Increasingly, social impact bonds are garnering bipartisan support in the US Congress and undergoing consideration in many state governments (Cohen, 2014). By enlisting private companies to supply capital for nonprofits to scale up operations, government stakeholders can cut costs on their current payout to remedial programs, and those private companies can profit from payment from those governmental savings. At the same time, the lives of the constituents facing certain issues in the US will improve due to the nonprofits ability to increase impact with the given capital. In essence, social impact bonds are creating an incentive for private companies to get involved in social impact.
Despite this incentive structure, it proves important to note that, although the outcome of “ improved lives” as a consequence of following this model may seem attractive, it is highly likely that some of these ventures will fail. The success of a certain social impact bond is measured by specific outcome criteria (Callanan et al, 2012). Thus, failure of a nonprofit would reflect a failure to meet these criteria. Still, the question that remains: How commonly do we think failure will occur?
Another widely researched concept (albeit relatively more simplistic) that pays stakeholders positively for positive outcomes is the value-added measures applied to evaluating teachers. Essentially, the better students perform on assessments, the more rewards, in the forms of tenure and increased pay, a teacher is eligible to receive from the employer (David, 2010). This type of evaluation method creates a an incentive for teachers to help students improve beyond a moral compass. The result is mixed (David, 2010). Students do not necessarily improve their scores and teachers do not necessarily have a greater impact on students, despite the incentive structure created by the value-added evaluation system. As social impact bond policies come to fruition, it will be important to analyze how well its incentive structure keeps certain ventures financially viable. Hopefully, the result it better than the value-added program.
References:
Cohen, R. (2014, July 25). Social Impact Bonds: Phantom of the Nonprofit Sector| Nonprofit Quarterly. Retrieved September 27, 2016, from https://nonprofitquarterly.org/2014/07/25/social-impact-bonds-phantom-of-the-nonprofit-sector/
David, J. (2010). What Research Says About using Value-Added Measures to Evaluate Teachers. Retrieved September 27, 2016, from http://www.ascd.org/publications/ educational_leadership/may10/vol67/num08/Using_Value-
Added_Measures_to_Evaluate_Teachers.aspx
From Potential to Action: Bringing Social Impact Bonds to the US (Callanan, et. al., May 2012)
Despite this incentive structure, it proves important to note that, although the outcome of “ improved lives” as a consequence of following this model may seem attractive, it is highly likely that some of these ventures will fail. The success of a certain social impact bond is measured by specific outcome criteria (Callanan et al, 2012). Thus, failure of a nonprofit would reflect a failure to meet these criteria. Still, the question that remains: How commonly do we think failure will occur?
Another widely researched concept (albeit relatively more simplistic) that pays stakeholders positively for positive outcomes is the value-added measures applied to evaluating teachers. Essentially, the better students perform on assessments, the more rewards, in the forms of tenure and increased pay, a teacher is eligible to receive from the employer (David, 2010). This type of evaluation method creates a an incentive for teachers to help students improve beyond a moral compass. The result is mixed (David, 2010). Students do not necessarily improve their scores and teachers do not necessarily have a greater impact on students, despite the incentive structure created by the value-added evaluation system. As social impact bond policies come to fruition, it will be important to analyze how well its incentive structure keeps certain ventures financially viable. Hopefully, the result it better than the value-added program.
References:
Cohen, R. (2014, July 25). Social Impact Bonds: Phantom of the Nonprofit Sector| Nonprofit Quarterly. Retrieved September 27, 2016, from https://nonprofitquarterly.org/2014/07/25/social-impact-bonds-phantom-of-the-nonprofit-sector/
David, J. (2010). What Research Says About using Value-Added Measures to Evaluate Teachers. Retrieved September 27, 2016, from http://www.ascd.org/publications/ educational_leadership/may10/vol67/num08/Using_Value-
Added_Measures_to_Evaluate_Teachers.aspx
From Potential to Action: Bringing Social Impact Bonds to the US (Callanan, et. al., May 2012)
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