How One Nonprofit is Helping Government Focus on Outcomes

Image credit: Third Sector / BIG Communications

Here at The Art of Association, we focus a good deal on how civil society groups are interacting with government at the front end of our democracy—i.e., the advocacy groups, political associations, think tanks, and community-based organizations seeking to provide inputs to shape what government does. But civil society groups are often instrumentally involved in shaping the outputs of government – how public policies are administered and public funds deployed.

This pattern is especially prevalent in the provision of human services to individuals and families coping with homelessness, substance abuse, domestic violence, hunger, etc. The policies and corresponding services that help comprise the active part of America’s social safety net are a curious inter-sectoral hybrid. They are in the main funded by taxpayer dollars but delivered by nonprofits whose work is underwritten through government contracts and grants. This hybrid has been put under tremendous strain by the COVID-19 pandemic, the renewed push for racial justice in the wake of George Floyd’s murder, and the chronic persistence of problems like homelessness and opioid addiction.

Today’s post conveys a recent conversation I had with the leader of a nonprofit dedicated to transforming how human services are delivered amidst these disruptions. Caroline Whistler helped found Third Sector Capital Partners in 2011 and has led the organization since 2017. Third Sector is tackling difficult and important work and doing it well, not least because it is constantly reflecting on and adapting its practices. (In the interests of full disclosure, I am not a completely disinterested observer; I serve on the organization’s external advisory board). Because we all have a stake in the ideal of an outcomes-focused government that Caroline and Third Sector are working toward, I wanted to share the following lightly edited transcript of our discussion.

[Update on June 17: Since I posted this interview, MacKenzie Scott announced that Third Sector was one of the 286 “high impact organizations” to which she was distributing her latest round of $2.7 billion in philanthropy. In announcing these grants, Scott observed, “Social sector infrastructure organizations empower community leaders, support grassroots organizing and innovation, measure and evaluate what works, and disseminate information so that community leaders, elected officials, volunteers, employees, and donors at every level of income can make informed decisions about how to partner and invest. These organizations, which are themselves historically underfunded, also promote and facilitate service, which in turn inspires more people to serve.” I completely agree — read on to learn more about how Third Sector works toward these ends.]

DS: Let’s start with the basics: What is the mission of Third Sector? Who are your clients? What kinds of problems do you help them solve? 

CW: The mission of Third Sector is to transform public systems to advance improved and equitable outcomes. We partner with government agencies working to deliver these outcomes across a variety of social services. It could be child welfare, behavioral health, economic opportunity, or juvenile justice. We partner with government where public money meets the people and seek to bring in the people most affected by the public funding to define the outcomes they want government to work towards. That happens mainly at the county and state levels, where the services are provided.

DS: What are two or three things Americans should know (but may not) about how human services are funded and delivered in the U.S.?  

CW: First, people often are not aware of the sheer amount of money that goes into human and social services beyond what is spent on healthcare. Government spends over a trillion dollars a year on non-healthcare-related services – across federal, state, and local governments. That's an enormous amount of resources going into our communities with the goal of improving lives.

Second, with this large amount of spending comes a lot of complexity, rules, and regulations that communities, especially states and counties, are having to navigate. You have multiple levels of funding coming in, and each source has different requirements on what it can be used for or who it can serve. This ultimately creates a compliance burden that is focused on inputs and activities -- what you spent the money on, as opposed to the results you achieved.

The last thing is that county governments are the recipients of a large amount of human and social services funding. Across the country, cities handle police, fire, and roads. But counties are typically responsible for justice services, child welfare services, public health services, etc. That is often new information for folks living in the Northeast or New York City, where all of those are under the city. But that city-based model of human services funding is quite rare across the country.

DS: Much of Third Sector’s initial work focused on supporting governments and nonprofits delivering “pay for success” programs. Can you say more about how that started and how it is going? 

CW: Pay for Success was the original tool we used to help government reflect on its outcomes and improve them. The pay for success model in its purest form is that government does not pay a penny unless outcomes are achieved.  That created an upfront funding need for the service providers, and a public-private partnership opportunity for philanthropists or impact investors to meet that need while the provider delivered services. If they achieved the outcomes, government would then reimburse for them.

When we started ten years ago, one hundred percent of our work was focused on the pay for success tool. Now that is only about ten or fifteen percent of our work, as we've learned and evolved over time.  As we worked with communities, we learned a lot about just how difficult it is for government to set aside funding over multiple years, particularly for one provider or at a very small scale. It's an awful lot of legislative work to encumber future budgets in that way.

It’s a much longer conversation, but basically pay for success was great at bringing in government, philanthropy, and private investors to define the outcomes they cared about. It was less good on what the community cared about. What we wanted to do more of was involving the community and beneficiaries in that conversation.  We discovered that many government leaders wanted to do this too. While some governments continue to pursue pay for success, over time, more and more of our work has kept the principle and idea of using public funding to drive change, but engaged beneficiaries of services in helping redesign how that funding can make a difference in their communities.

DS: What have been the biggest developments in the field you have observed over this period?

CW: The biggest shift I've seen is from a mindset of government as a provider of services to government as a funder of outcomes and a supporter of doing what it takes to enable families and individuals to thrive and achieve the American dream. The old service delivery mindset is very programmatically focused, very siloed. The work we've been able to do around outcomes-focused government with communities and government agencies helps folks think beyond a siloed program, think even – dare I say it? – beyond their agency, and be more person-centered in their approach. They now recognize one family may be interacting with the justice system, the homeless system, and the child welfare system, all at the same time. Knowing that, and having the data to understand that, how can they better center the needs of that family and deliver better outcomes for them?

I think the other shift we have seen is in government’s relationships with community. When we first started working with government, their idea was, “government contracts with service providers.” When we suggested they invite their service providers and their constituents in to share what outcomes they thought would be meaningful, the initial reaction was like, “We can't do that! They’re our vendors. It wouldn’t be legal to talk to our community before we put out an RFP!” Our partners have come a long way in understanding the value and the myriad ways beyond a focus group or an info session they can engage community members in understanding the root causes of challenges and helping to design better goals and programs for the agency.

It’s all coming together now. We are seeing human service agency leaders across the country becoming more strategic. They are starting to ask questions, like, “Wait a minute, this may be an evidence-based program, but is it delivering the results we hoped? How is it interacting with the other services the family is getting? How is the sum of services a family is getting greater than all individual programs they may be experiencing?” They now know from data things haven't been working. They don't want to fund the same programs. They want to do things differently.

These leaders are also asking, “How do we get more from our data?” Data has generally been a compliance exercise for government. Now there is a new interest and renewed focus with leaders asking themselves, “What do we want to achieve?  What data do we need to understand if anybody's better off?” It’s been exciting!

DS: How has the renewed push for racial justice over the past year impacted the work that you are doing and how you are going about it?

CW: It has put additional pressure and focus on centering people who are impacted by public funding and increasing the power they have in deciding what resources go where. The challenge now for us at Third Sector internally and with our partners in this work is how to sustain that pressure through to transformation. How do we not only elevate the voices of people of color most affected by public funding but share power in the decisions around the goals of the resources and investments being made in their communities, in the programs that are being brought in (or not)? How can they be a meaningful part of the process? We are still on our racial equity journey at Third Sector and will always be.

In the past, we certainly had a fear of naming racial equity within government, and within our own organization—of looking at the disparities in data and calling out the structural racism we know is inherent in all these government systems. We were afraid to raise and name it explicitly with our government clients, for fear it may turn it into a political conversation. What this past year has shown is that sometimes it is still a political conversation. But when you anchor the conversation in data and the disparities that exist by race across almost every public funding program, we're able to start to have a conversation more about how public funding has not been working for people of color. It has not been helping them thrive. Whether you're in a red, blue, or purple community, you desire to spend public funding better to achieve measurable results for all. That may mean we need to use public resources differently for certain groups of people to ensure they are able to thrive.

DS: What does it mean to achieve racial equity with government funding?

CW: At Third Sector, we think about racial equity as both an outcome and a process. You cannot be outcomes-focused if you are not noticing, naming, and dismantling the racial disparities that exist within government services. Racial equity as an outcome means every person, no matter the color of your skin, can achieve the same results and have the same chance at achieving a positive outcome as anybody else. Racial equity as a process is the understanding that not everybody needs the exact same thing to thrive because they are not starting from the same baseline, and that to achieve those outcomes, you need to be person-centered. Specifically, you need to center the people who are not achieving the outcomes in the design and the delivery of those public funds. It’s the process of centering black and brown people in looking at and providing context to data that may exist, but also in developing and co-creating the action that flows from it. If you see disparities exist and you say, “we need to do something and we're going to go out and fund XYZ program!” without engaging the community that would be affected by this funding in whether that program is going to matter to them, you would not be practicing racial equity as a process. And I would say you're unlikely to achieve racial equity as an outcome as well.

DS: How much impact does the Federal government have on how human services are delivered, given so much of the funding and work is at the state and local level?

CW: Even though the feds are not in the direct services business, they can have an enormous effect on how money meets the people in state and local governments. It’s mostly in a way you wouldn't expect, through compliance for the funds they deploy. The feds will set the tone, both in approving this new funding for SNAP [Supplemental Nutritional Assistance Program], for example, and in writing guidance around how that funding can be used. They will put guardrails around the questions of, “What is compliant? What is a good use of this money and what is not?” that have an enormous effect on how state and local governments spend that money, because nobody wants to have money clawed back. Particularly in the past, this has set a tone of focusing on reducing fraud, waste, and abuse from individuals instead of how a funding stream can achieve measurable results for a particular community.

DS: What opportunities if any have been created by the government’s response to the COVID-19 pandemic?

CW: COVID has exposed the disconnection and flaws in the delivery system of just providing individual services within government at the state and local level. There's been a realization – “Wow, we're struggling even with service delivery, and we're not getting outcomes, so let's take a step back.” It’s a crisis moment that has reinforced the convictions of a lot of agency directors and governors that we cannot build back the same way. These systems are failing us! They've been failing us during COVID. They've also been failing people of color and communities of color and rural communities across this country before that. And now is potentially an opportunity to really change because of such an enormous infusion of federal money that is quite flexible. We can spend it on transforming the public service delivery system. The challenge will be for government agencies to resist the desire to deploy money as fast as possible through existing systems that have failed and will continue to fail. They need to take a step back and resist the urge to plow money through failing systems and re-center the outcomes they are hoping to achieve with that funding, re-center the people who they're hoping to serve with this funding. This could be an enormous opportunity to redesign how public funding makes people and their communities better off.

DS: Ok, last question: If you could wave a magic wand, what are three changes you would make in how human services are funded and delivered in the U.S.?

CW: First, stop writing service prescriptions at the federal, state, or local level. At the federal level, it's extreme, right? There could be an evidence-based practice that works in Texas, has two or three great randomized control trials, and is then written into law and mandated for everybody. What we've seen on the ground is that communities are incredibly diverse across the United States. The world changes very quickly with technological advances, and challenges change. Service prescriptions that say, “You can only use government money if you pay for X input or X activity” really tie communities and providers’ hands when it comes to helping people achieve their goals. The result is you get government funding that is effectively, “here's what we can do for you money,” as opposed to, “how can we help you money?” So, stop writing service prescriptions. Leverage evidence-based practices to encourage evidence-informed uses of dollars. But ultimately hold people accountable for meaningful results with their communities, as opposed to whether you implemented this program with fidelity.

Second, make it somebody’s – or many peoples’! – job within government to manage to outcomes. We have compliance officers, but where are the “outcomes managers” to ensure outcomes for specific programs?  Third Sector often acts as an outsourced outcomes manager to support communities to achieve improved and equitable results. I believe we can train a generation of outcomes managers within government to encourage and reward states and communities that are willing to hold themselves accountable for outcomes, and to define what those outcomes are with the communities being served. Reward those who move away from a compliance mindset focused on preventing fraud, waste, and abuse by individuals, because we know that leads to mediocre results of entire systems. If local governments and their outcomes managers are willing to hold themselves accountable to sustainable, living wage jobs with upward mobility for their communities, or to kindergarten readiness for their kids, the feds should reward that risk! Give local governments more dollars to try that out, and to build the processes and the talent and the systems to be able to manage to outcomes over the long haul.

Third, free the data! Or at least make data sharing a two-way street. Make data available between federal and state and local governments. There's a lot of data going one way from local and state governments up to federal databases for compliance reasons. Some connections have already been made, between different federal agencies, between state agencies, but there's just an enormous opportunity to make that data available, and safely, to know whether the American people are better off based on this funding. There's also an enormous opportunity to start to look at data not on an individual but on a family basis. We've learned so much about opportunities with two generational outcomes. We also have seen how many families are over-serviced or experiencing multiple different siloed pockets of the public system. We have an enormous opportunity to make data available in a way that states can understand, is a family better off when they engage with the public system in this state? How do we know? That could help drive some of the system redesigns that will be necessary to focus more on the people we are trying to serve.

DS: Thank you Caroline, and Godspeed to you and Third Sector in this important work!