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Commentary – The Social Innovation Fund: Innovation for What?

By Pablo Eisenberg on June 20, 201010 Comments

Although the Obama Administration has asserted that it wants to support and strengthen nonprofit organizations, it has neither understood the vastness, diversity and needs of the nonprofit community nor launched a serious initiative to provide the resources required to sustain nonprofits in trying financial times.

Instead of coming up with a major substantial program, it has produced a “mouse,” the Social Innovation Fund, financed by an insignificant $50 million a year for several years. The Fund, alas, is the Administration’s pilot ship in strengthening the nonprofit sector. Why such a puny effort, and one that doesn’t target the significant problems facing the sector?

The Fund plans initially to award seven to ten grants of $1-10 million to intermediary organizations which, in turn, will redistribute the money to nonprofit groups that are making innovative efforts to improve the conditions of needy people in neighborhoods and communities throughout the country. Both the intermediary and local recipient groups will have to match the federal grants.

The intermediary organizations are expected to be private and community foundations. The reason given for selecting philanthropic institutions for this task is that they supposedly know best what is going on in local communities.

Many of the ideas about nonprofits adopted by the White House staff, Michelle Obama’s aides and Presidential advisers have been supplied by a very small group of social entrepreneurs who run nonprofits that stress innovative practices largely based on business models. New Profit, Inc, Echoing Green and City Year are among their most prominent practitioners.

Groups like theirs represent no more than a tiny sliver of the large nonprofit world. Yet, for some reason, they have captured the ear of the Administration. They do not reflect the needs of major or local social service organizations, homeless shelters, housing providers, local health centers, community organizing groups, national, regional and local advocacy entities and watchdog institutions that hold government and private sector groups accountable.

It is not surprising, therefore, that the Obama Administration, when it talks about nonprofits, never mentions activism, advocacy and organizing as fundamental approaches to problem-solving. Nor does the Social Innovation Fund. When Mrs. Obama speak about the “hidden gems” among nonprofits, she is talking about large, popular nonprofits that are entrepreneurial innovators with large and stable budgets, organizations that lend themselves to good publicity. The Social Innovation Fund is not likely to support activist or grassroots groups that can make a real difference at the local and regional levels and are so crucial to community well-being. In its search for non-risk taking and fairly safe organizations, it may well ignore those groups that have a real innovative capacity.

The President hopes that the Fund will prove to be a substantial stimulus for additional funding from the foundation community beyond the required matching funds of $50 million for the program. Indeed, five large foundations have recently pledged $45 million to the Fund for purposes that to date remain obscure. There was some indication in the press release announcing the pledges that the money would be used for matching purposes, but the Fund has already stated that the Fund’s initial $50 million would be matched by the intermediary foundations receiving the Fund’s grants. One of the five donors confided to a reputable source that he was really giving $10 million in order to get closer to the White House.

Involving a few foundations in the Social Innovation Fund is not an effective way of stimulating the foundation community to give more. A more compelling strategy would be for the Administration to push the Congress to increase the minimal payout that foundations are required to distribute annually from 5% to 6% of their assets, all in grants. Under current law, foundations can include all their management costs as part of the minimum payout of 5%. Such a change would provide at least an additional $10 billion a year to the budgets of nonprofits throughout the country.

Thousands of small nonprofits in rural areas and in regions currently underfunded by philanthropy are in desperate need of financial support. To meet this need, the Administration could use the Presidential bully pulpit to urge the foundation community to create new, large rural and regional foundations with the capacity to reach out to these overlooked nonprofit organizations and their communities.

But this is not what the President’s advisers seem to have in mind. The Social Innovation Fund is a diversion from the real needs of our nonprofit sector, an attempt to fund a few solid nonprofits, as well as gain some good public relations on the cheap. Ironically enough, the initiative is unlikely to produce the Fund’s goal…innovation.

Pablo Eisenberg is Senior Fellow at the Georgetown Public Policy Institute’s Center for Public & Nonprofit Leadership. Eisenberg served for 23 years as Executive Director of the Center for Community Change, a national technical assistance and advocacy organization working with low-income constituencies nationwide. He has actively contributed to national discourse on government accountability and reform, the role of philanthropy, and the achievements and problems of the nonprofit sector. Eisenberg has published numerous articles and chapters of books and has a regular monthly column in The Chronicle of Philanthropy. He has held senior positions with the U.S. Information Agency in Africa, Operation Crossroads Africa, Office for Economic Opportunity, and the National Urban Coalition. He is a founder and Vice-Chair of the National Committee for Responsive Philanthropy and President of Friends of VISTA.

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  • [...] Pablo Eisenberg, Senior Fellow at the Georgetown Public Policy Institute’s Center for Public & Nonprofit Leadership, provides a critique of the White House’s Social Innovation Fund in his OnPhilanthropy commentary “The Social Innovation Fund: Innovation for What?” [...]

  • [...] Social Innovation Fund – a critical voice on using large nonprofits over smaller grassroot [...]

  • [...] “Instead of coming up with a major substantial program, [the Obama administration] has produced a “mouse” … (onPhilanthropy, 6/20) – says Pablo [...]

  • Rick Cohen says:

    The concept of “social innovation” appears to be aimed at depoliticizing issues in the sector–and depoliticizing the sector itself. Organizing and advocacy are inherently small “p” political functions of the nonprofit sector, most of the impact of nonprofits can be ascribed to organizing and advocacy, but they are functions that are contentious–and sometimes have to be around specific topics and issues. But by moving programs into the “social innovation” column, they get elevated out of their political meaning, even though there are significant political aspects to and biases built into the programs that the successful social entrepreneurs promote. Glad we have Pablo continuing to raise issues as forthrightly as he does here with the Social Innovation Fund

  • I think this article offers important cautionary notes for the White House about being too exclusive in sourcing their ideas or relying on foundations to be close enough to individuals to know what approaches work best. Supporting innovative funding mechanisms for foundations is also a great idea.

    But, I believe that the White House has made efforts to reach beyond the “social entrepreneur” movement represented as you say by New Profit and Echoing Green. Sonal Shah, Michele Jolin and their team have sought input from across the country including local efforts.

    Also, the organizations targeted by the Social Innovation Fund won’t necessarily all be “fairly safe” bets. During a recent SIF-related address Michelle Obama called out Maurice Miller and the Family Independence Initiative. FII is not a large organization—it has reached about 100 families over the last six years and is now moving to a fourth city, Boston, for another pilot. FII challenges many of the assumptions that traditional providers make when working with low-income families, and for that it has received push back from other providers as well as funders. Miller’s is the type of innovation the fund could really help grow.

    In our new book The Power of Social Innovation (www.powerofsocialinnovation.com), we suggest executive leadership, e.g. a nod from the bully pulpit like the First Lady’s, can be as effective as new dollars in driving social innovation—in terms of individual models like FII and in changing the norms around how philanthropy and government fund them. For that reason, the relatively small size of the fund does not make it inconsequential.

    Independent of it size, the Social Innovation Fund doesn’t have to be about getting philanthropy to give more, as you suggest, but rather to give in a new way. More funding does not necessarily equate to more innovation. The ‘how much’ isn’t necessarily as important as the ‘how’ in this case.

    One more point of agreement. You mention that one donor offered to contribute $10 million in order to gain access to people in the WH. I think this is a great example of how social problem solving, which tends to be a web of nonprofit, philanthropic, business, individual, and government efforts, is inherently political in nature. Over time, organizations seek to sustain themselves rather than fulfill a mission. Incumbent providers oppose change in order to protect their interests. Despite all the goodwill, our social problem solving systems evolve to where being politically connected and savvy becomes the path to future funding, not achieving effective outcomes. Grassroots, advocacy and watchdog groups can help create the public awareness and demand and political will to overcome opposition from status quo providers and to transform these systems. Maybe, as you suggest, those looking to encourage more social innovation should also look to support those types of nonprofits too.

  • Jasmine McGinnis says:

    I really enjoy the post and definitely agree with many of your points. I also have written about the Social Innovation Fund and some concerns I have on a blog I started with some other doctoral student colleagues.

    Hope you enjoy it
    http://thirdsectornetwork.org/2010/06/16/social-innovation-fund-why-i-cant-get-excited-yet/

  • Auren Kaplan says:

    Thank you for this article, it brings up a relevant question – what exactly is the purpose of this $50 million?

    I would firstly submit that considering the $50 million as seed money for new non-profits is a mischaracterization of the fund’s mission. It is my belief that the President is committed to taking seriously the notion of for-profit social change business models. In speaking with funders of new for-profit and hybrid social ventures (using funds like Presumed Abundance to invest in for-profit businesses dedicated to social good), a rising belief within the social entrepreneurship community is that this funding amounts to a Presidential endorsement of a serious examination of for-profit, social good business models. The recent passage of Benefit Corporation legal status in Maryland points to the rising movement for creating business models to reflect the changing landscape for social innovators. As B Corp says on their website, “2 [states] down, 48 to go.”

    We are embarking on something new here, a re-conception of the way we share goods and services. It is my firm belief that we are moving away from traditional capitalism’s focus on pure profit, and are steadily heading in the direction of business, and capitalism, as the newest mechanism for creating social change. Some define it as triple bottom line business (people, planet, profit) others call sustainable economics, and still others call it social capitalism.

    In sum, there is a movement afoot. The energy is in the air, yes, but it is an energy grounded in action. The social enterprise movement is growing like never before, and is unwaveringly committed to ushering in a robust for-profit social change movement that not only competes with the best for-profit businesses, it seeks to transcend them.

    This $50 million fund serves as the White House’s message to the for-profit social change community that the President is committed to seeing this paradigm shift through, giving it every opportunity to take hold throughout our country.

    Sincerely,

    Auren Kaplan
    Director of Social Media, Hub LA
    Ambassador, Urban Social Entrepreneurs
    LA Board Member, StartingBloc

  • [...] from a much-needed Presidential effort to effectively empower our nation’s non-profits, and you can read his take here. I absolutely agree that we must rethink how our country values our non-profit social change [...]

  • I think Mr. Eissenburg makes some good points regarding the SIF. I think there are some inherent issues with the design of the fund and I think it will be tough to get money to where it is most needed –low-income, rural communities–but doing something is better than doing nothing. Our sector needs to really begin to look at what we do, how we do it, and how we define ourselves. I think the model is outdated and will eventually go the way of the dinosaurs if we don’t get on the front end of it.

  • [...] The Social Innovation Fund: Innovation for What? | onPhilanthropy Pablo Eisenberg calls the Social Innovation Fund "puny" in a scathing blog post. (tags: philanthropy) SHARE THIS POST Philanthropy Daily Digest    ← Previous post [...]

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