socially marketing

The social capital marketplace that socialmarkets advocates is a relatively new idea, but is clearly gaining traction - and visibility.

We were delighted to see this article in the Financial Times by Sean Stannard-Stockton (who also runs the excellent blog at Tactical Philanthropy) describing a future where social capital markets are the norm, not the exception, across the nonprofit sector.

His vision offers a model of nonprofit funding that closely mimics today’s for-profit financial markets, perhaps more closely than even we would have guessed. It includes the somewhat hyperbolic story of a nonprofit that defaults on a billion dollar bond issue, shocking the social capital marketplace and tightening credit across the sector.

While such a story may exaggerate the point, it certainly illustrates the potential power of the social capital market model. It also reminds us that such a market is subject to both the rewards and the risks inherent in its successful implementation.

Here are a few more features of this proposed future which resonated particularly strongly with us:

• Turning the tables: Google, IBM and Exxon don’t have to explicitly lobby for investors. There are plenty of third-party agencies offering potential investors both the data they need to make an informed decision and the mechanism to invest once they do. Nonprofits can reap the same benefit from similar tools in their own sector, allowing donation dollars to come looking for them rather than the other way around. Music to our ears, as well as to the legions of nonprofit staff who spend way too much of their time scrambling for financial support.

• Not your father’s marketplace: The social capital marketplace will inevitably differentiate itself from the financial marketplace it is modeled upon, a direct result of the people behind the market. The fortunes being sought by social capitalists go beyond the simple dollars of their finance counterparts, including the human, environmental and spiritual enrichment that defines multi-bottom-line accounting. The common goal of greater social impact will motivate both donors and nonprofits to share their experiences and related information, forming the tight community that keeps the social capital markets humming.

We spend so much time promoting the outcomes-based performance measurement model for the non-profit sector, that we sometimes forget one of it’s most fundamental problems: it does not currently offer a generally accepted standard of outcomes. It is often challenge enough to convince the relevant donors and/or charities of the value of outcomes measurement, but even after winning that challenge we are quickly confronted with another: which are the “correct” outcomes to measure?

Consider the market of charities working for affordable housing, particularly critical here in NYC where real estate prices stubbornly defy reports of credit crunches and imminent recession. “Number of available housing units” is an obvious metric of quantity, but what about issues of quality? Where does safety fit into the equation? What about measuring subjective outcomes like quality of life? We critically need at least an initial set of outcomes that considers all these questions - and fortunately we have one very promising source for just that: The Center for What Works (CWW).

CWW states their mission as:

“improving social sector results through benchmarking for nonprofits, a strategy to facilitate outcomes measurement and reporting by linking nonprofits and funders through a common language.”

This kind of talk is music to socialmarket’s ears. The notion of a common language is particularly compelling, since it would be tragic to see the coalition of support for outcomes measurement fall apart for lack of clarity on implementation. CWW (along with the Urban Institute) has created an impressively coherent road map for fourteen non-profit markets (including affordable housing) as well as a generic taxonomy to implement those not yet covered. I encourage you to click the link above (or here) to look for yourself - and see if you agree.

With enough momentum behind them, we envision CWW becoming the de-facto standard for performance benchmarking across the nonprofit sector. We think that their outcomes taxonomies are a sensational way to move nonprofit outcomes measurement forward in a highly practical - and measured - manner.