Nonprofit Sector

It’s Time to Build Equity into Outcomes Funding

February 18, 2020
Illustration showing the word "equity" being constructed

We want your input on our principles for centering equity in outcomes funding

Nonprofit Finance Fund has been a leader for over 10 years in advancing outcomes funding, which promotes a shift from funding based on short-term metrics to funding based on long-term, meaningful results. Having been at the helm of NFF’s work in this arena, I frequently speak about the evolution of outcomes funding in the U.S. However, when asked to speak at a recent event focused on the intersection of equity and outcomes funding, it led to a painful realization of personal and collective blind spots and concern that, despite good intentions, those in control of resources are inadvertently perpetuating inequity.

There are a handful of tensions to be reconciled in how most outcomes projects are structured if we seek to disrupt the perpetuation of inequities:

  • How we define success: Beyond cost savings, investor returns, and even measurable outcomes, we need to consider the ways in which outcomes projects (and the processes we employ to structure them) impact communities in ways that cannot be captured by quantitative metrics alone, contribute to lasting social change, and reduce inequity. For instance, changes to policies and processes, and the relationships and trust built through authentic community partnership can have transformative impact.

  • “Top down” versus “bottom up” approaches: Too infrequently are outcomes funding projects designed or led by the communities they intend to serve. We’ve seen time and again that “proven” solutions aren’t enough—local context matters. Those of us who are called upon to “design” outcomes projects are accustomed to holding decision-rights and funding resources. But we need to intentionally shift that power to the community, so they determine which outcomes matter to them, which interventions are effective locally, who is well-placed to deliver those services, and how success is meaningfully measured.

  • Investing in local organizations: Historic and continued disinvestment of resources in communities of color has led to disproportionate poverty and social challenges in these communities. Systemic inequities in under-resourced communities are mirrored in the community organizations that serve them. Rather than importing from outside of the community service providers who have been able to access funding to “prove” the efficacy of their services, we need to invest in the local community-based organizations who have knowledge and the trust of the communities they serve.

  • Forced reliance on national consultants: Outcomes project often rely on complex evaluation and financing arrangements. This has resulted in millions of dollars directed to national intermediaries and experts. We must examine the ways in which these largely white-led organizations with privilege and social connections to funding—including NFF—maintain control of “intellectual resources” and the financial resources that accompany them. Intermediaries do have a valuable role to play. We have expertise, key knowledge of how the funding system works and connections to major funders. But I suspect we could make a bigger impact if we use these resources in service of local leaders. Better yet, share with them the rules of the game that are largely not common knowledge to those outside monied, privileged circles.

We must ask ourselves if greater good could be done by directing money, power and decision rights into the hands of those communities—largely of color—that have been systematically disconnected from wealth for centuries. (And we should remember that those controlling resources for the first time may not achieve success right away—and that’s okay. Failing forward isn’t just for the privileged.)

Acknowledging our blind spots and shortcomings is an important first step in the process of correcting for entrenched systemic inequity in the funding system. Today, NFF, along with Shift Health Accelerator, the Federal Reserve Bank of San Francisco, and JSI are articulating a set of principles for centering equity in outcomes funding, summarized below and seen in full here. We want to figure out together with you all whether these are the right principles, and how we can enact them. Please share your thoughts on our draft principles by taking this survey.

  1. Local communities decide priorities, goals, and outcomes.
  2. Think beyond cost savings, and value outcomes that reflect community and societal benefits.
  3. Benefits and risks should be shared equitably and intentionally. When community-led efforts successfully achieve outcomes, the value of that success goes directly back to communities, providing resources to address additional priorities; similarly, risk is situated with partners with the resources and ability to mitigate and manage them.
  4. Pathways of community leadership are supported, cultivated and sustained so that communities make meaningful decisions about their futures and have the power to implement those decisions. Communities build from their strengths, assets and existing resources (defined broadly to include their people, history and culture) to support their leaders in achieving community goals.
  5. Institutional systemic barriers to equity are explicitly acknowledged and addressed. We acknowledge the challenges that communities face are rooted in inequities caused by systemic power inequality including systemic and institutional racism, white supremacy, and systems of wealth accumulation.

What did we miss? What are you glad to see here? We want to hear from you so that together, we can get this right.

Please share your reactions to the article through this survey.

We are partnering with the Federal Reserve Bank of San Francisco’s Community Development Department to collect feedback and promote cross-sector dialogue on the principles outlined above. Your comments will be helpful in shaping an upcoming issue of the Community Development Innovation Review, which will bring together perspectives, critiques, and fresh ideas from across the field that can help advance both the theory and practice of equitable outcomes funding. For additional background on the outcomes funding field, please check out the 4th volume in the San Francisco Fed’s “What” series: What Matters: Investing in Results to Build Strong, Vibrant Communities.

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NFF is in the middle of reforming our strategy to focus on equity. We understand there is much work to do and that we have benefitted from a position of privilege. We are working to evaluate our blind spots and growth opportunities to ultimately guide us to a new way of working with our clients and within our organization.

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