The missing leg of the stool

Continuing from yesterday: “varieties of capitalism” teaches us that there are different ways to organize a modern economy. The German model, what Hall and Soskice call a “coordinated market economy,” feature a relatively high level of coordination between firms, capital, and labor. They’re able to develop high-quality, labor-intensive goods because each takes a risk knowing that the other is taking a complementary risk.

In the U.S., the high-quality good of strong nonprofit evaluation/learning practices is not frequently produced, and one reason may be that that three-way coordination doesn’t happen. Nonprofits, foundations, and clients/the public aren’t coordinated in the same way. Foundations are rarely patient enough to support high-quality evaluation, nonprofits can’t count on stable financing to do it, and most crucially, nonprofit clients (and workers) don’t have clear incentives to participate in high-quality evaluation.

(I know that just earlier this week I distinguished between monitoring and evaluation. I’m using “evaluation” here to mean those practices of continual learning that allow a nonprofit to understand its environment, its product quality relative to that environment, and make adjustments to its resource allocations.)

There are some different ways to address this. One would be to make it easier for clients and nonprofit workers to gather and analyze evaluation data. This is improving the tools (SurveyMonkey has done this). That mitigates a disincentive, but doesn’t necessarily provide an incentive. Another way is to make evaluation data available to those from whom it’s gathered. This is improving the feedback loop (again, web-enabled tools, including SurveyMonkey,┬ámake this more easier). This provides somewhat of an incentive, because you see that your contributions actually result in something. But to have a really positive incentive, there has to be a connection to the person’s life and own interests. And that comes from a clear articulation of the nonprofit’s mission and a strong communication of its value added to its clients and workers. People need to be able to see why having a nonprofit that’s better able to learn is better able to serve them.

And that’s where I feel the real challenge is. It’s a missing piece in what could be a greater form of coordination among nonprofits, foundations, and the public to produce the kind of evaluation data that would make it easier for all involved to know that the work being done was having real impact.

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