Drucker's Vision Is Being Realized Across America
As he was so consistent, Peter Drucker was prescient in foreseeing a blossoming of local not-for-profit organizations addressing a wide range of social problems. It’s a blossoming I’ve seen first-hand, in fact. Beginning in 2001, I’ve led an initiative at the Manhattan Institute to seek out such organizations, through an award program. The diversity of their causes and methods has been notable. They have arisen in implicit recognition that government is failing to address changing social needs—even in such areas as immigration, aging and education where government spends so much. In San Francisco, an organization called Upwardly Global helps immigrants with professional-level skills gain the credentials necessary to work in the U.S. In suburban Atlanta, Fugees Family, started by an immigrant Jordanian Muslim, operates a school solely for refugee children, who arrive years behind educationally. In Boston, Beacon Hill Village developed the idea of helping older residents “age in place” by joining a “village” offering services ranging from transportation to book groups. Its model and its vocabulary have spread across the country. In New York, Civic Builders, started by an NYU business school graduate, arose to use philanthropic support to build facilities for charter schools, which would otherwise lack them.
Groups such as these are notable in several regards that Drucker anticipated.
First, they have responded to needs which government had not anticipated nor served. The inspiration to serve, on the part of founder-leaders, was civic-minded and personal; it did not arise in response to an agency’s request for proposal. Second, in many cases, they provide services similar to those for which government provides support but at far lower cost. Consider, for instance, the Parker Family Health Center in Red Bank, New Jersey—part of a nationwide network of more than 100 volunteer-based emergency medical facilities called Volunteers in Medicine. The clinic, a freestanding state-of-the-art facility, relies on philanthropic support for its $1 million budget—which allows it to serve 10,000 patients, many on an ongoing basis. Philanthropy and volunteerism allow it to charge $80 for an emergency visit—compared to an estimated $300 for a basic hospital emergency room visit. As a group, the 110 Volunteers in Medicine clinics raise some $45 million in local operating funds annually and take no government funding.
What’s more, as Drucker foresaw, specific measures of success, rather than good causes alone, have come to be the coin of the realm among those seeking support for such organizations. Those promising to reduce prison recidivism typically must track rates of recidivism, as well as avoided costs of reduced imprisonment. In New York’s Harlem section, a group called Getting Out and Staying Out, which teaches classes inside New York’s Riker’s Island jail and continues its relationship with inmates once they’re released, reports that fewer than 10 percent of those with whom it works wind up back behind bars—far less than 60-plus percent that’s typical for those who go through the standard release and parole system. In Jersey City, N.J., Rising Tide Capital, led by two young Harvard graduates, provides classes in entrepreneurship for low-income residents--and tracks whether they start and continue a business over a period of years. Nearly 300 of those graduates have, in fact, started new businesses, while some 460 have seen expansions in businesses they already operated when they enrolled with Rising Tide. On average, those with businesses who have completed the 12- week program have seen a 64 percent increase in sales and a 47 percent increase in income (from $38,375 to $56,412). They’ve started and expanded pre-schools, pest control, home repair, home cleaning and auto repair businesses.
Indeed, The Robin Hood Foundation, which emerged after Drucker wrote, began to direct hundreds of millions annually to social service organizations--on the proviso that they had the ways and means to report on their results. The term “social entrepreneur” was unknown at the time that Drucker wrote--but he outlined the profile of just the sort of person and enterprise Robin Hood supports— those with original ideas who often combine philanthropic support with other forms of income and can demonstrate success. I’ve visited and evaluated dozens of such organizations--and seldom left without being uplifted by their effectiveness and amazed at the extent to which smart and successful people are starting entirely new organizations to address social problems about which they care.
At the same time, some such new organizations—many of which are far larger than mere “points of light,” it’s important to note—are serving another role of a sort Drucker understood well: that of signaling what positive social norms should be.1 Examples of philanthropy and nonprofits that “scale” by establishing new norms are not common, of course, but are memorable and well known. Historically, the settlement-house movement — which began bringing social services to new immigrants at the dawn of the 20th century — started with a single institution (Chicago’s Hull House) and within two decades included more than 400 similar locally led and funded organizations across the country, offering English classes, music lessons, and fresh-air camps.2 Like the Village movement dedicated to encouraging “aging in place,” the settlement-house movement had a national trade organization. But its power, too, lay in its core idea: that new immigrants deserved help in their quest for upward mobility and, indeed, Americanization. It was an idea, in other words, that inspired support from local leaders across the country. Similarly, Mothers Against Drunk Driving, although it has gone on to become a national organization with policy objectives, arguably has had its greatest influence simply by establishing a new norm: the designated driver. Teach for America’s going to scale was helped by federal funding that complemented philanthropic support, but it arguably had its greatest influence simply by promoting an idea: that our best and brightest should considering teaching and join the crusade for improving public education.
It’s even possible that influencing a cultural norm may not require an extensive organization or widespread replication. Think of the venture capitalist and philanthropist Peter Thiel, whose 2010 announcement that he would offer $100,000 fellowships to prospective for-profit and social entrepreneurs who would agree to drop out of college to pursue their ideas, has called into question the much larger idea of whether a college education is worth it — and, if so, for whom? Public acceptance of the idea that a college education may not be right for everyone has since emerged as a new cultural norm, helping to legitimize, for instance, not only high-end high-tech entrepreneurship but also a revival of vocational education, now rebranded as career and technical education. Yet at the same time that this flowering of social entrepreneurship has occurred, a bleak narrative has developed about many of our social problems--such as the prospects of the poor advance or the spread of drug abuse—has taken hold. Thus, a contemporary response to Drucker must engage the question of why, when so much of what he foresaw has come to pass, a key element has not. As Drucker wrote: “What is needed, therefore, is a public policy that establishes the nonprofits as the country’s first line of attack on its social problems.”
Drucker’s key public policy proposals have not, in fact, advanced. The charitable tax deduction has not only not significantly been increased in value—rather, President Obama consistently proposed limiting its value. Not only has there not been a move toward vouchering social services--and thus empowering those in need to shop among organizations for help--but the Obama White House has moved to draw even start-up non-profits into direct financial reliance on government, through something called Social Innovation Fund (SIF). This fund is housed within the Corporation for National and Community Service, the agency that oversees the AmeriCorps program, which poses its own problems; it pays “volunteers” to serve in approved non-profit organizations. The Innovation Fund goes further and can be understood as an effort by government, in the name of helping good new ideas go to “scale,” as effectively a means for government to set charitable priorities. The SIF staff, without even specific Congressional direction (other than a lump sum budget), sets select priorities. Such goals as “preparing youth for success in school; increasing economic opportunities for economically disadvantaged individuals, and promoting healthy lifestyles” appear uncontroversial but, at the same time, can be seen as select philanthropic purposes that have received a government seal of approval. That prospect takes actual form because the Fund is premised on recruiting major foundations—designated as “intermediaries”-- as partners called upon to provide matching funds. One must keep in mind that as robust as American philanthropy is, it constitutes only two percent of gross domestic product. Designating certain causes as having official priority risks starving the types of unpredicted, idiosyncratic—but effective—organizations described above. One fears that it will be a short step from a “public-private partnership” to a tax code that favors some types of charitable giving over others.3
That such developments that inhibit the growth of the “independent sector” have occurred at the same time the social entrepreneurship movement has emerged reflects a key barrier to the realization of Drucker’s vision. I refer here to another sort of norm, one which has taken a deep hold in American life since the New Deal. Americans have come to expect government, rather than a vastly decentralized independent sector, to retain responsibility for operating, or at least organizing and funding, a system to address social needs. In other words, the norm of expecting government responsibility is the default of the polity.
Changing this norm is as important as nurturing new organizations themselves. To do so, we must acknowledge the source of its power. That lies in the government promise of universal provision of services. In that formulation, there will be funds to support Head Start, or Meals on Wheels, programs in every community--not just those that happen to have motivated local leaders who established new non-profits. Mounting an argument against that sort of apparent reach requires leaders willing to argue that mediocrity in the service of universal provision is not acceptable--that we can do better by relying on social entrepreneurship, and support from tax-advantaged philanthropy and charity.
Drucker’s idea of using voucher financing is attractive--but hard to envision in detail. Who would qualify and how? Does it propose a clear-headed consumer of social services making informed choices--when those in need may be far from such a state? It may well be more practical simply to return as much tax money as possible to individuals and foundations to direct to organizations they believe can be effective--and rely on those organizations to draw in those who need their services. There is, at the same time, a tempting alternative, which must be avoided: continuing or expanding government contracting for social services. It is clear that, rather than extending the effective reach of non-profits, such contracting extends the risk-averse and bureaucratic culture of government to the independent sector. One need look no further to know this true than the regular horrors stories of abused children whose welfare was supposed to monitored by government-supported child welfare agencies. Government contracting with non-profit organizations for social services is, indeed, reveals the flaw of expanding such services through public spending: the services become extensive but mediocre. As Steven Smith and Michael Lipsky trenchantly observed in their unappreciated classic, “Nonprofits for Hire”, government tends to judge the quality of the work for which it contracts “simply by recording the production of service units.” 4
Nonetheless the power of the idea of universal provision—a Head Start center in every town—is difficult to dislodge. The precondition for change must be leadership that will seek to reassure Americans that a decentralized, non-governmental system can be both sufficient and effective. Telling the stories of those non-governmental organizations which succeed where government fails can be a start—because when the Drucker, non-governmental model is given a chance, it proves to be potent, even in the face of some our most difficult social challenges, such as inner city crime. Consider the work of Advocates for Community Transformation in what has long been a high-crime district in West Dallas. Founded by a faith-inspired former commercial litigator, it has successfully used the threat of legal action against the owners who buildings used by drug dealers to clear neighborhoods of the drug trade its high rates of related violence. It speaks the language of faith but brings to its work the sophistication of GIS mapping, innovative legal tactics, and an alliance with city government (but not government funding). The Dallas Police Department regularly provides ACT with up-to-date crime data for its targeted neighborhoods; the city’s own legal office refers cases to it because it lacks the capacity to take up the cases of dozens of individual homeowners— who ACT helps to come forward, courageously, to threaten drug-related landlords with the loss of their property, as public nuisances. ACT, in a way police often cannot, gains the cooperation of homeowners who have long lived in fear. The results have been closely tracked—and are impressive. In the four West Dallas neighborhoods where ACT has been active since 2008, crime, over that time has fallen by 52 percent. That’s a decline in major crimes—including murder, assault, burglary and rape, thanks, in part, it’s worth noting, to the efforts of white evangelicals working with black neighborhoods not far from the site of the tragic July police shootings in central Dallas.
This is not to say that there may not be ways in which government can be effective in providing for those in need. To the extent that Americans, as a polity, decide that our social safety net should include cash support, government can effectively cut the checks. One must not, however, confuse the skills associated with helping the addict or retraining the ex-offender, with simple, straightforward financial support. Identifying and addressing changing needs in a changing society, however, is not something government can do well at all. Convincing Americans that this is the case must precede the changes that Drucker, so wisely, proposed. Drucker, not surprisingly, remains ahead of his time.
1 See Howard Husock, “A Smart Way for Philanthropy Ideas to Spread Fast: Change Social Norms,” Chronicle of Philanthropy, July 13, 2015
2 See Howard Husock, “Bringing Back the Settlement House,” The Public Interest, Fall, 1992
3 See Howard Husock, “Nonprofits and the State,” National Affairs, Winter, 2011
4 Steven Smith and Michael Lipsky, “Nonprofits for Hire: The Welfare State in the Age of Contracting.” Harvard University Press, Cambridge, 1995, p 199
This piece originally appeared in Essays in Economics, Finance, and Management (edited by Murray Sabrin)
Howard Husock is the Vice President of Research and Publications at the Manhattan Institute. From 1987 through 2006, he was director of case studies in public policy and management at Harvard University’s Kennedy School of Government.
This piece originally appeared in Essays on Nonprofitization, the Welfare State, and the Future of Social Entrepreneurship