The Policy on Elderly Care Service in China

Social innovation sometimes may be limited by a legal, regulatory environment. Thus, the government needs to explore whether outdated rules may be limiting different kinds investments especially for-profit or hybrid ones with a social purpose[1]. This reminds me of my intern experience at Development and Reform Commission of Pudong, Shanghai, China, a governmental agency that helps administrate and plan local economy. There, I witnessed how lagged policy negatively influenced social enterprises, and how a newly designed system addressed the problem.

Shanghai government had been imposing strict restrictions on kinds of organizations that could act in elderly care service industry. Despite of governmental organizations, only non-profit organizations are allowed to provide service such as community nursing service and home-based care service. The governmental organizations taking advantage of preferential policy had no incentive to improve their service, while non-profit organizations did not operate well either because of a lack of resources and business acumen. This led to a poor-functioned and uncompetitive market of elderly care service, and thus the industry had been lagged with little high-quality service provided.

Even worse, the government set a goal that the number of elderly care beds should equal 3% of elderly citizens population in Shanghai till 2015. This goal was too difficult to be achieved in the predefined timeframe. So, some local municipal officers had no other means but to force nongovernmental organizations to make over their rights of operation to the governments so that these elderly care beds could be counted into the performance of the governments.

While we were visiting a well-managed elderly care center, which was built by the government but operated by non-governmental organization that gained rights of operation through bidding. President told us that a municipal officer threatened her team to leave although they were still in tenure, simply because nongovernmental-operated institutions would not be figured into the number of the target. At that moment, we could do nothing but comfort president that policy would evolve better in the future.

Fortunately, the goal was later abandoned. Instead, the policy makers began to work on marketization reforms of the elderly care service industry. We then helped design a new, economically sound system within which for-profit and other kinds of organizations were newly allowed to compete equally. For example, service provided by any kinds of organizations could be paid by public pension, which used to be the privilege of governmental organizations. In this way, customers would go to their favorite service providers, no longer making their choice based on the availability of pension use. So, the market players would try to improve quality of service and lower their price. Meanwhile, some for-profit companies were doing well with business acumen as well as doing good through innovative ways.  This new policy would be implemented for trial in Pudong, Shanghai. If proved success, it would be generalized to the whole country.

From this experience, I see the important roles policies play in social innovation and enterprise. Although the elderly care service industry is evolving, there is still a long way for China to go to build a legally friendly environment for all the organization with a social purpose. 

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[1] Investing in Social Entrepreneurship and Fostering Social Innovation (Jolin, Center

for American Progress, December 2007);

www.americanprogress.org/issues/economy/report/2007/12/21/3706/investing-in-socialentrepreneurship-

and-fostering-social-innovation/

Benchmarking Methods for Social Impact Bonds

As this week covers Capitalization and Impact Assessment, I find that the concept of assessment is the most ambiguous aspect of the topic. While numerous readings explained that Social Impact Bonds are only paid for by the government if the program succeeds, I felt they lacked attention to identifying what defines “success”.

The concept of establishing measures of success was recently discussed in my Creating Results Oriented Programming class in Heinz. Taking the ideas from the 7th edition of “Evaluation: A Systematic Approach” by Peter H. Rossi, Mark W. Lipset, and Howard E. Freeman, their method of developing measures of success involves identifying the most important inputs, outputs, and outcomes of the program, determining a metric upon which to measure them by, and finally identifying the strengths and weaknesses of this measurement. Realizing the strengths and weaknesses plays a key role. For example, some measurements are quantitative and therefore easy to collect but don’t necessarily provide deep insight, while others are qualitative and hard to collect data for but will provide extremely meaningful insight. Overall, this method allows for easy identification of outcome level and outcome change, which is the difference between outcome levels at different points in time. The net program effect can then by determined by finding the portion of an outcome change that can be attributed uniquely to a program as opposed to the influence of some other factor. This method is effective in identifying the success of the most useful aspects of a program, which seems like the most logical way for SIBs to be evaluated.

Diving further into the idea of assigning quantitative measurements to qualitative areas reminded me of episode 24 of the Exponential Wisdom podcast hosted by Dan Sullivan and Peter Diamandis. In this episode, titled “Scorecards (Without A Target, You’ll Miss It Every Time)”, they discuss the concept of using scorecards as a benchmarking tool to objectively evaluate progress. Creating criteria upon which to measure outcomes provides structure for evaluation, because “if you can’t measure something, you can’t experiment and improve it.” They suggest taking areas that are essentially qualitative in that they are experienced emotionally and practically and quantifying them with numbers so that personal and organizational performance and improvement is possible, mentioning specifically that this method is particularly useful for evaluating startups and investments because you can compare and see which are successful. Additionally, if a program has high scores in all but one category, it shows exactly where their focus should be for improvement. I think this would be extremely useful for SIBs. Creating a scorecard for a specific program would identify if the program is reaching its full potential and worthy of government funding. Alternatively, a comprehensive scorecard would allow social programs to be compared to other social programs, thus accomplishing the same goal by identifying which ones are performing most effectively.

Would developing scorecards for new social programs improve the consistency and accuracy of impact assessment, and what kind of qualitative measurements are most important to identify?

Exponential Wisdom Podcast: http://podcast.diamandis.com/page/2/

Are Social Impact Bonds really the magic bullet that we've been led to believe?

This blog post will examine the uphill battle that social impact bonds as a form of investment have faced and reflect on their capacity to fix the innumerable issues they have been tasked with including housing reform, education, and improving maternal health rates (among many others). They have been touted as the magic bullet of financing for social impact but is there data to back up those claims? Is this the holy grail of funding; the linkage of public and private sectors which come together to cure all of the world's woes?

I think not. Although I agree that social impact bonds have the potential to create a new market which will benefit society and investors, I'm extremely skeptical of their ability to provide long term results in these areas.

Despite my hesitation, I acknowledge that any progress made towards these identified social goals, is worth some type of investment. With a few key actions on behalf of governments and policy reformers, the risks can be mitigated while the potential rewards can be harnessed:

1. Quality Unbiased Academic Research in this field: Harvard has already begun this task but more diverse research will be needed for this funding to gain credibility and for societal results to be verified. To date, a majority of research is biased and completed by those with potential stakes in this new market.

2. Emphasis on long term results: The current structure of social impact bonds emphasizes quick and strong impacts at low costs which create strong financial returns for investors. This incentive structure may lead to favorable short term results and negative long term results. Since the field is so new, this aspect has yet to be determined but should remain a concern until further research and evaluation is completed.

3. Create universal, measurable evaluation tools which can easily be accessed by all stakeholders: Again this has already begun but it behooves us to continue with standardization to avoid to much inefficiency and overheard as the market continues to grow.

4. Create additional subsidies for the less profitable sectors by using a portion of the returns from the most profitable: As it currently stands, affordable housing investments are projected to provide the most return, while those in education and other areas have faced uphill battles when trying to tie in revenues with their impacts. This propensity of investors to shoot for the most profitable can be reduced not only by seeking a variety of investor types (including those whose primary concern is social impact), but by creating subsidy structures to improve returns to investors in less profitable areas.

5. Garner public support: Once more research is conducted and results are more conclusive, public support and education should be leveraged. This will generate even more funding opportunities.

Although social impact bonds have potential, much more research and evaluation is needed to determine the long term effects. The only way to conduct these evaluations is to give it a try. Only time will tell.

A universal impact metric

This week's theme is crucial to any type of enterprise: Impact Assesment. It doesn't matter if the enterprise is purely for-profit, corporate, Non-profit, Not-for-profit, NGO, social venture et al, all these organizations have a core purpose and the best way to assess their impact is to measure how well they serve their purpose or in other words, how effective are they in creating value? Now the value creation may take many forms ranging from dividends to investors, returns on investments to the effectiveness with which their customers are being served. With organizations principally focused on financial gains, there are a plethora of tools to measure the effectiveness of their operations but with social enterprises, this is a gray area. Each social venture has different and unique core values, so it is very important that we take these core principles into account while measuring impact. It is only logical to infer that the most effective yardstick, so to speak, for measuring impact would be assessing the value creation and the process itself i.e. the throughput. This is exactly what has been done by Ebrahim and Rangan in their work titled "What Impact? A Framework for Measuring the Scale and Scope of Social Performance". It's just that they didn't explicitly say that they are measuring throughput.

As I mentioned before, each social venture is unique in its own way and measuring throughput which effectively maps the value created along the vision of the ventures is a monumental task in itself. It is more easily understood by example. Let's take Carnegie Mellon University, it is a corporate, non-profit, educational institute after all (in spite of the exorbitant fees!)! So, how does CMU assess its impact? Well, one would think that the number of students enrolling every year (and not dropping out later) combined with the job placement statistics of that year would be a pretty good metric of how well the university is doing, right? Not exactly, CMU's impact is assessed by contribution it has to the research community vis-a-vis the number of relevant publications, citations to the research, research awards, et al.

Let to summarize, let's take the KaBOOM! case by James E. Austin & Jose Miguel Porraz in the HBR case study pack. The mission of KaBOOM is "Every Child through the participation of their local communities should have healthy play opportunities". KaBOOM! introduces a unique Performance Management System (PMS) for a social enterprise which aids in setting up strategic goals and possibly reshapes the original strategy of value creation through a feedback loop. Their metrics have a cause-effect property which helps in obtaining consolidated, timely, accurate and useful information pertaining to the throughput of their enterprise. This all neatly tied up into a simple formula (derived from the DuPont formula) that measures the throughput as a linear multiplication of Output, Internal Efficiency, and External Efficiency. Thus giving us a generic yardstick which is universal in measuring impact.

Try & Buy (If it works of course...)

My submission this week touches on redefining how we assess the impact of social impact bond (SIB) interventions within the criminal justice. This relates to this week’s theme because I explore the usefulness and applicability of SIBs within the context of criminal justice reform.

My hometown of New York City was the first city in the United States to test social impact bonds. In 2012, the city was able to secure a $9.6 million loan from Goldman Sachs to pay for a program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffended after their release. The program set a goal of reducing recidivism by 10 percent and was ultimately found to not have no impact on the recidivism at all. Goldman Sachs to Invest.

Though the program was unsuccessful, I contend that its impact was substantial. For one, because the program failed to meet its goal, the city was able to avoid spending taxpayer money. Additionally, because of the comprehensive evaluation requirements of SIBs, the city was able to determine the efficacy (or lack thereof) of the program, and ultimately end it before throwing more money at an ineffective intervention. Lastly, there was anecdotal evidence that the program was not a complete failure for some participants that felt the program worked for them. Wall St. Meets Rikers.

According to From Potential to Action: bringing Social Impact Bonds to the US, SIBs are primarily a vehicle for scaling up a preventive program that delivers significant social impact rather than a reliable source of cost savings. In 2012, the United States spent more than $265 billion on criminal justice, including corrections, policing, and judicial expenses. Corrections Spending. As was the case in New York City, SIBs could lead to huge savings by shifting the spending on our criminal justice system from tax payers to private investors. This seems like it would be an outcome that would attract buy in from people on both sides of the political isle.

However, given the current administration's "tough on crime" rhetoric, one question stands out for me; would there be enough political will and buy in to implement more SIB interventions, regardless of their efficacy?

Capitalization of Social Impact through SIBs: A Bipartisan approach

Capitalization of Social Impact through SIBs

Politicians in the US are all in for economic growth and the support of the "backbone of our economy", small business. When starting a new venture, which may eventually become a new business, social impact bonds represent a new means of incentivizing the public good with capitalist ideals.

Social Impact Bonds (SIBs) start with the government identifying a target area for social innovation. Then the project is given an intermediary who identifies investors and organizations to carry-out the venture based on previous experience. Once the project is completed and if outcomes are favorable the government pays the intermediary who then pays back the investors and organizations. (McKinsey Social Impact Bonds Report). This methodology allows for social problems to be solved by a unique combination of the public and private sector.

My undergraduate experience was in Economics and I can see why this solution could be great at addressing problems that the market, even when functioning efficiently, could not solve. This is why SIBs have a range of bipartisian support. For example, just this past April two senators Young (R-IN) and Bennet (D-CO) introduced legislation to expand SIBs(Young 2017). The reasoning for this support is it pairs the social supports that the democrats favor with the reduction in taxpayer spending the republicans favor. The actual efficacy of the programs can be varied. As Bob pointed out in his post, the difference between outcomes and impact can often be conflated(Santamaria 2017). In doing so its difficult to tell whether programs are truly solving the underlying social issues or rather just meeting outcomes goals. To assess social impact requires a strong knowledge of the stakeholders involved. Take an issue such as increasing access to education. A outcomes goal may be increasing graduation rates; however, the schools may be lowering requirements to achieve the rates instead of achieving the impact of overall education increases.

In the context of social innovation it is complex to say how to precisely ensure that impact is being valued just as much as outcomes. SIB's represent an interesting partnership between the public and private sector to begin to address social issues; however, it is only a start. In order to ensure that the public good is the final outcome, ventures and organizations that take advantage of the benefits that SIB's distribute must have the target stakeholders involved in assessing their impact. In doing so, the future for more public-private partnerships for the social good have a strong future.




Citations:

http://mckinseyonsociety.com/downloads/reports/Social-Innovation/McKinsey_Social_Impact_Bonds_Report.pdf

Santamaria, 2017. http://cmusocialinnovation.blogspot.com/2017/09/conflating-outcomes-and-impact-case.html

Young, 2017. http://www.payforsuccess.org/resource/sens-young-bennet-collins-booker-introduce-social-impact-partnership-legislation

Using Private Capital to Solve Social Problems

     The social sector needs an enormous amount of help addressing its problems. In the United States, almost 550,000 people were homeless on one single night in 2016 (1), 12.7% of the population lives in poverty (2) and more than 40% lives with chronic illness (3). 

     Solving these huge problems requires huge amounts of capital. The scale that they have grown to is proof that the government (which, generally speaking, has been historically “responsible” for them) alone doesn’t have the necessary resources. Even though social expenditure costs in the US are close to 20% GDP (4), these trillions of dollars simply aren’t enough. 

     The gap between current spending and what’s needed is so large for two reasons. First, too many existing programs are reactive; remediation is more expensive than prevention, but preventative programs are generally too risky to make it into government budgets. Second, public budgets are shrinking. 

     The answer, then, is twofold: support preventative programs and do so with a funding pool that’s growing. 

     Social impact bonds (SIBs) do both of those things. With SIBs, private funders supply capital for unproven and unscaled programs (delivered by nonprofits) for preventing social problems that would otherwise be the government’s duty to remediate after the fact. The risk is carried by philanthropists and investors who are willing to accept below-market rate returns, which come only if programs are proven to be successful. Those returns are provided by the government, who then takes over the successful program; they’ve avoided the risk of testing a new program while inheriting the long-term savings of prevention.

     It’s important to know that this growing funding pool actually exists. Globally, the private impact investor community committed more than $22B to impact investments in 2016, which is a 45% increase over 2015 (5, 6). New, larger funds like Bain’s $390M Double Impact fund and TPG’s $2B Rise Fund also create a “promise of liquidity” in the impact market by “broaden[ing] the range of possible exits for early-stage investors” (7). This market supports everything from SIBs to socially responsible private companies.

     Interest in both SIBs and impact investing is booming in no small part thanks to the promise of financial gain. With SIBs, there are numerous intermediaries, evaluation advisers, independent assessors, service providers, and investors who stand claim to a piece of the pie associated with the model’s near-term costs. With the impact investment market, its growth itself all but promises not-so-much-below-market rate returns. 

     While it’s acceptable for financial returns to be fueling some of this interest, it is crucially important that impact — that which is built into the very names of SIBs and impact investing — isn’t forgotten in the pursuit of sector growth. It is the duty of SIB administrators and investment managers to prove first and foremost that their homeless, poor, and sick service users themselves are getting larger and larger pieces of the pie, too; not just their organizations and clients.

References:

1.) United States, Congress, Community Planning and Development. The 2016 Annual Homelessness Assessment Report to Congress, Nov. 2016. www.hudexchange.info/resources/documents/2016-AHAR-Part-1.pdf. Accessed 26 Sept. 2017.
2.) United States, Congress, Income, Poverty and Health Insurance Coverage in the United States: 2016, 12 Sept. 2017. www.census.gov/newsroom/press-releases/2017/income-povery.html. Accessed 26 Sept. 2017.
3.) “Chronic Disease Prevention and Health Promotion.” Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, 28 June 2017, www.cdc.gov/chronicdisease/overview/index.htm. Accessed 26 Sept. 2017.
4.) Social Expenditure - Aggregated Data, Organization for Economic Co-Operation and Development, 26 Sept. 2017, stats.oecd.org/Index.aspx?DataSetCode=SOCX_AGG. Accessed 26 Sept. 2017.
5.) Annual Impact Investor Survey 2017. Global Impact Investing Network, May 2017, https://thegiin.org/assets/GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.pdf. Accessed 26 Sept. 2017.
6.) 2016 Annual Impact Investor Survey. Global Impact Investing Network, May 2016, thegiin.org/assets/2016%20GIIN%20Annual%20Impact%20Investor%20Survey_Web.pdf. Accessed 26 Sept. 2017.
7.) Bank, David. What We Know About Bain Capital's $390 Million Double Impact Fund. ImpactAlpha, 18 July 2017, news.impactalpha.com/what-we-know-about-bain-capitals-390-million-double-impact-fund-8dd4e0c90571. Accessed 26 Sept. 2017.

Still a long way to go.

This week’s readings remind me a question: how to evaluate the social impact of education on children? Scores and grades are easy to be observed. And long-term and comparative research about behavior changes can also indicate a general trend of the impact, improving or deteriorating. It is like the gym case in Impact Alpha’s article. Research and Bridges’ experience shows that getting first-time gym users to join, stay and change their health habits can be a game-changer, with preventive health benefits for which insurers and others are increasingly willing to pay. As Trelstad said, in this way we can see all the impact homerun opportunities to think about ways to connect the social-finance dots around gyms.

Patrick also said that in each targeted case, impact benchmarks and milestones would be clear and Bain would report under the so-called GIIRS rating standards developed by the nonprofit B Lab. Take one step further, big data analysis may be a chance for social impact measurement by tracking and recording a tridimensional database of behavior changes. This may be useful for the third impact theme: community-building which is aimed at creating jobs and catalyzing economic activity in areas of chronic unemployment. We can use the changes in the unemployment rate, GDP per capita, or numbers of new jobs created to evaluate the outcomes of social impact programs.

However, I have read another article called “Genetic influence on human psychological traits: A survey”, which summarized some research findings that our traits/talents were significantly influenced by genetic factors[i]. Thus, taking individual differences into account, only depending on what we have observed is not reliable. It is hard for us to measure that whether our education is effective or we just lucky enough to meet some smart and resilient children. We cannot easily separate the influence of genetic factors from the impact of external environmental factor-education. 

The same as Rick who holds a negative viewpoint about the impact assessment. The SIBs (Social impact bonds) case indicates that public programs even don’t measure the results, or fail to track outcomes, decouple funding from effectiveness, and prioritize compliance with rules.

After reading this week’s passages, I feel that investing into the social impact area is one thing, and proving that the spending is effective and efficient is another thing. But developing/finding some scientific methods to justify the spending is not a long-period effort (reasonable 10-12 years according to the McKinsey’s report). We admit that every investment carries risks, although it is a government-funded social program using our (taxpayers’) own money, it hasn’t to be successful. At least the investment/funding itself encourages and promotes initiative willing and actions to address social problems.

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[i] Ilska, J., Haskell, M. J., Blott, S. C., Sánchez-Molano, E., Polgar, Z., Lofgren, S. E., . . . Wiener, P. (2017, June 01). Genetic Characterization of Dog Personality Traits. Retrieved September 26, 2017, from http://www.genetics.org/content/206/2/1101