Posts Tagged ‘incentives’

All of the Feels (#FailEpic, part 3)

Thursday, November 5th, 2015

Why is it so hard to foundations to talk about failure? In the last two posts, and the lively comments therein, we’ve seen a few reasons: lack of incentives, presence of disincentives, lack of context, lack of clarity about when failure has actually happened and who owns it.

There’s a dimension of these reasons on which I want to dig in further, because it’s one we’re not that well set up to deal with in the sector. This became clear to me when I sat in on a local convening of funders talking about how to identify high-impact opportunities. (Another trusted network.) The concept of risk came up, and risk aversion. We dug in on, “risk of what?” What are we afraid will happen? Here are some of the things that came up:

  • Embarrassment: you got something wrong, you made a mistake, you messed up, you did damage
  • Ignorance: looking like you don’t know everything, or enough, about a particular topic or idea or community
  • Damage to relationships: you’ve wasted someone’s time, you’ve let down your colleagues, you’ve made others question your judgment.

These are not the concerns of technocrats! This is emotional stuff, what Jan Jaffe is calling philanthropy’s “second discipline,” the relational and interpersonal skills program officers need to do the work well.

I daresay we are spectacularly ill-prepared in the social sector to talk about and deal with this stuff in any kind of systematic way. There are any number of great program officers who move through these issues sensitively, effectively, and with nuance. CEP highlighted several a few years back. But that’s, as CEP put it, “luck of the draw,” not something that we hire or train for systematically.

I’m reminded of my former colleague Anne Sherman, who talked about change management as an inherently emotional process. It’s the CEO’s job, Anne wrote, “to help staff and board cope with the emotional aspects of change—the painful aspects of the process that involve letting go of something in order to make room for something new.”

What a discussion of risk helps us see is that it’s not just at times of change that emotional dynamics need to be managed; it’s in how we deal with uncertainty on a day-to-day basis. So, what might this look like?

  • Part of it is self-management, and self-awareness. GrantCraft has a great guide to leveraging your whole self in your grantmaking role. Hiring for that kind of emotional intelligence and self-awareness is part of equipping foundation staff to deal with risk, and failure.
  • But it’s also about the social dynamics within the organization. Individual self-awareness isn’t enough; the practices of how people generate ideas, talk about them, and decide whether or not to implement them deserves attention. Who gets to talk during your staff meetings? (How often do you have staff meetings in the first place?) Is there a de facto division between program staff and other staff? Are program staff the only ones looked to for program-related ideas, or suggestions about what’s working or what could work better?
  • One element of social dynamics that often doesn’t get discussed in philanthropy, because we’re oh-so-polite, is the role of education and social class. Look around at your next staff meeting. Are only the people with graduate degrees talking? Do we overly value the perspectives of those who’ve gone through the slog of post-secondary education? And do the cultures of those institutions sharpen our vulnerability to failure, because we’re so used to high achievement and reward?
  • Another element of social dynamics that does get discussed, all too often in a superficial way, is diversity, equity, and inclusion. As you’ll hear me say if you spend more than ten minutes with me, diversity is a checklist exercise about who’s at the table; inclusion is about how we treat each other at the table and who gets heard; and equity is about what results from our deliberations at the table. It’s time to get beyond diversity and engage inclusion and equity. And to do so in a way that allows for our vulnerable, fragile, human selves to work through unfamiliarity and difference toward understanding and comity. As the new Canadian premier said yesterday while announcing his new cabinet, when asked why it was 50% women: “because it’s 2015.”

All of this connects back to the relationship between internal openness and external openness. Do you need to be more internally open to enable you to be more externally open? Or you can be a structured, hierarchical, fear-driven place that delivers great customer service? This is an empirical question, but a moment’s reflection about how the corporate sector operates suggests that the two aren’t necessarily related. You can have places that are run very traditionally but are great at listening to customers. But how sustainable is this approach? And is greater harmony between the internal and the external conducive to better relationships? Again, this is an empirical matter.

But I would suggest, based on a discussion with some colleagues brought together by Grantmakers for Effective Organizations (GEO – another trusted network), that there are multiple points of entry for engaging with openness. These can include strategy, branding, technology, processes, leadership succession, and even physical space. This morning, I visited the Foundation Center’s beautiful new location in the financial district of Manhattan, which has open-plan architecture – no one has offices. It seems like it sends an important signal to have Brad Smith, the president, sitting at a workstation among everyone else. Making a change to the space is fostering a discussion about how the organizational culture shifts to incorporate open-plan. For us at Ford, a major strategy shift is spurring us to think about organizational culture. For others, it’s about branding, or technology.

These multiple paths are a gift: they give us different ways to engage with internal openness, including a willingness to talk about failure. And I think that means that we don’t have to wait to feel like we’re entirely internally open before being willing to be externally open. Rather, we can identify what point of entry to greater openness is most available, whether internal or external, and follow the thread that it provides us. What lies ahead is sure to be a labyrinth, but in the tale of Ariadne, Theseus, and the Minotaur, in the end, the heroes emerge from the maze. That’s a feeling worth working towards.

 

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Discount Double Check

Thursday, February 6th, 2014

One of the central issues in philanthropy is time horizons. Do you exist in perpetuity? Are you spending down within the donor’s lifetime? Are you looking to bring the next generation into governance? When can you expect to see impact?

Private funders have a tremendous luxury in the ability to set their own time horizons. If they want to exist in perpertuity, the law allows them to pay out 5% of assets per year, and with sound investment policy, they can keep ahead of inflation for a long, long time, and not have to touch the principal. If they want to spend down within the founding donor’s lifetime, as Chuck Feeney of the Atlantic Philanthropies has elected to do, or within fifty years of the death of the last founding trustee, as the Gates Foundation will do, there’s nothing stopping them.

Compare their reality to that of other endeavors:

  • Publicly traded companies: Quarterly earnings reports drive the stock prize and the value of compensation. Analysts will punish you for failing to make predictions. (Almost makes you not want to publish your theory of change if you’re a foundation – why be seen as making a prediction?)
  • Elected officials: Members of the House of Representatives are elected for two-year terms. As soon as they’re elected, they have to start campaigning again. Maybe this was designed to keep you accountable to the people, but nowadays, it means you’re accountable to donors and fundraising events.
  • Pop stars: One album doesn’t sell – hmm, have they lost it? Two albums don’t sell – bye-bye record deal, enjoy the nostalgia circuit.
  • Sports coaches: The Monday after the final regular-season NFL game, the coaching carousel begins to turn. The Cleveland Browns have had three head coaches in three seasons.

It’s really only tenured college professors who have at all comparable time horizons to private funders.

So how should private funders handle this power?

There are worse places to start than gauging δ.

What’s that, you say?

I said, δ.

Is that a backwards six?

No, it’s a lowercase delta, the Greek character. You may recognize its upper-case sibling, Δ, the symbol for change.

Lower-case delta, δ, is the symbol for the discount rate, your personal algorithm or set of assumptions for how you value future payoffs relative to present ones. “This ice cream tastes good. If I have another few spoonfuls, I’ll enjoy them, but man, my stomach will hurt in 20 minutes. So I can have yummy ice cream now, or sleep better later.” If I have a low discount rate, the value of future payoffs goes up, and I get a good night’s sleep. If I have a high discount rate…well, at least I can blog at 1:15 in the morning.

So, low δ = high patience.

High δ = politicians, public-company CEOs, sports coaches, pop stars: give me success now, whatever the cost.

Now, what happens when you have high δ people running a low δ institution? This is one of the problems with governance in philanthropy. We look to experts who thrive in high δ environments and ask them to downshift to a low δ mindset, without necessarily the tools for making that shift and checking their own instincts.

The good news is that in economics at least, δ boils down to preferences. And preferences can change. The art of governance in philanthropy may be tapping into the power of low δ thinking. I’m curious how much being a family board affects this. The presence of children is a classic way to lower δ – “think of what they’ll inherit.”

How do you see δ play out in the foundations with which you work? How do they value future payoffs relative to present results, particularly with regard to funding decisions?

20 Feet from the Corner Suite: What Darlene Love Can Teach Us about Workplace Success

Thursday, September 19th, 2013

My first post on the fabulous and essential Role/Reboot, an online magazine about the evolution of gender roles in contemporary culture.

The post was inspired by the inspiring documentary “20 Feet from Stardom,” well worth seeing:

http://www.rolereboot.org/culture-and-politics/details/2013-09-what-backup-singers-can-teach-us-about-workplace-suc

What’s Strategy Got to Do With It? On the Social Sciences and Philanthropy

Thursday, August 29th, 2013

My first post on the Stanford Social Innovation Review opinion blog:

http://www.ssireview.org/blog/entry/whats_strategy_got_to_do_with_it

Jealous Guy

Thursday, August 8th, 2013

“I didn’t mean to hurt you / I’m sorry that I made you cry / I didn’t want to hurt you / I’m just a jealous guy”

I wonder if implicit bias is the progressive version of unintended consequences.

A truly powerful idea that’s associated with conservative thought but has become widely accepted is “unintended consequences.” You try to alleviate poverty by providing a village with a better paved road, and the town becomes attractive as a route for drug smugglers to use in transportation, bringing violence to the town. You create certification processes for businesses so that consumers are protected, and business is disincentivized because the red tape becomes unmanageable.

For foundations, you provide grants in your focus area, and nonprofits that are desperate or don’t know any better modify their missions to go along with what you fund. You try to be clearer in your grant guidelines, and nonprofits hew ever more closely to what you say.

Unintended consequences are usually marshaled as an argument against government intervention, which makes them a popular resource of conservatives. But the reality of their existence means progressives are aware of and care about them as well, even if they don’t like some of the thinking behind them. They’re a hard-to-deny reality that undermines a central tenet of progressive thought, the value of intentional collective/government action in pursuit of greater social welfare.

I wonder if implicit bias is the progressive version of unintended consequences – a hard-to-deny reality that undermines a central tenet of conservative thought, that, as Chief Justice Roberts put it in a recent decision on affirmative action, “The way to stop discrimination on the basis of by race is to stop discriminating on the basis of race.” If despite our conscious efforts, our unconscious minds betray us, Roberts’ notion is not enough.

Implicit bias is the idea that even if you don’t consciously hold racist beliefs, even if you would reject them with your conscious mind, you have still learned patterns of thought and behavior that encode biased and racially invidious beliefs.

Studies have been done looking at the way recruiters handle job applications differently based on something as superficial as people’s names (example, see page 4).

For foundations, implicit bias can affect the way that leaders of nonprofits are seen as legitimate or not, authoritative or not, trustworthy or not. There’s a gender dimension as well, as the study linked to previously points out as well.

My question is whether the moment for implicit bias to emerge as the counterpoint to unintended consequences has come. The beliefs that George Zimmerman had about Trayvon Martin based on the limited visual information he initially received – some were explicit (“they always get away”) and some were no doubt implicit. “Suspicious-looking” – so much is encoded in this slippery phrase.

We live in the era of the algorithm – they calculate what to recommend on Amazon or Netflix, what ads we see on Facebook, what search results we get on Google. We all walk around with implicit algorithms about race and propriety and danger. George Zimmerman’s came to light, tragically, fatally. How long before it becomes abundantly clear to all that implicit bias is real?

In the meantime, foundation folks who review and approve grant applications would do well to ask themselves about potential sources of implicit bias, and investigate means to mitigate them. Because it would be a tragic unintended consequence to allow implicit bias to undermine the laudable goals of philanthropy.

Change in My Pocket

Thursday, August 1st, 2013

I got a letter from my health insurance company today saying that my employer and I would be getting a rebate because under Obamacare, insurers are required to spend at least 85% of premiums on hospitals and health care services, and no more than 15% on “administrative costs such as salaries, sales, and advertising.”

The overhead ratio has come to healthcare, just as nonprofit leaders are calling for it to be transcended in the social sector.

The kicker: just for New York State, the amount of customer premiums for this one insurer in this one year is $2.2 billion. That would have put it at number 27 in the list of top 50 foundations by assets in 2011. So 0.7% of those premiums is about one-seventh of what that hypothetical foundation’s payout would be – call it one grant program. $15 million, give or take. (Now whether I as a policyholder ever see a dime of that rebate is an open question: my employer subsidizes my premiums, so they may decide to use whatever we get toward defraying those costs.)

I bring that up just as another reminder of the scale of philanthropy relative to other parts of the economy. And to observe that in the aggregate, even relatively small-seeming instances of inefficiency (missing the target by less than 1%!) can conceal some serious dollars.

But the larger issue is, do we want an overhead ratio in healthcare, is that actually a useful thing? For once, the nonprofit sector may be ahead of the game relative to other sectors. I worry we may have to really evangelize some of this thinking beyond our own sector – where it’s hard enough to get the word around. And it’s a tough sell in healthcare – hard to argue that we need more hospital marking. It’ll be interesting to monitor how this “Medical Loss Ratio”, aka the “85/15 rule”, plays out in practice. God, I hope the authors of the healthcare bill didn’t get that number from nonprofit overhead ratios….

Oh, and like everyone in philanthropy, I read and thought and talked about Peter Buffett’s blog on the “Charitable-Industrial Complex.” For me the definitive word on this is from Zack Exley here. The upshot: the unglamorous way to reduce poverty quickly is aggressive state-led development. Viva varieties of capitalism!

Meeting Across the River

Tuesday, June 21st, 2011

(About the title: One of my recent vinyl purchases was “Born to Run.” The title song is of course a timeless classic that’s also musically about a couple of time periods (50s and 60s rock and R&B), but this track on the second side is a keeper too. Not one of Clarence Clemons’ (RIP), but enhanced by soulful horn playing.)

It’s frustrating to me that so many of our theories of human behavior are just so dumb and literal-minded. Take this piece in yesterday’s NYT about the return of genetic explanations in criminology:

A rash of new research has focused on self-control as well as callousness and a lack of empathy, traits regularly implicated in the decision to commit a crime. Like other personality traits, these are believed to have environmental and genetic components, although the degree of heritability is debated.

Why not just say, “we have no idea how these things are connected, so we’re going to make some stuff up based on our immediate cultural milieu and take the unspoken assumptions that govern our own behavior as the default for human nature”?

It’s like there’s no imagination about the complexity of human motivation. Get some Jonathan Franzen in there.

I get that you need to simplify to make predictive models work, but does the simplification have to be to models that are so boring and pedestrian? The model of simplicity you’re looking for here is Emily Dickinson, not Jack and Jill.

It’s one thing when this happens around the dinner table and your uncle sounds off in a cringe-inducing way. It’s another when these just-so stories are hidden in the assumptions of analyses that end up shaping policy. From the same NYT piece:

One gene that has been linked to violence regulates the production of the monoamine oxidase A enzyme, which controls the amount of serotonin in the brain. People with a version of the gene that produces less of the enzyme tend to be significantly more impulsive and aggressive, but, as Ms. Moffitt and her colleague (and husband) Avshalom Caspi discovered, the effect of the gene is triggered by stressful experiences.

“The effect of the gene is triggered by stressful experiences”? Come on now, we have to be able to do better than that. What’s the mechanism here – is stress about a certain kind of intensity of emotion – but that can be good or bad? Intense experience? Intensely negative experience? Or can euphoric experiences generate a stress-like spike in emotion, like when people bust up a downtown after their team wins a championship? (Ah, Vancouver, I so enjoyed my trip to you last month, why do you have to go and be a counterexample to the point I’m trying to make?)

I think we need to keep pushing to put some more imagination and ethnographic detail into our assumptions about the dynamics of human motivation. They’re called “microfoundations” in economics, but they don’t have to be small-minded.

All of which leads to a recurring topic on this blog, people’s motivations for giving. To be continued….

Don’t Stand So Close to Me

Wednesday, March 9th, 2011

Continuing from yesterday, I laid out different ways you could invest $1,000 of discretionary funds:

  • Contribute to a political campaign
  • Invest in a big business (through the stock market)
  • Invest in a small business (through Kickstarter)
  • Give to a nonprofit organization
  • Pool your money to give with others

What determines what’s right for you?

  • How much control you want: do you want to be able to have a say in how the funds are used? To what extent – one time (ask a favor of a politician one day), over time (direct a gift to a specific program at a nonprofit)?
  • How much proximity you want: do you want to be able to see the results of your investment directly, or are you OK with endorsing an interesting idea that happens somewhere other than you live?
  • How much visibility you want: do you want your name on a donor roll or an annual report? Do you want to be seen by other people as having given, like in a giving circle, and hang out with people who’ve done the same thing?

I’m trying to think of different ways to say “impact” without saying “how much impact you want.” Because of research is showing, maybe donors to nonprofits don’t want that.

What else?

    The Harsh Truth of the Camera Eye

    Wednesday, January 5th, 2011

    (With apologies to Morrissey for lifting the title of this post from one of his songs)

    Continuing from yesterday, I’m wondering about transparency and decision-making. One of the ultimate decision-making bodies, the U.S. Congress, reconvened today with the first class of Tea Party “freshmen.” Right out of the gate, the theater starts. (Remember how I pointed out yesterday, via Schattschneider, that when you increase the number of people in the argument, the incentive to showboat also increases?)  A friend on Facebook pointed out an article about one bit of performance art – Eric Cantor pushing to get rid of the (frankly kinda silly) resolutions the House does periodically to commemorate National Asparagus Week, or whatever. This is the kind of thing that happens when decisions are made visible – the Congressfolk sponsoring want them to be seen, they make a theater of decision-making, turning the very ability to make a decision into a spectacle. This is the power of certification, an authority changing the significance of something just by pointing its finger. What an abstract and strange power, when you think about it. But it’s real, given how long traditions like these House resolutions persist.

    Do we expect such forms of theater to increase or decrease as decision-making becomes more public? Hannah Arendt has some truly beautiful writing in The Human Condition about the importance of the public sphere, and the meaningfulness of political participation – a lot of it based on the example of the Greek polis and the origins of democracy. But as some critics have pointed out, the gap in her thinking is, why do people (well, men in the Greek case) jump into the public sphere? And it turns out simple vanity may be the answer. They want to look good, they want to be seen as virtuous. We tend to think of corruption as the acts of venal people, and “sunshine” or transparency as a way of mitigating corruption. But what if the most venal people of all don’t mind – or even prefer – to do their dirty deeds in the full glare of the spotlight?

    Mercedes-Benz and nonprofit evaluation

    Wednesday, December 15th, 2010

    Last week I talked about intentionality and coordination, and expressed my dissatisfaction at market-based metaphors that would make it difficult for philanthropy to proceed in terms of “coordinated voluntary participation.”

    Well, it turns out I’ve written a fair amount about coordination in the context of “varieties of capitalism,” the idea that the U.S. mode of doing business is not the only effective one. In addition to the “liberal market economies” of the U.S. and England, there are “coordinated market economies,” like Germany and Japan, where there is more intentional coordination, and the pieces of the employment/jobs system fit together more: vocational training fits with trade unions that have strong, long-term relationships with employers, who are willing to take risks on high-quality, labor-intensive products (think Mercedes-Benz) because they’ll have a supply of high-quality workers and relative labor peace.

    I’ve also said that philanthropy and the nonprofit sector in the U.S. have a weird hybrid model of LME labor relations and CME finance. What would a fully-CME enclave, perhaps at a state level, look like in the U.S. nonprofit/philanthropic sector?

    It would have to involve institutions working together to enable mutual risk-taking, on a path toward higher-quality, more labor-intensive outputs. Like, say, more attention to measuring results. What the German economy has to teach us is that all the parts need to fit together and assume some of the risk. (That means you, philanthropy). Firms (nonprofits) will produce higher-quality goods (better evaluation) if they can be assured that capital and labor will play nice; that is, that capital will be patient, and that labor will be high-quality enough to make high-quality goods. Foundations need to be patient with capital for evaluation, and be willing to pay for it, AND there need to be incentives for labor (in this case, the clients or nonprofit workers who provide the data for evaluation) to participate in this. German unions go along to get along because they’re more or less guaranteed job security and a steady flow of trained young people from the vocational system. That’s what’s missing in the U.S., the equivalent of the German-labor side of the equation. Where’s the incentive for nonprofit staff or clients to collaborate in the gathering of high-quality evaluation data? We haven’t made that connection (or rather, most orgs haven’t), and so the coordination breaks down.

    What might those incentives look like? To be continued….