Collaboration

Social Impact Bonds are Booming

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Social impact bonds are fairly new funding vehicles for social impact, with the first agreement dating back to 2010; however, the model was first advocated 22 years prior to that by a New Zealand economist in 1988. As with all things funded by the U.S. government, these bonds have a super appealing nickname: Pay for Success Initiatives.

What is a Social Impact Bond?

A social impact bond  brings together private investors and public dollars to solve tough social issues. It's essentially an agreed upon bounty. Ideally, the business-minded investors fund innovative projects that make a substantial dent in an entrenched problem that is costing the government X dollars. In exchange for funding the successful project and reducing their costs, the government entity pays an agreed upon amount, theoretically sharing the cost savings they realized.

In the past few weeks, three new social impact bonds were announced nationwide:

Goldman Sachs, billionaire John Arnold, and other partners just funded the largest social impact bond ever. As of yesterday, these philanthropic investors set the record with a $27M social impact bond aiming to prevent young men in Massachusetts from returning to incarceration. In 7 years, if the project realizes the projected 40% reduction in in incarceration among program participants, then the investment is paid back with 5% annual interest by the Massachusetts' Juvenile Justice Department.

The funding from the investors is split between a large nonprofit, Roca, and a nonprofit advisory firm, Third Sector Capital Partners. Roca will be doing the heavy lifting, working with just under 1,000 young men, ages 17-23, to achieve the desired outcomes.

This begs the question: What makes this any different from direct government funding of nonprofits, which has been going on for decades?

There's a lot of money on the line; therefore there's greater accountability to the outcomes which will theoretically spur increased collaboration and innovation, leading to better outcomes than have been achieved through the government-nonprofit funding model.  In this example, if the initiative fails, both the investors and the nonprofit will suffer, as the nonprofit has agreed to defer $3.3M in fees.

Additionally, the government doesn't have to pay unless the results are achieved, which is a lot more palatable to tax payers who are funding these social programs. In the Goldman deal, Massachusetts stands to save between $1M and $45M; the corresponding "success payments" range from $0 to $27M.

New York State broke new ground just weeks ahead of the Goldman-Massachusetts deal with the first state-led social impact bond with a $13.5M deal, which was also the first-ever to be distributed through a leading wealth management platform, Bank of America Merrill Lynch, to qualified private and institutional investors.

Similar to the Massachusetts bond, the deal targets the ultra-expensive criminal justice system, aiming to expand comprehensive reentry employment services to 2,000 former inmates in NYC and Rochester in an attempt to reduce recidivism and re-incarceration.

On the other side of the country, California also announced a social impact bond this week. The much smaller $2.5M bond is more generalized, aiming to improve social services throughout the state over the next two years by engaging nonprofit and government leaders in an active learning group. The initiative illustrates some hesitancy - hoping to incubate the social impact bond concept through the learning group toward expediting successful future agreements.

Are Social Impact Bonds Smart? 

Critics suggest that because the public funds must be budgeted, regardless of whether the project works, social impact bonds don't actually increase capital for social program, instead displacing it from other programs. Additionally, it's expensive to set up the complex financial and legal mechanisms required to structure such agreements.

It's still too early to tell if any initiatives funded by social impact bonds have or will produce promising (and profitable) results, but many would probably agree that any innovative idea for better social outcomes from public funding is worth a shot when we only pay for real results.

Do you need to switch your pitch?

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We've all heard of pitch competitions in relation to startups. The pressure is intense and these infant business ideas often have a small window to demonstrate their ability to sell their product (and their company) to would-be investors. But the pitch isn't new and it isn't limited to startups. Mission-driven organizations who have mastered the pitch are recruiting more dollars, volunteers, partners, and investors than those who haven't for the very same reasons: You have a small window to sell your cause.

Too often, a pitch looks like this:

 

We tell people what we do or recite our mission statement rather than sharing the impact we have.

The small nonprofit "provides free mental health services to low-income, uninsured adults" instead of "relieving debilitating mental health symptoms for those most at risk and most in need so they can get back to work and take care of their families".

The community foundation "pools donations and expertise through coordinated grants to improve the quality of life of Sunshine City" rather than "catalyzing ideas into action for good to change our neighborhoods, schools, and community for the better".

How much  more compelling is the following pitch?

 

How many mailings did you receive between November 1st and January 1st asking for a donation? Now consider the number of emails, tweets, websites, texts and other forms of media vying for the attention of your would-be donors.

If you don't think your in sales, think again. Mastering persuasive communication skills, especially in sharing your impact with potential donors, board members, or partners, is critical in this digital era.

Let's get the juices flowing with some ideas from Dan Pink, master of motivation and author of Drive and To Sell is Human:

 

Take the next step RIGHT NOW. Share your own fast pitch in the comments.

New opportunities for cause collaboration

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Non-profit organizations grew out of early social welfare roots. People driven primarily by moral beliefs fed the poor, took care of the sick, and took in orphans. These groups became more specialized and structured and eventually the non-profit organization was born from legal tax classifications. The mission was the seed and still comes first. Conversely, business is rooted in the ability to make a profit; to earn a living by providing goods and services to customers. There was even a possibility of striking it rich with the next big idea. The financial bottom line was the seed and is still the common metric by which all businesses are measured by.

Despite very different roots, business and mission have always shared a symbiotic relationship. Mission-driven organizations create desirable communities, providing medical care and hospitals, animal welfare and clean-up services, safety nets and religion. Ultimately, non-profits lay the foundation for a dependable workforce for employers.  Businesses in turn provide financial support, in-kind donations, and leadership for non-profit governing boards.

Over the years the boundaries between business and mission have blurred. Businesses have increasingly integrated sustainability into their models and more and more non-profits are being managed by experienced business leaders. More recently, the intermingling has spurred hybrids, creating for-profit organizations with a mission.

Social enterprises have been cropping up for years, but have only recently become recognized in their ability to apply business strategies to tackle social and environmental challenges in just the past few years. The low-profit limited liability corporation, or "L3C", was first created out of Vermont legislation in 2008. Nine states has since adopted similar legislation, allowing business with a purpose to take advantage of flexible LLC laws while also qualifying for "program-related investments" from private foundations.

The benefit corporation, or "B-corp", was born in 2010 when Maryland first passed legislation recognizing this pairing of business with community impact. Unlike traditional business, benefit corporations have a formal purpose to have a "material positive impact" on society and the environment. Their hands are not tied to make decisions that deliver the greatest financial return for the shareholder. As of this writing, 19 states have passed B-corp legislation.

These new models represent giant steps toward solving pressing social challenges...if we work together. Because regardless of how smart, creative or passionate any one of us is, together we create synergy that takes advantage of diverse strengths, expertise, and experience.

Share your best practices. Start a think tank on a shared goal. Reach out to potential partners. Invite new, crazy ideas. Just don't stick your head in the sand and plow forward with the ways you've always done things, or conversely blaze what you think is a brand new trail based out of entrepreneurial ego. Cause collaboration and innovation has never been more accessible or fruitful.

Why your mission needs business partners

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The first resource to be released through this blog is a guide to Partnering for Multiplied Impact. There are a variety of topics that could have been tackled instead (and are coming up), including empowering a change leadership team, grassroots problem solving, creating a strategic 5-year vision, and much more. This initial guide focuses on non-profit and business partnerships for a reason:

For most mission-driven organizations, a strong business partner has the potential to multiply impact faster than nearly anything else.

Just a few of the potential benefits business partnerships can bring to your mission:

  • Access to expensive expertise targeted to your gaps, such as advertising, architecture, or digital marketing
  • Political leverage through the biggest voice in the community
  • Loyal advocates and arms-length lobbying resources
  • Vetted and dedicated board and committee members
  • A volunteer workforce
  • Increased exposure and publicity
  • A positive reputation as being an efficient and high impact organization
  • Accountability to long-term goals and results-oriented outcomes
  • Improved effectiveness and organizational capacity
  • Creative ideas and opportunities
  • Increased donations and grants

It's time to get a competitive edge on your cause. If you haven't considered strategic partnerships or wrote them off as too much work with too little returns, take a peek at the new Partnering for Multiplied Impact guide and see if you can't stir up some inspiration and ideas for win-win opportunities waiting in your community.

In what ways have you already partnered with  businesses? What has been the impact for your cause?

4 Type-A Networking Mistakes

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My perspective on networking when I was working a salaried 9-to-5 was likely similar to most folks:

  • I don't have time.
  • I am doing just fine on my own.
  • What's the benefit to me?

When my career took a sudden and unexpected turn and I left said job, I realized my mistake with heavy regret. The understanding of what genuine networking consists of and where I had failed came in waves.

1. I quietly shined in the background.

I missed hundreds of relationship opportunities where I shined, but didn't connect. I rarely introduced myself to the key players in my industry or shared what I was working on. I sat at the table, listened, and performed quietly within my organization. I invested in my boss's approval and the relationships contained within a single company because I didn't plan on leaving and immaturely believed I could get things done best on my own. When I did network, I did so on behalf of my company, never connecting as an individual.

2. I saw networking as rubbing shoulders at events.

I held a naive view of networking as scheduled events where I could introduce myself to new people. This created so many barriers to genuine relationships. First, I didn't "have time" to attend events like this. Second, when I did prioritize an event, I didn't know how to take advantage of introductions. I told them what I did, they told me what they did, we swapped business cards. Once in awhile a relationship would form because the stars aligned at the right time with their needs and mine, but it was always a short-lived surface connection that died off when our mutual interests went in different directions.

3. I was self-centered and opportunities looked like work.

I was genuinely very busy at my job (due to hoarding the work in exchange for control). So, when I came across opportunities to volunteer, advise, or otherwise share space with other professionals, I saw them as tasks that simply added to my overwhelming to-do list. Why should I share my expertise with others? Why should I volunteer my time when my time is in such short supply? I certainly never went looking for this additional "work", let alone responded appropriately when it came looking for me. I stubbornly figured challenges out on my own to the extent that when I reached out to an organization with a successful model for a project I was leading, I was motivated to do so because it would look good on funding requests.

4. I thought well-connected people were born that way. 

To me, the popular saying, "it's all who you know" was said sarcastically under your breath after congratulating a snob on their unearned promotion. Their wealthy, well-connected parents obviously pulled strings with their golf buddies to get little Johnny that CEO title at 22. While this may be true at times, nepotism is totally separate from networking. I failed to realize that I too could "know people" and move to the top of the list for exciting opportunities, even after discovering that if I hired someone I knew, I always got better results. Hello, McFly?

I was fortunate that after I dumped a ridiculous amount of career nesting crap into the back of my car, an unsolicited introduction resulted in a wake-up call to the importance of relationships. One connection introduced me to another, who introduced me to another, resulting in the privilege of learning from a strategic relationship master.

This one relationship has led to at least a dozen high-powered connections and already several opportunities that have rounded out my skills and increased my value in the marketplace. Much beyond that, I got to reverse my past mistakes and begin investing in relationships the right way, which will lead to immeasurable benefits going forward.

I look back and wish I had found a way to benefit that original link who made the first unsolicited introduction, because the series of connections that she kicked off have added exponential value to my life and career.

Relationships are a little magical. You never, absolutely never, know where one will lead.

So, shine openly and beyond the walls of your office, invest in everyone you come in contact with all the time (even if it's just a quick compliment), appreciate opportunities to volunteer yourself as gifts, and remember that anyone can grow their network into an all access pass by generously listening and competently adding value.

The Keys to Superconnecting

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Nothing happens without people and unbelievable feats occur when a tribe pools their resources. Successfully building and navigating relationships is key to achieving extraordinary goals, both personally and in business. If you missed Judy Robinett's webinar on building relationships to build business on Thursday, you missed out on some gems. Robinett has spent years breaking down what she does naturally into a proven formula that anyone can use to build valuable relationships.

The steps are deceptively simple, but just like adding yeast to a few basic ingredients transforms them into a much greater result, Robinett's recipe for relationships will multiply your outcomes.

Confront your Fears

What's holding you back from starting those critical first conversations? Your assumptions are almost guaranteed to be wrong.

  • Shy? You don't need to be a gregarious extrovert, you simply need to engage. Focus on the other person.
  • Stranger Danger: The distance between a stranger and a friend or a mentor can be crossed with genuine conversation.
  • Lacking a Harvard degree in a room of brilliant people? No pedigree or silver spoon is required. Your experiences give you unique knowledge.

Four Prerequisites

You don't need a pedigree or a huge personality, but you must develop these areas in order to develop strong relationships:

  1. Become an amazing listener. Remember the details. Ask thoughtful questions. Start with a goal of learning about them, rather than trying to find commonality. This will come naturally.
  2. Be genuine. Like bloodhounds, there is a sensation that creates distance when you encounter someone who is  hiding something. Be you, regardless of whether you feel insecure.
  3. Don't rush it. Robinett compares networking to dating. You need to work up to the ask and then court for a period of time. The first conversation is not the time to ask for more than advice.
  4. Be value-driven. Be passionate about these cornerstones that guide your life. Integrity, accountability, and empathy will attract the right people to you.

Three Golden Questions

Don't try to make them yours right off. Try them out just as they are and experience the magic:

  1. How can I help you?
  2. What other ideas do you have for me?
  3. Who else do  you know that I should talk to?

Nurturing relationships is a marathon, not a series of sprints or hurdles. Your focus needs to be on quality, not quantity. Target the right groups and focus in on a few key people rather than trying to get your business card into the hands of every person present.

Attempting success alone places a very real ceiling on your potential. The people that are available to you hold the keys to connections, information, money, and opportunity. What do you have to lose?

Learn more about Judy here: www.judyrobinett.com

Follow her on Twitter: @judyrobinett