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On 8 July 2012 - 11:40pm

“Resource dependence theory assumes that people shape their organizations to attract resources; the more heavily dependent on government they become, the more likely it is that they will eventually look and act like government.”

So says Stephen Goldsmith in his book, The Power of Social Innovation. Goldsmith, a former Republican mayor of Indianapolis, who was appointed chair of the US Corporation for National and Community Service during the presidency of George W Bush.

He goes on to describe this risk – that community organisations, in taking on government contracts, assume many of the practices of the in-house public providers they’ve replaced – as the ‘fatal embrace’.

In my recent myth-buster column for The Guardian‘s Social Enterprise Network, I disputed the myth that social enterprises are inherently innovative. Underlying this myth is that fatal embrace. Public sector bodies look at those social enterprises who are finding new and better ways of delivering positive social change and think, quite rightly, ‘we want some of that for the people who depend on the services we fund.’

The problem is that often the reason why innovative social enterprises (and charities) are operating innovatively – either out of active choice or economic necessity – is that they’re not delivering services according to the prescriptions of public sector agencies.

As I mentioned in my Guardian article, The Once and Future Pioneers, a longitudinal study into the innovative capacity of voluntary sector organisations, led by Stephen Osborne of University of Edinburgh, reported that the % of surveyed organisation engaging in innovative activity dropped from 37.9% in 1994 to just 19.1% in 2006.

As the study points out, the voluntary sector (including social enterprise) doesn’t exist solely to deliver services in new and different ways – in many situations, it may be equally useful for organisations to deliver specialist services on an ongoing basis while making incremental improvements to the way they’re delivered – but these figures do demonstrate the significant impact of government policies on the way that voluntary sector organisations operate. As government shifted from funding innovation in the voluntary sector to funding target-driven efficient service delivery, the voluntary sector shifted from away innovative activity towards delivering target-driven public sector-style services.

Stephen Goldsmith illustrates the big dilemma facing community organisations when they ‘face serious challenges in feeding and housing people in crisis, and more resources mean that they can reach more of their hurting neighbours‘.

He concludes that: “Understanding when those resources undermine results and innovation will remain difficult, so nonprofit boards and their executives must vigilantly balance tradeoffs and opportunities.”

You need more money to do more good stuff but what if you can only get more money by spending it on doing other stuff that gets in the way of doing good stuff.

Number 14 in the pop-up social enterprise thinktank, popse!’s list of 100 social enterprise truths is: “All money comes with strings attached; that’s fine as long as you know what they are”. That’s probably true but when it comes to the public sector supporting (or allowing) innovative approaches to services delivery, it may be that people giving out funds may not even know what strings they’re attaching – and the consequences of attaching them.

As we move deeper into an era of ‘more for less’, will it be possible for government to risk funding organisations and ideas that might actually deliver that?