Nonprofit Sector Research Handbook Forum

The Outcomes Movement in Philanthropy and the Nonprofit Sector

Editors’ Note: Paul Brest introduces his chapter in the newly published third edition of the Nonprofit Sector: A Research Handbook, on outcome-oriented philanthropy. For other posts in Histphil‘s forum on the Handbook, see here.

Introduction: The Essence of Outcome-Oriented Philanthropy

My chapter in the Nonprofit Sector: A Research Handbook chronicles the rise of the contemporary outcomes movement and its benefits, hazards, and limits. Common synonyms for “outcome-oriented” include “strategic,” “results-oriented,” and “effective.” The four core elements of an outcomes framework are clearly defined goals, evidence-informed strategies for achieving then, monitoring progress in order to make appropriate course corrections, and evaluating ultimate success.

Philanthropists pursue a virtually infinite number of goals. Their choice may be affected by religious, political or moral beliefs—for instance, by the ethical theory of the Effective Altruism movement or the belief that charity should be devoted to one’s own community. An outcomes framework has nothing to say about the choice of goals, however. It comes into play only after that choice has been made.

This insight vitiates the criticism that an outcomes approach favors the head and neglects the heart. The heart selects the goal. The head then ensures that the goal is successfully achieved through organizations that have sound plans and the capacity to carry them out. Society is surely better off when organizations that provide essential services to the sick or needy or advocate for social change deploy their resources to serve their beneficiaries effectively.

Antecedents

The roots of the contemporary outcomes movement lie, not in the nonprofit sector, but in businesses’ and governments’ interest in efficient management. New concepts and tools were adopted by new classes of professionals and spread by an emerging management consulting industry as well as by executives who moved between business and government.

Much of John D. Rockefeller’s philanthropy at the beginning of the 20th century was guided by the Progressive Era’s emphasis on rationality and empiricism. The organizations he founded sought to end hookworm, tuberculosis, yellow fever, and malaria through practical methods informed by scientific research results. Their strategies involved estimating disease prevalence, curing infected populations, and preventing reinfection. In today’s parlance, they were empirically based theories of change. The Ford Foundation also pursued outcome-oriented projects, including collaborating with the Rockefeller Foundation to develop high-yield cereals in the developing world—the Green Revolution. Ford later helped establish the Manpower Development Research Corporation (MDRC), which mounted and evaluated programs targeted to low-income people.

New Concepts and Tools

New concepts and tools played an essential role in the development of the outcomes movement.

A signal moment in the history of evaluation came in 1963, with the publication of Donald T. Campbell’s and Julian Stanley’s Experimental and Quasi-Experimental Designs for Research, which championed the use of experimental methods to evaluate social policies. Evaluation subsequently became a growth industry.

The origins of cost-benefit analysis (CBA) can be traced to the Flood Control Act of 1936’s requirement that the benefits of federal waterway infrastructure projects be greater than their costs. In the 1980s, President Ronald Reagan’s administration began to mandate that all federal regulations be subject to CBA―mainly as a means of curbing the federal government’s regulatory reach. CBA is not an intrinsically conservative tool, however, but rather one that is valuable for any outcome-oriented policy maker. Indeed, it lies at the core of contemporary pay-for-success programs.

The theory of change, or logic model, dates to a 1970 study commissioned by the U.S. Agency for International Development (USAID) to help improve its assessment of foreign aid projects. Its use as a framework for program design as well as assessment soon spread to other development agencies and then domestically. Today, the theory of change is regarded as a core part of any outcomes framework for program planning and assessment.

It is worth reminding readers who grew up with personal computers that the digital computer emerged only in the 1950s. Computer use migrated from business to government and eventually to the nonprofit sector, where it plays an essential role in monitoring and evaluation.

Emergence of the Contemporary Movement

The preceding discussion indicates a general progression toward the practice of managing to outcomes. Although no particular event marks the start of the contemporary outcomes movement, I would situate its origins in the last decade of the 20th century.

Advances in philanthropy during this period also have a lineage in the business sector. The title of an influential article published in Harvard Business Review in 1997 explicitly makes the link. In “Virtuous Capital: What Foundations Can Learn from Venture Capital,” Christine Letts, William Ryan, and Allen Grossman argue that foundations should emulate venture capital practices such as risk management, performance measurement, a focus on partnership rather than oversight, adequate funding, long-term relationships, and plans for exit.

Even before this article, George Roberts, a founding partner of the global investing firm KKR & Co., had launched a venture philanthropy program, now known as REDF, with the goal of supporting homeless individuals in the San Francisco Bay Area. REDF was committed to monetizing the social value created by its investees by measuring their social return on investment. In 2000, the Edna McConnell Clark Foundation transformed itself from a conventional grantmaking foundation to, in effect, a venture philanthropy organization that uses unrestricted funding and technical assistance to incubate and scale organizations serving disadvantaged youth.

Between 1984 and 2002, Atlantic Philanthropies (founded by Chuck Feeney, the entrepreneur behind Duty Free Shops) made more than $200 million in grants to support the infrastructure of the nonprofit sector, to improve its effectiveness, enhance its impact, and strengthen its accountability. Infrastructure organizations that emerged during this period included the Bridgespan Group and FSG, consulting firms to foundations and large nonprofits; the Center for Effective Philanthropy; and Grantmakers for Effective Organizations (GEO), a membership organization committed to improving nonprofit organizations’ performance by pressing funders to provide general operating and capacity building support.

This period also saw the launch of Harvard Business School’s Initiative on Social Enterprise—the first MBA program of its kind; a half-dozen university-based research centers on philanthropy and the nonprofit sector; two university-based publications, Stanford Social Innovation Review and The Foundation Review; a practitioner-oriented publication, Nonprofit Quarterly; and several books prescribing good practices for foundations.

Resistance

Resistance to the developments chronicled in the preceding sections was largely passive. The outcomes movement did, however, engender several vocal critics. William Schambra, former director of the conservative Bradley Center for Philanthropy & Civic Renewal at the Hudson Institute, contended that the focus on outcomes was anathema to civil society: “Our vast, bewildering, and ever-growing profusion of nonprofits – in all their naïve, amateurish, bumbling, redundant glory – may appall those who want to see social services delivered in a neat, orderly, rationalized and centralized way. But Tocqueville would have said that this is a small price to pay for the education in democratic self-government provided by our thick, organic, local network of civic associations.”

Bruce Sievers, former director of the progressive Walter & Elise Haas Fund, criticized contemporary philanthropy’s adoption of a business-inspired framework that focuses on “methods to increase leverage, grow return on investment, enhance effectiveness, improve evaluation, measure outcomes, strengthen organizational development, and so on.” Dennis Collins, former president of the James Irvine Foundation, was similarly concerned that “‘Hyperrationalism’ and ‘managerialism’ are taking over the nonprofit sector, … crowding out a more values-driven, mission-centered approach to philanthropy and replacing it with technically-based, efficiency-driven, outcome-centered processes.” Collins also argued that “one of the most pernicious consequences of this rush to proficiency is the impulse to avoid, if not eliminate, funding to address big, complicated, messy, seemingly insoluble problems, problems rife with uncertainty, risk, and inefficiency, and projects whose potential for failure is high. . . . The reluctance or inability of foundations to ‘swing for the fences’ is discouraging.”

The First Two Decades of the Twenty-First Century

Did these gloomy forecasts about the outcomes movement turn out to be correct? At the cost of giving away the punch line, not in the least. The full chapter in the Handbook describes the role of an outcomes focus in service delivery including pay-for-success programs, advocacy, “wicked” problems, and impact investing.

The real problem, to my mind, is that the outcomes movement has not spread widely enough. To be sure, an increasing number of wealthy philanthropists, foundations, nonprofit leaders, and academics have self-consciously worked to improve the social sector’s effectiveness. But Mario Morino (2011), a savvy participant-observer, captures the state of the movement in its third decade when he writes:

I’d like to believe that this progress is a sign of pervasive disruptive transformation throughout the social sector. I’d like to believe that the majority of nonprofits are now poised to materially improve their impact by being more analytical about causal relationships and how they assess their performance. I’d like to believe that the majority of funders are poised to make decisions based on evidence and merit rather than loyalty, stories, and relationships. Yet the reality—in absolute terms—is that the promising developments . . . still touch only a small minority of nonprofits, foundations, and donors.

Just as with other social strategies, the key to achieving the goals of the outcomes movement lies in a sound theory of change. While acknowledging its uncertainties and limitations, the chapter sketches the components of such a theory.

-Paul Brest

Paul Brest is Former Dean and Professor Emeritus (active) at Stanford Law School, a lecturer at the Stanford Graduate School of Business, co-director of the Effective Philanthropy Learning Initiative at the Stanford Center on Philanthropy and Civil Society, and co-director of the Stanford Law and Policy Lab. He was president of the William and Flora Hewlett Foundation from 2000-2012.

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