Nonprofit Sector

What We've Learned: A Foreword by Nonprofit Finance Fund

May 7, 2019

Originally published in Pay for Success: The First 25 , May 7, 2019

Eight years ago, as Nonprofit Finance Fund (NFF) and other pioneers set out to bring Pay for Success (PFS) to the United States, we couldn’t predict how the field would develop, if the hype around a U.K. experiment was deserved, or what “success” would look like. But we knew that business-as-usual approaches to addressing entrenched social challenges weren’t making enough progress, and that we needed to get better at funding what works.

Every day in our work, and often in our personal lives, we witness the incredible contributions of our social sector, and the great challenges that persist. NFFers are optimists, and pragmatists. We believe in doing the best we can under current conditions, while working to change the systems that govern progress. And that true innovation requires tolerance for risk, and learning from failure.

In this spirit, we’ve learned, led, partnered, invested, and helped evolve Pay for Success as a vanguard of the movement toward more effective social-sector funding. And in this report, we’ve aimed to analyze and distill—as dispassionately as possible—where the field is, and where it’s going. But we are bound by no such rules of restraint in this foreword. Here’s what we most want you to know from our experience:

  • PFS is an important tool for research and development. Although one of the promises of Pay for Success was to replicate and scale what works, we now know that PFS projects are best used to help us to learn, “What works here?” The projects are not ends in and of themselves. They are a means to research and develop local solutions to local problems, bring community members together to define and address critical needs, and help government partners orient around outcomes.
  • PFS is not a magic fix for the systems change needed to achieve social progress, which is challenging and expensive work. It has encouraged conversation around the often inefficient and unfair ways money flows; however, addressing widespread and historic underinvestment in the organizations we trust to solve our biggest problems is long past due.
  • We need more service providers and service recipients at the table, and at the table sooner. One exciting element of Pay for Success has been its ability to amplify the voices of the service providers involved and to showcase their abilities as creative problem solvers. Another is the emergence of projects that involve service recipients in design and delivery. More needs to be done to listen to those stakeholders who are most capable of developing culturally competent solutions that fit the local context and have the highest likelihood of measurable success.
  • We need a new definition of success. We’ve seen a project that never got off the ground change—dramatically for the better—the way a government paid local service providers, a direct result of PFS exploration. Yet PFS headlines often still focus on whether the investors got their money back. We need to make sure we consider lasting social progress and systems change when we talk about project success or failure, rather than just outcomes payments that were made. And that in touting results we don’t inadvertently dismiss or ignore organizations whose powerful contributions to their communities can’t easily be tracked or measured.
  • Scrutiny speeds systems change. Contracts, large investments in both field building and the projects themselves, and the spotlight of innovation have helped PFS gain more traction than some other collective impact strategies. While the complexity of PFS projects has drawbacks, the high-stakes, high-scrutiny environment, where money and reputations are on the line in a very public and sometimes controversial way, have expedited delivery of critical services in many cases.
  • PFS “2.0” requires additional support. New funding models, such as bonus payments, rate cards, and other innovative financial structures that build on what was learned through the first 25 projects need continued support. The Social Innovation Fund (SIF) played a critical role in encouraging the emergence of this field, as have key philanthropic supporters. Although federal interest continues in the form of the Social Impact Partnerships to Pay for Results Act (SIPPRA), it will not replace what SIF was able to accomplish through its significant funding of project development and knowledge sharing.

These are among the learnings we’re applying as we support cross-sector, outcomes-oriented efforts to address critical social issues. What excites us most about the past eight years is that more high-quality, preventative services have reached people who can benefit from them, because of PFS programs. These demonstration projects are yielding results, information, and lessons that contribute to continuous improvement on the road toward lasting social change.

PFS reminds everyone that our work isn’t about how many homeless people occupy a shelter, but about ending homelessness and keeping families in their homes. It’s not about how many meals a nonprofit can serve, but how we can improve food security and end hunger in our communities. It’s not about how many job trainings we can deliver, but how we can better extend educational and economic opportunities to all. We’ve witnessed the power of stakeholders coming to the same table in shared pursuit of better results for people and communities, and are proud to stand beside so many others working toward a more just and vibrant society.

- NFF's Pay for Success Team

Pay for Success: The First 25 is a detailed, comparative analysis of the first 25 projects to launch in the United States. This report builds on NFF research and analysis previously published in Pay for Success: The First Generation and in the book “Payment by Results and Social Impact Bonds.” It highlights lessons and contributions from these pioneering projects along with case studies and tables that look at everything from project structure to results, payments, and more. 

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