What could be wrong with the humble grant?

Grants are what make the social world go round. They are the standard product of exchange between funders (aka grant makers) and social organisations. But grants have a problem – a feedback problem.

The grant recipient, who might give the feedback, is usually going to be seeking more money from the grant provider. That can get in the way of complete frankness. Grant feedback is usually rose tinted and sometimes becomes a matter of how many times you can fit lovely, wonderful, creative, thoughtful and brilliant into each sentence. I remember being very disconcerted when I was a grant maker for a while. My jokes were suddenly funny, my thoughts pearls of wisdom, and my ideas boundless creativity. I found this uncomfortable. Most grant makers I know do too, and while they generally see through it and work hard to do the right thing, it is sometimes a difficult bubble from which to escape.

So here, with as much honesty as I dare, is a list of grant features and their issues. Thereafter I will put down some thoughts on possible alternatives or improvements.

No. Feature Bug
1

Grantmakers have carefully thought through programmes to which organisations apply. These ensure cohesion and impact

Applicants try to squeeze their work into ill-fitting boxes, refocusing on new measures and creating mission creep. Over time this can create an insidious battle for strategic control with charities playing cynical lip-service to funder wishes and funders becoming more and more controlling.
2

Grants are for a set period of time, up to three years, to avoid dependency

This means that charities have to fill a one third minimum funding void every year, independent of effectiveness or impact. Continuity of funding is effectively completely un-meritocratic.
3

Grants are for a set amount of money, to pay for specific things, and are paid according to a clear schedule to ensure the money is used effectively

This is fine when the plan is clear, but doing anything new one learns on the job and should adjust accordingly. Does business investment tell you exactly how and when to spend the money? In that culture change and adaptation are expected, not cause for concern and negotiation.
4

Applicants should demonstrate that they need the money, as otherwise the grant money could be more effectively used elsewhere

This can create an insidious reverse meritocracy. An effective organisation that looks impressive and organised, with effective financial planning may struggle to get funded. A disorganised one, in clapped out buildings and a handwringing story, may be more successful.
5

Grantees should not use grants for commercial gain or exploitation, results and any intellectual property should be made public

Many social impact ideas can be set up as social enterprises and seek to compete in a commercial market, but with a social product. They can’t get commercial funding, due to their social focus, but they may also struggle to get grant support because someone one day might make some money.
6

Grantmakers want to support innovation

So a charity with a long track record programming excellence can struggle to get its core programme funded. Also the required innovation needs to fit within a pre-defined programmatic area. In other words, we would like to support innovation we have already thought of…
7

Grantmakers want to support the frontline as their money is for saving children, not administration

So charities and social organisations are undermanaged, with poor IT and data systems, and have trouble with senior staff retention as staff leave to do other things if they want to start or support a family.

Put together, these features can:

  • Promote bureaucracy over innovation;
  • Promote mission creep or even fudging;
  • Have unsustainability built in from the start;
  • Are unmeritoctratic and can in fact support the poorer or more needy over the more effective.

Many of these features seem originally designed to fit the needs of foundation trustees or creators, who would like a series of ideas that feel fresh and exciting, that directly affect peoples lives, and that can be cheaply administered. Complicating issues such as commerciality are regarded as too fiddly, and are therefore excluded.

Grants 1.1

Many grantmakers, traditional ones as well as new types such as venture philanthropists, have tried to break at least some of these moulds. For example, many grant makers in the US provide follow-on funding and develop longer term relationships. Esmeé Fairbairn’s social investment fund allows them to be thoughtful around commerciality and social enterprise. The Big Lottery Fund’s Better Start programme aims to provide 10 year funding. Venture philanthropists often allow for more adaptation and provide support to enable the business plan rather than a pre-designed programme. Here are some further experimental grant structures designed to get round some of these issues.

  1. Some grantmakers just accepting that they want to support the strongest organisations in a given area, and then to continue to do so. They can then build long term customer style relationships, developing monitoring and feedback systems to ensure that the charity focuses on the needs of those that it serves and seeks to improve the service it provides. This may sound dull, but it would have a considerable impact.
  2. A success top-up grant. A grant maker provides a three year grant. In the event that the grant applicant is being successful, an additional 50% of the grant value becomes available automatically after say two or two and a half years. The grant maker continues to measure the same impact measures on the new money as on the three year grant, but doesn’t specify how and when the money should be spent. The grant maker can then compare the impact of the follow-on grants it is making with the initial grants. Grant makers should publish the proportion of grants that roll over to set expectations, for example the aim might be say two thirds roll over, or half if feeling more aggressive.
  3. A grant maker could decide an amount of money to tackle a social issue, but then provide a complete mix of different funding, grants, loans, commercial funding, to organisations tackling different aspects of the problem. By doing so, the grant maker learns about the issue from different angles and can add value to those it supports and become a genuine partner. The grant maker can become part of the dialogue around that issue and an agent of change. It could measure itself by the overall impact that it has on the issue, rather than individual grant success, enabling more risk taking and a more holistic strategy.
  4. A grant that converts to equity. To resolve issues of commerciality, grant makers can put the grant in place so that in the event the entity supported receives commercial funding the grant maker can expect to join that first round at the same valuation. They will have taken initial risk, but that is what the grant was for. This idea would need tinkering with, depending on circumstances, but should allay the commerciality concerns.

What are other people’s ideas? I would be grateful for any thoughts on improved grant making structures as I’m not sure I’m being very imaginative here.

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Further data on the Peterborough Social Impact Bond

The Office of National Statistics provided further data on Peterborough at the end of July, this time on the complete first cohort of 1,000 prisoners.

While this is largely confirmatory information, the Ministry of Justice found a closer matching baseline, by focusing on local prisons rather than all national prisons. This responds to the concern that Peterborough may be hard to emulate or unrepresentative as it is local and therefore returns more of its prisoners to the local area.

The updated data looks like this:

Peterborough (and national equivalent) interim re-conviction figures of cohort 1 with a 6 month re-conviction period

 Peterborough

National local prisons

Discharge Period

Cohort size

Binary

Frequency

Binary

Frequency

 Sep05-Jun07

837

40.4%

74

36.60%

66

 Sep06- Jun08

1028

40.6%

81

37.80%

71

 Sep07- Jun09

1170

41.0%

85

38.30%

74

 Sep08- Jun10

1088

40.3%

84

37.30%

75

 Sep10- Jun12

1006

38.6%

78

39.30%

84

Binary: Reconviction rate over six months
Frequency: Frequency of reconviction events per 100 offenders within six months

A few topics to cover:

– Is this a better baseline and therefore does it give us greater confidence in the effect that Peterborough is having?

– Is this data good, or mixed as some have reported?

1. Is this a better baseline?
It should be, as it better matches the Peterborough cohort. As an experiment, I thought I would put together similar graphs to the ones before and compare them.

Data to March, with National baseline
Rebased reoffending data

Data to June with National local baselineRebased reoffending 2

And now the relative change graphs

Data to March, with National baseline
Peterborough relative to national

Data to June with National local baselinePeterborough relative to national2

What this shows visually is that the new baseline appears to be a better fit. Movements in the baseline prior to the intervention are closer to the movements in the Peterborough cohort, in other words the baseline appears to explain more of the movement in the Peterborough data. So it gives us greater confidence that we are seeing an intervention effect.

It also gives us a degree of greater confidence that we will get paid. The previous data ended with Peterborough’s frequency number equalling the national average. This one ends with Peterborough at least improving upon it. The propensity score matching process should bring out a comparison cohort that is even more similar, but of course we still haven’t tried it.

So, is it time to pop open the champagne and celebrate? Not yet. This is good news, but it is still only on six month data. We will be measured on whether we reduce offending over twelve months. What we can say is that our intervention appears to at least delay reoffending behaviour.

We should also say, this is only the first cohort of the first Social Impact Bond. It is incredibly early days so drawing significant conclusions at this stage is premature. On the other hand, we are learning and developing all the time, so the fact that we see a significant impact on such an early group is clearly exciting.

2. So is this data good, or mixed as some have reported?

We are cautious, because this is early days and early data. It isn’t a randomised control trial, sure. Nor is it the formal comparison cohort that will be developed for payment purposes using propensity score matching. But this is very positive data, on the best available information.

In the first set of results, which were also good, one of the caveats people put forward was that the Peterborough frequency was now only the national average. On this closer baseline this is no longer the case.

Another concern was that the jump in re-offending frequency in the national data should be treated with caution. I understand that, and see the potential for regression to the mean, but comparison with national data is more precise than looking at a comparison with historical data. Thus the 20% relative decline is the more useful figure than the 8% decline against historical figures, particularly given the strong correlation between the local prison data and the Peterborough data historically.

It is important to draw a distinction between responding with caution, on the basis of the caveats outlined above, and saying that results are “mixed” as we have seen in a few quarters. They’re not mixed, they’re surprisingly strong – but early and indicative at this stage.