Thursday, July 20, 2017

A radical proposition for changing the way we design SIBs – A service provider perspective

We have both written, previously, with energy and enthusiasm for SIBs; about the benefits they can bring. We still believe that to be true but we also believe that it is important not to lose sight of the potential challenges and downsides. From a service provider point of view, there is a risk that we can find ourselves in a difficult position once the SIB funding has gone. It can be difficult to sell something you have been able to deliver for free for three or four years under a SIB model. It is not impossible: you can sell to some, but not to all.

We recognize that the issue of having to charge for a previously ‘free’ service is not an issue that confronts all previously SIB-ed services. This is where the issue of ‘who has been paying’ and ‘who has been benefitting’ comes in. With SIBs being deployed across cross-cutting social issues, those who pay for outcomes are not always the only ones benefitting. At the end of a SIB, it can be challenging to persuade those other organizational beneficiaries to pay for some of the outcomes they have been enjoying over the duration of a SIB.

What that means is that the people who have been working tirelessly to get the expected results are left wondering: “What next? Another SIB? Great, if there is one on the horizon, or alternatively, look for another job.” It would be a real shame to lose good staff with all their knowledge and passion. The uncertainty towards the final phases of SIB delivery can affect the quality of delivery at a time when delivery needs to be at its best — the opportunity to ‘sell’ the product subsequently.

So what can we do? We could build in a period of adjustment, into costs, say, to cover six months of adjustment post the SIB delivery period. This would allow for the service provider to adjust to the change in a way that minimizes the impact on delivery during the final phases of the SIB.

It would allow those organizations that have benefitted from some of the outcomes from the SIB-ed service to have a period when the service is longer there. This is, of course, a contentious issue and is meant to be provocative. There is a case for arguing, nonetheless, that those organizations that have been benefitting from programmes but who have never had to pay often end up taking these programmes for granted. They do not necessarily understand the real value of things that they have been enjoying for free. Planning proactively for a period of withdrawal could prompt these other organizational beneficiaries to miss the programme and consider more clearly the case of buying in the service. All the while, the infrastructure and workforce for the intervention remain intact so that the programme can be mobilized at short notice. We all know that, sometimes, to truly appreciate something, you may have to do without it, feel the loss and take action to get it back!

So who could pay for this? Well, social investors. In the spirit of re-investing in services, this would go a long way to demonstrating their commitment to its principles. They could set an amount to support the service provider during this period of transition. This would allow the service provider to maintain good staff, engage with ‘new clients’ directly and agree costs. After all, it’s always cheaper to maintain an existing service that has been proven to work than to scrap it and rebuild it subsequently.

Indeed, true social investment is about sustainability. Under a SIB model, we continue tracking outcomes for those in direct receipt of services for a period of time after the SIB-ed programme delivery has ended. If we can do this for the direct service recipients, why would we not want to do that for delivery partners? There is growing recognition of the importance of capacity building within the voluntary and community service provider worlds to engage in outcomes contract and public service delivery more generally. There is further recognition that a healthy market for service provision should include diverse, small local players, so as to avoid larger players monopolizing the market. Changing the design of SIBs to actively promote the sustainability of such players will be transformative.

We continue to look at ways in which Social Investment can be utilized to support better outcomes for Children and Young People and are in early discussion with investors to see how Social Investment can support the growth of the newly formed Manchester Youth and Play Trust-Young Manchester

 

Michelle Farrell-Bell, Chief Executive, Young Manchester

Dr Chih Hoong Sin, Director of Innovation and Social Investment, OPM Group

Wednesday, July 12, 2017

Social Impact Bonds are not a magic bullet, but they can be useful

On 6 July 2017, we delivered a webinar on the Life Chances Fund (LCF) and Social Impact Bonds (SIBs) timed to raise awareness of the latest LCF call-out. As an independent public interest organisation, we are not in the market to “sell SIBs”. Instead, our mission is squarely on working with public services to enhance social impact.

The presentation begins at 5:10
Dr Pete Welsh presents at 8:23
Dr Chih-Hoong Sin presents at 24:55

 

 

Despite SIBs having been around since 2010, there is still a relatively low level of awareness. I have written elsewhere about how myths and misunderstandings abound in the context of a lack of transparency and limited, albeit improving, learning and sharing. I have also argued elsewhere that an innovation, such as SIBs, may be abandoned because of dissatisfaction with early versions of it, which may not have fulfilled the creative potential that may be on offer.

We maintain that SIBs are not a magic bullet. Nonetheless, we believe they have value particularly when considered as part of a wider suite of responses to financing and delivering public services.

Those interested in the LCF should not start with the position of: “I want to do a SIB”. If all we have is a hammer, then everything looks like a nail that needs pounding. We should start with clarity over the problem we are trying to solve. Work is then needed to explore whether the potential solution is amenable to outcomes contracting. Where the issue at hand lends itself to being tackled through an outcomes-based commissioning approach, we then need to consider whether social investment adds value or whether there are other more appropriate ways of financing and delivering an outcomes contract.

While not exhaustive, we present three reasons for why and when SIBs may make sense for commissioners.

  1. The space to innovate – When budgets are tight, there can be aversion to taking risk. New, untested, interventions may be overlooked as the risk of failure is high. Commissioners do not want to be seen as ‘gambling’ on things that prove not to work. Under a SIB model, the financial risk of failure is transferred onto social investors. Commissioners only pay for outcomes, and not for failure. In this way, SIBs can be seen as one way of protecting the space to innovate.
  2. Driving efficiency – With established services, there may be less inclination to adopt a SIB approach. There is, however, emerging evidence from evaluations that SIBs can drive higher levels of outcomes even for proven interventions. Of course, it is still too early to conclude that SIBs always drive higher performance, and more evaluations are needed. Nonetheless, if this early finding is true, then SIBs can be said to drive greater efficiency in existing interventions. Process evaluations report consistently that the SIB model, by aligning incentives, encourages commissioners, providers and social investors to work together and ‘pull in the same direction’. Where they work best, SIBs have been shown to have helped join up the ‘different worlds’ by breaking down institutional and cultural barriers to effective partnership working.
  3. Availability of top-up funds – At this point in time, the £80million LCF represents a time-limited window of opportunity for commissioners to tap into additional funds to help pay for outcomes. With top-up contributions from the LCF typically around 20 per cent of the overall financial value of outcomes, commissioners stand to ‘keep more of what they save’. This top-up contribution is obviously meant as a ‘sweetener’ for more commissioners to engage with SIBs. However, just to portray it as such is to oversimplify things. SIB funds like the LCF, its predecessor the Commissioning Better Outcomes Fund, and others, perform a more important function of helping to break down commissioning silos. There is clear recognition that many of the social issues that SIBs have been deployed to help solve are entrenched and cross-cutting. For example, tackling alcohol dependency not only has implications for the use of health and social care services, but also for housing, criminal justice agencies, etc. Working out ‘who pays and who saves’ can be hugely challenging, and can stand in the way of effective co-commissioning. Many have argued, nonetheless, that top-up funds like the LCF are not sustainable over the longer term. In the meantime, they do provide the opportunity for at least testing out different models of co-commissioning. It is of interest to note that there are already efforts underway to develop SIBs that do not rely on top-up funds. It will be important for learning from these efforts to be shared more widely.

In conclusion, I reiterate the importance of being clear about the rationale for developing a SIB. For commissioners, this is especially pertinent as there are a range of alternatives for raising capital, some more cheaply than others. There needs to be a clear case for using public monies under a SIB model, with effective communication around how SIBs can add value.

Dr Chih Hoong Sin, Director, Innovation and Social Investment

 

Additional video and interactive content is available via the Webinar Webex site here.  Note – it is best to access using Chrome or Firefox.

 

Friday, June 30, 2017

Life Chances Fund Social Impact Bond – Free Webinar

6 July 2017.  11am – 12pm

OPM Group is bringing together influential people in social care and public health for a webinar to explore the opportunities of the £80m Life Chances Fund (LCF). The LCF is designed to help those people in society who face the most significant barriers to leading happy and productive lives. OPM Group’s internationally recognised Social Impact Bond (SIB) experts Dr Chih Hoong Sin and Dr Peter Welsh will help you gain a clear understanding of how to:

The current round of the LCF supports:

Who is it for?

This first in our Life Chances Fund webinar series is primarily intended for commissioners:

About the speakers

Dr Chih Hoong Sin is Director of Innovation & Social Investment at OPM Group and has been influential in leading both the development of SIBs and the thinking around their use in areas such as health and social care. Chih Hoong has worked with SIBs from Essex to Japan and has become one of the foremost experts in the field, delivering some of the most significant workshops and learning events in the UK and appearing as a keynote speaker.   Dr Peter Welsh is Head of Evaluation at OPM Group and is recognised as a SIB advisor by the Centre for SIBs following his innovative work in developing the ‘Closer to Home’ SIB for Kent County Council. Peter’s specific expertise in evaluation is essential in building the evidence base for SIBs and providing the basis for building investor confidence and impact measurement.

About OPM group

OPM Group is an independent employee-owned research and consultancy organisation. We support and champion the delivery of social impact, and help people have a say in the decisions that affect them. We work with public, private and third sector organisations – as well as service users and communities – to ensure that services are designed and implemented efficiently, effectively and in the public interest. We deliver a range of services including

Our clients mainly work in:

We were established in 1989 as the UK’s first employee-owned “public interest” company. Since then, the landscape of public service delivery has changed immensely but our commitment to social value still runs through all the work we do. We are proud of the social impact of our work and this motivates us to deliver high quality services and outcomes for our clients. Please save the date if you are interested in attending.  More details to follow W/C 26 July 2017 

We welcome any specific questions and would be delighted to receive them before the event.  Please can you email these (and any questions) to Peter Welsh: 

pwelsh@opm.co.uk  and prefix the subject line with LCFSIBWEBINAR 

If you would like to participate please contact Marcus Clissold-Lesser:

mclissold-lesser@opm.co.uk to get a Webex meeting invitation

Tuesday, May 2, 2017

The impact of learning and sharing on the development of Social Impact Bonds

In this third blog of my 2017 series inspired by my advisory visit to Japan, I reflect on the importance of international learning and sharing for improving Social Impact Bonds (SIBs). While honoured to have been an expert advisor to colleagues in Japan over the past three years, helping the country take its first steps to develop SIBs; I have also benefitted hugely from the opportunity to learn from them and others.

Here I reflect on the impact of international learning and sharing on two specific areas, based on my Japanese experience.

Role of government

In a previous blog, I argued that governments have key roles to play in supporting the growth of SIBs (and social investment more widely). As I shared the UK lessons during the Social Impact Forum at Yokohama City, I also heard from Australian colleagues who put forward a similar view. What was notable was the fact the New South Wales Government in Australia has actually issued a social investment policy committing to two SIB transactions per year. While the UK Government has been hugely supportive of SIBs, the support has been enacted in different ways. We do not have a specific policy committing us to a specific number of SIBs per year. As Australian colleagues noted, this policy really focusses minds and has mobilised everyone to work together. The machinery of government has been aligned to support this, for example by building in evaluation; by developing policy reviews and analyses; by assessing the effectiveness of known interventions in priority policy areas, etc.

Japanese colleagues, reflecting on their (still very recent) experience, observed that while the Japanese government has made certain overtures indicating interest in SIBs, they have been far less proactive and engaged in stimulating growth, compared with Australia and the UK. It has been very challenging to engage with central government, leaving local governments and their non-profit organisation partners to try lobbying for change while attempting to make things happen on a very small scale.

This comparative approach enabled us to work closely with Japanese colleagues to share specific recommendations for engaging with central government, while also drawing in lessons from related developments and how these have successfully captured the imagine of governments, such as Climate Bonds.

The purpose of SIBs

Another area where the comparative approach surfaced important issues for scrutiny is the motivation behind SIBs. While much of the discourse in the UK, US and Australia is underpinned by a strong ‘savings’ narrative, Japan seems to be more minded to develop SIBs that are focussed squarely on improving wellbeing even when this may not lead to any discernible savings for the public purse.

In challenging the dominant discourse around SIBs, Japanese colleagues tapped into a creative seam of thinking around constructing SIBs on a very different foundation. We were able to share specific models of how this may be done, proceeding to advise Japanese colleagues about the implications for outcome metric selection and outcome modelling. At the same time, this re-focussing enabled us to build a stronger narrative and practice around more meaningful user-defined outcomes in the UK, counter-balancing the more dominant system-defined outcomes approach. I have certainly woven this into my work with Northern, Eastern and Western Devon Clinical Commissioning Group on their SIB to tackle alcohol dependency.

Conclusion

One of the downsides of working in the SIB field is that although we all assert that “things change very quickly”, we have yet to demonstrate willingness to share experiences, learning and data. Indeed, I have often encountered strong opposition towards sharing, under the guise of “commercial and/or political sensitivity”.

At the same time, we all call for transaction costs to be reduced as the current high costs make it difficult for SIBs to be sustainable. Surely one of the ways to bring down transaction costs is for better sharing of information and experiences so that others do not have to reinvent the wheel every time a new SIB is being developed. This glaring contradiction does not escape me and many others. It is time that we have the courage and humility to learn and share more widely.

Dr Chih Hoong Sin, Director, Innovation and Social Investment

Monday, April 24, 2017

Unleash the creative potential of Social Impact Bonds

In a previous blog based on my latest advisory trip to Japan, I noted that Japan is currently ‘translating’ the SIB model in order for it to be implemented in a way that is appropriate to its specific social, economic, political and cultural context. I have encouraged Japanese colleagues not to simply think that SIBs are and always will be what they currently look like. Instead, they should approach it creatively, making it work better for all. There is a risk that an innovation, such as SIBs, may be abandoned because of disillusionment with early versions of it, which may not have fulfilled the creative potential that may be on offer. Here, I describe four reasons why I think current SIBs have only scratched the surface of what may be possible.

Outcome payers

In the UK, we have become rather lazy with our terminology. I often hear people swap ‘commissioner’ for ‘outcome payer’. In doing so, there is a real risk that we limit the way we think about who outcome payers can or should be. Apart from public bodies, who else may be interested in paying for outcomes? What types of outcomes may they be interested in paying for?

If outcome payers are ever only going to be public sector commissioners, then we need to question whether SIBs are indeed channelling ‘new’ or ‘different’ funds. After all, if all outcome payments to investors are ultimately made by public sector commissioners, then the monies will only ever come from direct taxation.

Transaction costs

Read any publication or attend any conference on SIBs, and you will head the refrain: “SIBs have high transaction costs”. Again, rather than simply accept this as an immutable fact, I challenge the market to design these costs out of future SIBs. We have good evidence that this is possible, at least for some types of transaction costs. For example, we know that vested commercial interests can cause some intermediary organisations to develop SIBs that are unnecessarily complicated. Similarly our evaluation of the Essex County Council SIB found that when the various players are more concerned about minimising risks to themselves, they can end up with a contract that is too complicated and therefore imposes ongoing costs. As our experience in Essex shows, these can be designed out of a SIB even after it has gone ‘live’.

Who bears the risks?

An attraction of SIBs is that we introduce a new group of stakeholders called ‘social investors’ into the picture, who have higher risk appetites and are socially minded. However, the fact that 7 out of the 10 SIBs in the US have over half of their values guaranteed by philanthropic organisations really causes us to question who is really bearing the risk? Are we attracting the ‘right’ types of investors into the market or are we distorting the market to suit certain types of investors? In addition, there is also evidence that some social investors can try to pass on some of the risks to service providers, for example, by providing part of the capital as a loan rather than as revenue. We must therefore be clear about who bears what risks, and whether these models are true to the ideal of the SIB aspiration.

Is it all about savings?

In a blog I wrote last year, I argued that SIBs do not have to be about savings, and showed different ways of constructing alternatives. SIBs are about social outcomes. To reduce social outcomes to only those that generate financial savings for the public purse is highly limiting. This, again, draws attention to the limitations of thinking of ‘outcome payers’ only as ‘commissioners’. Even amongst commissioners, financial savings do not have to be the only motivator. We need to ask ourselves the question: “Outcomes for whom?” when we design SIBs. If we never ask service users what success looks or feels like to them, then what message are we sending out about SIBs? Whose interests do they serve?

Conclusion

Current SIBs have barely scratched the surface of what may be possible. Rather than allowing them to ossify into what they currently look like, we should challenge ourselves to keep pushing the creative potential of the idea of a SIB. In the process of doing so, we must never lose sight of outcomes and how they can be meaningfully defined.

Dr Chih Hoong Sin, Director, Innovation and Social Investment

Monday, April 24, 2017

Unleash the creative potential of Social Impact Bonds

In a previous blog based on my latest advisory trip to Japan, I noted that Japan is currently ‘translating’ the SIB model in order for it to be implemented in a way that is appropriate to its specific social, economic, political and cultural context. I have encouraged Japanese colleagues not to simply think that SIBs are and always will be what they currently look like. Instead, they should approach it creatively, making it work better for all. There is a risk that an innovation, such as SIBs, may be abandoned because of disillusionment with early versions of it, which may not have fulfilled the creative potential that may be on offer. Here, I describe four reasons why I think current SIBs have only scratched the surface of what may be possible.

Outcome payers

In the UK, we have become rather lazy with our terminology. I often hear people swap ‘commissioner’ for ‘outcome payer’. In doing so, there is a real risk that we limit the way we think about who outcome payers can or should be. Apart from public bodies, who else may be interested in paying for outcomes? What types of outcomes may they be interested in paying for?

If outcome payers are ever only going to be public sector commissioners, then we need to question whether SIBs are indeed channelling ‘new’ or ‘different’ funds. After all, if all outcome payments to investors are ultimately made by public sector commissioners, then the monies will only ever come from direct taxation.

Transaction costs

Read any publication or attend any conference on SIBs, and you will head the refrain: “SIBs have high transaction costs”. Again, rather than simply accept this as an immutable fact, I challenge the market to design these costs out of future SIBs. We have good evidence that this is possible, at least for some types of transaction costs. For example, we know that vested commercial interests can cause some intermediary organisations to develop SIBs that are unnecessarily complicated. Similarly our evaluation of the Essex County Council SIB found that when the various players are more concerned about minimising risks to themselves, they can end up with a contract that is too complicated and therefore imposes ongoing costs. As our experience in Essex shows, these can be designed out of a SIB even after it has gone ‘live’.

Who bears the risks?

An attraction of SIBs is that we introduce a new group of stakeholders called ‘social investors’ into the picture, who have higher risk appetites and are socially minded. However, the fact that 7 out of the 10 SIBs in the US have over half of their values guaranteed by philanthropic organisations really causes us to question who is really bearing the risk? Are we attracting the ‘right’ types of investors into the market or are we distorting the market to suit certain types of investors? In addition, there is also evidence that some social investors can try to pass on some of the risks to service providers, for example, by providing part of the capital as a loan rather than as revenue. We must therefore be clear about who bears what risks, and whether these models are true to the ideal of the SIB aspiration.

Is it all about savings?

In a blog I wrote last year, I argued that SIBs do not have to be about savings, and showed different ways of constructing alternatives. SIBs are about social outcomes. To reduce social outcomes to only those that generate financial savings for the public purse is highly limiting. This, again, draws attention to the limitations of thinking of ‘outcome payers’ only as ‘commissioners’. Even amongst commissioners, financial savings do not have to be the only motivator. We need to ask ourselves the question: “Outcomes for whom?” when we design SIBs. If we never ask service users what success looks or feels like to them, then what message are we sending out about SIBs? Whose interests do they serve?

Conclusion

Current SIBs have barely scratched the surface of what may be possible. Rather than allowing them to ossify into what they currently look like, we should challenge ourselves to keep pushing the creative potential of the idea of a SIB. In the process of doing so, we must never lose sight of outcomes and how they can be meaningfully defined.

Dr Chih Hoong Sin, Director, Innovation and Social Investment

Thursday, April 20, 2017

Japan’s first steps in developing Social Impact Bonds

Dr Chih Hoong Sin is in Tokyo for a third year running, this time to find out about the experiences of the Yokohama City Social Impact Bond (SIB) pilot. It has been a real privilege working with a diverse group of stakeholders from the outset as they initially learned about the UK experience in implementing SIBs, and then took steps to develop and test a model for Japan. I have written previously about specific learning shared with Japanese colleagues. In this blog, I make further comparisons between the Japanese and UK experiences.

Travelling well?

SIBs originated in the UK and have since spread to many other countries. It is easy to understand why the idea of a SIB is so attractive to governments internationally. It purports to only ‘pay for success’ and holds the promise of helping governments save money.

Japan contributed to the OECD’s Social Impact Investment Taskforce’s work to better harness the power of entrepreneurship, innovation and capital for public good. The Japanese Ministry for Education, Culture, Sports, Science and Technology has been funding a five-year study by a consortium led by Meiji University, while three other Central Government departments have expressed interests in developing SIBs. The Nippon Foundation has also played an intermediary role in coordinating three small-scale early pilots in 2015.

It is fair to say that as SIBs developed within and beyond the UK, there has been a constant process of adaptation. Each country has had to do a considerable amount of ‘translation’ to enable the model to be implemented in its particular national, regional and local context.

Japan, similarly, is trying to figure out an appropriate form of SIB that suits its unique socio-political, economic, and cultural milieu. For example, voluntary sector organisations tend to be small and hyper-local; there is a lack of participative governance in terms of the structure of central and local government relationships; and despite the huge national debt the government has no problems accessing cheap capital.

It is therefore naïve, and frankly wrong, to think that there is a singular SIB model that can be transposed with ease.

What might help?

Japan, drawing lessons from the UK, recognised the importance of stimulating the development of a social investment market. Taking a lead from the model set by the UK in creating Big Society Capital (BSC), Japan recently passed the Dormant Bank Account Act whereby a portion of the money will be transferred to a foundation independent from government who will act as a wholesaler (like BSC) in which money is lent or invested in social investment intermediary institutions who go on to invest in frontline social sector organisations. There is also interest in setting up impact bond funds, akin to the ones in the UK.

However, it is not sufficient if governments only see their role in terms of providing the money either to pay for outcomes or to grow the social investment market. In Japan, we hear that the pilots have struggled with being able to identify the right outcome metrics and being able to conduct measurement consistently and robustly. This area seems under-developed in comparison with the UK where the government has invested significantly in developing the evidence base for outcome measurement and for pricing outcomes.

The UK government has also set up the Government Outcomes Lab: a partnership with the Blavatnik School of Government at the University of Oxford, to support commissioners to better engage with outcomes contracting.

There has been legislative change that support development in this area. For example, the social investment tax relief aims to attract individual social investors, complementing Big Society Capital’s effort at growing the market of institutional investors. The Public Services (Social Value) Act additionally requires public bodies in England and Wales to give due consideration to improving local economic, social and environmental outcomes through commissioning.

I will be encouraging participants at the Social Impact Forum at Yokohama City on 22 April 2017 to consider the specific forms of support that should be put in place, and who might be responsible for doing what, to enable SIBs and social investment more generally to flourish in Japan, and in ways that truly bring about social outcomes.

Dr Chih Hoong Sin, Director, Innovation and Social Investment

Thursday, April 6, 2017

Working together for a stronger society – Our response to the Lords Select Committee of Charities Report

Charities play a vital role in the ongoing social and economic success of the UK. At the same time, funding for charities has changed significantly. Funding received as grants has decreased over time, while contract funding has been increasing dramatically.

Our response to the Charities Report shows that charities need better support to build their capacity, so they can deliver public services and access suitable finance. Commissioners also need support to develop social value for service users. OPM Group’s social finance experts Dr Chih Hoong Sin and Sheila Pardoe have summarised their experience and comment on the Charities Report.

Thursday, April 6, 2017

Working together for a stronger society – Our response to the Lords Select Committee of Charities Report

Charities play a vital role in the ongoing social and economic success of the UK. At the same time, funding for charities has changed significantly. Funding received as grants has decreased over time, while contract funding has been increasing dramatically.

Our response to the Charities Report shows that charities need better support to build their capacity, so they can deliver public services and access suitable finance. Commissioners also need support to develop social value for service users. OPM Group’s social finance experts Dr Chih Hoong Sin and Sheila Pardoe have summarised their experience and comment on the Charities Report.

 

Monday, March 20, 2017

Commissioning for Outcomes – The role of social finance

Can social finance help with the challenges that public commissioning faces?

This paper is intended as a provocation to government, commissioners, providers and investors to begin a richer conversation that doesn’t assume we already know the answers. OPM’s experts in commissioning for outcomes (Sue Goss) and in social finance (Chih Hoong) draw on their learning about systems leadership, experience of teaching commissioning programmes and our work in evaluating social investment experiments.