Pay for Success: To Invest or Not to Invest? Assessing Collaboration (Living Cities)

By Sindhu Lakshmanan and Tynesia Boyea-Robinson

When things go wrong in a PFS project—and they most likely will—it’s the quality of the partners’ collaboration that determines whether the project stays on track toward better outcomes for low-income people.

We’ve launched our Pay for Success: To Invest or Not to Invest? series to walk others through how we decide which Pay for Success (PFS) projects to consider investing in. We started by sharing our initial screening criteria, and have written about the importance of impact and innovation. Over the next few weeks, we’ll discuss each of our initial screening categories in more depth.

When things go wrong in a PFS project—and they most likely will—it’s the quality of the partners’ collaboration that determines whether the project can course-correct to stay on track toward getting better outcomes for low-income people. So it’s no surprise that collaboration is one of the qualities we look for when screening. In fact, the level of collaboration we look for closely aligns with our “partnership” criteria in the 4 Ps framework that we use to assess the credit worthiness of a PFS transaction.

In PFS, strong collaboration looks a lot like collective impact. As our colleague Eileen Neely has previously written, we’ve long considered PFS to be collective impact. PFS transactions with strong collaboration have the power to realign existing partners, funds and organizations, ultimately leading to large-scale, enduring change that addresses the most pressing problems facing low-income people.

Three key elements that demonstrate that a project is set up to facilitate strong collaboration:

Cross-sector Partnership of Decision-Makers and Doers

PFS transactions are a team effort and the people at the table matter. When we’re deciding whether or not to invest in a PFS project, we want to see that everyone who has skin in the game is engaged in the partnership. If a project is focused on workforce development, for example, we want to know whether early-stage conversations included someone from the government departments of budget/finance, labor, education and workforce, in addition to the service provider, evaluator and intermediary putting together the project. As the project moves through transaction structuring, are funders from both philanthropy and the private sector being included in conversations? Are funders viewed as partners? When we look at the list of project partners, we want to see a representative from every organization and/or system that influences the problem.

Aligned Incentives

When investing in PFS, we look for evidence that a project will align all partners’ interests to achieve outcomes. This involves two primary questions.

First, is there a shared goal, and are partners clearly aligned in how they articulate the shared goal? In the Massachusetts Juvenile Justice PFS Project, for example, all parties involved agreed that the goal was to reduce recidivism and increase employment for high-risk young men coming out of the juvenile justice system or on adult probation. This ensured, from the start, that all partners were working toward the same endgame.

Secondly, is there a way to hold people accountable to the shared goal? As we addressed last week, we ideally like to see a financial incentive for all the project parties–including the service provider—to keep everyone involved in problem-solving throughout the duration of the project. Together, a unified goal and financial incentives keep everyone at the table and engaged throughout the life of the PFS project.

Local Support

The benefit of collaboration is that everyone brings their strengths to the table, and we believe that a local/community foundation represents an important voice in the partnership. These groups know their communities’ needs best because they are connected to the fabric of the place they serve. In addition, strong local support of a project indicates to us, as a national funder, that the problem the PFS project is targeting is a priority for the local community. We also look to local and community foundations to provide context for us—is this project truly serving the hardest-to-reach populations?

No one person, organization or sector can solve our seemingly intractable urban problems. Cross-sector collaboration is critical to finding and implementing solutions. And because effective, sustainable solutions are the ultimate goal of PFS transactions, collaboration is critical for success.

Next up: we explain what we look for in a government champion. Check back next week to learn more!