Nonprofit Board Policy: Pay-For-Success

[Mike Burns]

What constitutes meaningful nonprofit board conversation? I pose that meaningful nonprofit board conversation, (usually what goes on in a board meetingand/or board planning session informs and/or results in action around fiduciary and strategic policy, planning and evaluation.

One of the topics I believe should be on the table of many human service nonprofits: pay-for-success. PMany US state and federal legislators are considering payfor-success as an answer to both cost savings and accountability. Here's a description from the Wall Street Journal:

Historically, providers of social services to at-risk and vulnerable populations have been paid for their efforts rather than for the outcomes they effect. But the past four House budgets constructed by Rep. Paul Ryan (R., Wis.) have emphasized measuring the impact of federal funds spent on education, food security, and other social needs. Such programs typically reimburse operators for meeting specific benchmarks in their efforts to keepclients out of prison or end homelessness. These policy innovations could help improve outcomes for at-risk populations while stewarding scarce federal dollars.

Federal job training programs are one place to look. Traditionally, such programs have focused on training job seekers independent of whether the training results in people getting and keeping a job, leaving few ways to measure the effectiveness ofthe approximately $18 billion the government spends every year to train those who need work.

In pay-for-success job training programs, however, market forces are applied to the process of calibrating employer needs and trainee education levels, matching trained applicants to employers with job openings, and providing supports to help ensure long-term success on the job. The programs typically work by making a portion of a provider’s reimbursement contingent on meeting an initial benchmark—usually job placement in a sector for which the employee was trained—and paying the remainder of the fee when a second benchmark, such as continued employment for a full year, is met. The Australian Department of Employment reported this summer that the cost of placing jobseekers has plummeted from $16,000 to $3,500 per trainee, even as the number of trainees getting and keeping jobs has doubled.

A consensus is also developing in the GOP around an accountable, efficient approach to poverty alleviation. Rep. Ryan has visited nonprofits around the country helping those caught in the cycle of poverty and dependency, and he recently proposed a plan to address endemic poverty. Language in the recent Workforce Innovation and Opportunity Act, championed by Rep.Susan Brooks (R., Ind.) and Sen. Rob Portman (R., Ohio), allows governors to use as much as 10% of their federal job training funds for these types of pay-for-performance, outcome-based programs.

Incoming House Budget Chairman Tom Price has said that he wants the GOP budget to give “the greatest amount of opportunity to the greatest number of Americans.” Incorporating policy guidance in the budget resolution to build and test pay-for-success models would send a message.

Social programs have a contract to keep with those who fund them and those they serve. Pay-for-success policies update the conservative lexicon to re-emphasize focus on outcomes–and empathy. By incorporating such strategies into the next budget, Republicans could improve the economic prospects of those Americans who need help the most—and improve their own prospects for 2016.

Juleanna Glover is a corporate consultant and Republican policy and communications adviser. She is an adviser to America Forward, a nonprofit that advocates accountability in government spending on social programs. She is on Twitter: @juleannaglover.

But, while pay-for-success may be the right strategy for the government, nonprofit boards must really examine their core values and mission as well as business model to discern how pay-for-success would affect the institution and their clients. Perhaps a pay-for-success task force should be created to understand all the issues and impact and be called upon to lead a board conversation that results in a clear direction with parameters. And, once ready to adopt, imagine the many and varied internal policies, practices, training, and /reporting/evaluation activities that will need be put in place to achieve the pay-for-success goal. Note, pay-for-success may not be right for every nonprofit.