needs, what new solutions do we need to develop over the medium and longer term?
• For programs with potential, how do we continuously improve outcomes to justify growth?

Outcomes-based growth

Once the organisation has an evidence-based decision on which programs need to grow, it needs to develop a strategy for growing those programs. While a mission-driven organisation may have a range of objectives, outcomes-based growth should be at the top of its priorities. It helps ensure the mission of social impact is the core strategic goal, and it helps make governance easier.

Outcomes-based growth can be achieved either by increasing the number of people who benefit from the solution (either more intensity in an area, or expanding to more areas), or by increasing the amount of impact for a given dollar. In short, do more of what we do and get better at what we do.

One of our clients had a program proven to address a difficult social issue, and wanted to know what its growth options were. Sometimes the best option is for the organisation to partner, license or share its service model with like-minded organisations in other geographies around Australia or further afield. Sometimes the impact depends on the unique culture of the organisation, and expansion of the organisation is a better option. Some organisations seek partners and then merge with those organisations to gain a wider footprint.

In parts of the sector with individualised funding, investment can be sought to scale a solution based on predicted income flows from clients making their own purchase decisions. In other cases, there may be options to seek alternative social finance such as pay for success / outcomes-based commissioning, which includes social impact bonds. Where an income stream can be established, impact investing might be possible. As the social finance sector matures, the options will keep growing.

Moving to outcomes-based commissioning

From a policy perspective, Australian governments should be moving to a much higher percentage of outcomes-based commissioning in order to incentivise outcomes-based growth strategies within the social sector. In the US, despite an emerging impact investing sector, it is estimated that less than 1 per cent of the US$800 billion (A$1 trillion) spent each year in social funding is outcomes-based (David Wilkinson, White House, June 2016). Australia has a similarly low base.

While outcomes measurement is growing at pace in the social sector, connecting this to an outcomes-based growth strategy is just beginning.

For social service organisations that are measuring outcomes, it’s time to use that data to make informed resource-allocation decisions. That means shrinking what’s not driving outcomes, and growing the programs that deliver.

About the author: Dale Renner is a strategy and innovation consultant in the social, health and local government sectors, and director of Latitude Network. At www.latitude.network and email dale@latitude.network.