Funding for Outcomes
Mario Morino, author of Leap of Reason, discusses funder pitfalls in setting and measuring goals for grantees.
After a successful career in the private sector, Mario Morino “retired” in 1992 to work in the social sector. A co-founder of Venture Philanthropy Partners, Morino has galvanized funds, expertise, and his network of relationships toward improving the lives of children in the National Capital Region of Washington, D.C. Morino’s 2011 book Leap of Reason was hailed as a “must-read” by leaders from all backgrounds: including Harlem Children’s Zone’s Geoff Canada, Harvard Kennedy School’s political analyst David Gergen, and venture capitalist Steve Denning of General Atlantic. This week, Morino wrapped up a successful two-day conference titled: “After the Leap: Building a Performance Management Culture” that brought together leaders from all sectors in a frank, practical dialogue about what it really takes to create this cultural shift.
Susan Wolf Ditkoff: In Leap of Reason, you describe how funders sometimes contribute to grantee underperformance, despite their best intentions. Tell us more.
Mario Morino: As I see it, the whole system sets nonprofits up for struggle and starvation, not for solving challenges. We funders should be supporting nonprofit leaders to build strong, high-performance organizations. Instead, we cause them to think incrementally—month to month and hand to mouth. We often treat them as contractors to carry out our programs. We often say we’re focused on results. But really what we’re doing is demanding more information on results without wanting to invest to help leaders build evidence of their work or paying enough attention to what leaders actually need to produce those results.
Leaders need funders who are willing to make large, multi-year investments in helping them rethink their models and strengthen their management muscle and rigor. That approach is at the core of what Venture Philanthropy Partners does.
Why is this results-orientation so rare?
First, funders don’t fully fund the type of “overhead” that leads to high-performing organizations—the kind of investments that are de rigueur in the private sector and simply considered good management. We unfortunately lump essential management functions, including developing and tracking outcomes and leadership development, into “overhead.” Leadership development isn’t sexy. Performance management processes aren’t sexy. And nonprofits don’t have enough discretionary capital to fund these expenses on their own—they are completely starved for capital. Funders (and government, for that matter) set arbitrary overhead ratios that don’t actually support high-performing nonprofits. If more funders funded the executive management development and organization-building necessary to manage their operations in this way, we’d be far better off. If more funders rewarded leaders for making outcomes-based decisions, we’d be far better off. Many leaders in our sector are charismatic and passionate and visionary, but were knighted into their roles and haven’t benefited from the training and on-the-job development that would better enable them to do basic blocking-and-tackling management skills well.
Video: Mario Morino on how leadership sets the tone for culture and performance.
What landmines do funders who do want to focus on outcomes encounter?
Unfortunately, even funders who do push for an outcomes orientation can do so in a wrong-headed way. Let me give an example. Sometimes funders establish performance metrics tied to very specific targets or milestones. Sometimes funders insist that those milestones be established years in advance—when we know that the world changes, and that the nonprofits and funders need to adapt too. The goal must be to help grantees define and use current information to manage their operations toward outcomes. They need relevant, timely data and the flexibility to track, course correct, and adapt their approach when necessary to stay focused on the ultimate results they’re pursuing. The goal of performance management must be to fuel learning and improvement by and within the staff so that nonprofits can keep getting better and better at meeting the needs of those they serve.
What’s the single best piece of advice you have for private funders?
In my experience, it’s all about building a trusted relationship. Strive to earn that relationship. It’s easy to say, but hard to do. Fear of retribution by funders means many nonprofits fear sharing any form of bad news, especially information on their performance; it’s just too risky. They need funders who will work with them to fix what went wrong, rather than pull out on them. Nonprofit leaders know whether they sit across the table from a punitive funder or one who is truly invested in their success. Funders need to focus on helping leaders build high-performing organizations with a sharp focus on outcomes in an adaptive way, rather than with a linear and narrow mindset, and they need to financially incentivize and emotionally and intellectually encourage their grantees to do so as well.