Council Profiles

Are Maximizing Financial Returns and Maximizing Social Outcomes Mutually Exclusive?

March 13, 2017
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Are Maximizing Financial Returns and Maximizing Social Outcomes Mutually Exclusive?
Arbor Brothers co-founders Sammy Politziner and Scott Thomas advise and and help nonprofit organizations work through "second stage gap" funding. Courtesy of Arbor Brothers
When it comes to social impact businesses, there's a tension between what's perceived and what's reality.

Best friends Scott Thomas and Sammy Politziner have shared a lot of experiences: being college classmates, teaching in New York City public schools, working on Wall Street and volunteering for Obama’s 2008 presidential campaign. Inspired by that moment and a desire to be “part of the solution,” says Politziner, the pair founded Arbor Brothers, which provides money and coaching to nonprofit organizations dealing with growing pains. NationSwell spoke to the two members of the NationSwell Council about how nonprofits can adapt to changes in the social service sector.

Talk about the “second-stage gap”—after an idea’s seed funding runs out, but before the organization has proven results—that you’re trying to bridge.
Thomas: There’s a lot of incubators, fellowships, business plan competitions. At the other end of the spectrum, traditional philanthropy is really risk-averse; a lot of folks get paid every day to find those things that are really proven solutions. Between this throbby start-up area and this staid, traditional funding lies this big chasm. That holds true for even the most talented entrepreneurs. Take the example of Wendy Kopp and Teach for America: She was scrambling to keep the lights on at TFA in years three and four. We used to joke, “It shouldn’t be that hard to change the world.” If you have a good idea and that passion to develop it, someone should be there to help you across that funding landscape.

These days, there’s so much emphasis on numbers. How do you develop an outcomes-focused culture?
Politziner: We don’t believe changing someone’s life is a math problem. We have seen the philanthropic space, once somewhat unconcerned with numbers, swing maybe too far towards them. At Arbor Brothers, we’re quantitative by nature, but we recognize that a lot of changes cannot be measured quickly. We shouldn’t not invest in something simply because we can’t see the change right away. That said, the leader can’t just say this change is so far down the line, we shouldn’t bother to track indicators along the way.

How do you find the most promising leaders?
Thomas: There are a bunch of intangibles that we consistently mull on when we look back on the really successful organizations. One thing that we’ve grown ever more focused on is what Jim Collins talks about in “Good to Great,” this notion of deep humility. The really great leaders are so humble about how hard the problem is to solve, how long it’s going to take to find something that works and how many times they should expect themselves to fail and to struggle. If you’re the kind of person who’s never been wrong in your life or you’re not interested in learning from the failures of others, it’s really hard to get where you need to go fast enough.

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What book would you recommend for someone to better understand your approach?
Thomas: “Leap of Reason,” by Mario Morino, a former software executive turned philanthropist in the [Washington] D.C. area. His Venture Philanthropy Partners, on a much bigger scale than Arbor Brothers, has really set the standard on what it means to help an organization with high potential become high performing. His book really distills what it means to be focused on outcomes—not just the philosophy, but the systems to make sure it persists over time.

What philanthropic trends excite or disappoint you?
Thomas: Speaking personally, there’s a tension between the perception and reality around social-impact businesses. Having spent some time with a couple, I personally have yet to see an organization that both achieves meaningful financial market returns and meaningful social outcomes. The tension between are you maximizing profits and are you maximizing outcomes has never been truly resolved. People’s hand-waving over that challenge leads to a lot of wasted time and money in this area.

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