HOWARD W. BUFFETT AND WILLIAM B. EIMICKE
In the middle of New York City is an open and expansive green space—something just as quintessentially Manhattan as its skyline. Every year Central Park welcomes more than forty million visitors from all over the world.1 Many think of it as a perfectly landscaped and pristinely maintained park, but not so long ago it was one of the most dangerous precincts in what was then the murder capital of the United States. In popular movies—The Out of Towners, Annie Hall, Six Degrees of Separation—Central Park symbolized why few people wanted to live in New York, why Europeans were advised not to visit, and why no street smart New Yorker ventured in after dark.
What changed? In the 1980s and 1990s, the neighboring community mobilized to create the Central Park Conservancy (CPC), recruited hundreds of volunteers and millions of dollars in support, hired highly qualified and passionate leaders and workers, and partnered with the city to run the park as if it were their own. The city government still owns the park, and it is open to all for free—but CPC runs it and raises the money to pay most of its operating and capital costs. This was an uncommon approach for its time, but this kind of creative cross-sector partnership is becoming more and more common. It didn’t happen overnight, and it required constant, tireless, and visionary leadership from members of the conservancy and the city government. As good as this approach is, the partners are still trying to make it better—and they are helping other parks around the world replicate their success.
Just blocks away in Chelsea, near the previously notorious and highly dangerous Hell’s Kitchen neighborhood, is a park built atop the abandoned tracks of an elevated freight train line that once delivered meat, dairy, and manufacturing supplies to the city. A well-organized community organization with inspired leadership convinced the city not to demolish the tracks, and, together, the community and the city built a beautiful park with panoramic views that attracts nearly eight million visitors each year.2 Similar to CPC, the nonprofit Friends of the High Line manages the park for the city and raises funds from donors to cover most of the rather substantial operating costs.
The Central Park Conservancy and Friends of the High Line are excellent illustrations of cross-sector partnerships: voluntary collaborations between organizations from the public, private, or philanthropic sectors that accomplish mutually agreed-upon goals. Today partnerships are delivering goods and services more efficiently and effectively, and with greater benefit to society, than one organization could ever achieve on its own. The two parks also show how partnerships between different sectors—in these cases, nonprofit organizations partnering with government—often are able to overcome the limitations that constrain organizations in any single sector. Private sector organizations also bring unique contributions to partnerships, generally driving better outcomes for programs that benefit the public in addition to their profit-making purpose.
We explore cross-sector partnerships as case studies at the School of International and Public Affairs at Columbia University, where we teach. Our graduate students are incredibly bright and diverse, and our alumni span more than 150 countries and come with professional backgrounds from government, for-profit, and philanthropic organizations.3 However, they all come together with a common goal of improving society. In our courses on effective public management, innovation, and philanthropy, we often find ourselves describing cross-sector partnerships as a more effective way to serve the public interest. From the innovative High Line urban park in the heart of New York City to the many other examples in this book—digital transformation of government services in India, economic and agricultural revitalizations in Afghanistan, and so on—organizations from all three sectors are coming together in different ways to meet their individual organization’s goals and serve the greater good.
WHY DO WE NEED PARTNERSHIPS?
The traditional view of how societies manage themselves is changing. Government alone has not been able to handle the growing responsibilities and costs of the issues it faces in the modern world: public safety, social welfare, public health, infrastructure, education, national defense, international relations, job creation, housing, energy, environmental protection, transportation, space exploration, scientific research, justice, and so on. In addition, most individuals and local communities do not want these important issues handled for them without their input, no matter how well-meaning the government may be. A community generally will have better everyday solutions than officials from their vantage points at city hall or far away at the capital.
Decentralizing government decision making at the local level may help, but economic decisions are increasingly influenced by global developments, which have both positive and negative implications.4 On the good side, globalization has improved the lives of billions around the world, and much of that benefit was made possible through organizations partnering across sectors and national borders.5 At the same time, globalization contributed to the financial crisis of 2008 and its lingering aftermath: displaced homeowners, drained retirement accounts, limited access to financing, and structural unemployment.6
So far globalization seems to have reduced inequality in many countries and exacerbated it in others. The innovations and efficiencies globalization has enabled also has created an uncertain future for many workers around the world. For example, the coming age of automation could act as a second industrial revolution in the decades ahead, with the potential to significantly increase efficiency and convenience. Simultaneously, millions of workers may be replaced with robots, worsening already dangerous levels of inequality.7
As we discuss in chapter 1, government used to be the leader in responding to major societal challenges, such as poverty during the Great Depression. In today’s world, however, government bureaucracies seem slow, rigid, and clumsy and often are stalemated by partisan bickering and gridlock. Too many people across our country (and around the world) are underemployed, hurting, and frustrated. The Brexit vote in Great Britain and the U.S. presidential election in 2016 reflect the pessimism of working-class and middle-income voters, not just regarding their future but also the prospects for their children and grandchildren.8
Many around the world believe that our challenges are too great and too complex to be solved. Although these challenges will not be solved by any one country, organization, or even sector of society, solutions to these challenges do exist. Leaders from organizations of all types have been developing new strategies and joining together to tackle the most entrenched and intractable problems in our world today—progress that is well documented in economist Steven Radelet’s book, The Great Surge. In the past few decades alone, extreme poverty has been cut in half,9 billions more have access to clean water,10 and under-five child mortality has declined nearly 60 percent.11 This is undoubtedly incredible progress, and yet much more is needed.
In the following chapters, you will read about how cross-sector partnerships are becoming the most effective method of accomplishing large-scale public good in the twenty-first century—dramatically improving programs by sharing responsibility that governments alone are unable to deliver. However, implementing these new approaches requires unprecedented innovation, inclusivity, and sustainable solutions, and they will only be successful if they focus on creating value for everyone involved.
CHANGE IS ON THE HORIZON
Major shifts in the characteristics of our populations, their values, and the distribution of wealth are happening all around us. For instance, the baby boom generation has been surpassed in size and influence by the millennials.12 Simultaneously, roughly $60 trillion of global wealth is expected to change hands over the next 50 years,13 and 86 percent of future inheritors are interested in sustainable investing14—including actions or advancements by businesses that improve our society.15 According to Deloitte, 2013 marked the first year that millennials began ranking the primary purpose of business as creating social value—not creating profit.16 Between 2012 and 2014 alone, socially responsible investing grew more than 76 percent,17 and in 2016, it comprised more than one out of every four invested dollars under professional management.18 A Pew Research Center study found that 84 percent of millennials report that making a positive difference in the world is more important to them than professional recognition.19 What these numbers indicate is not a temporary or passing trend but a paradigm shift in how society values itself—value defined by purpose rather than by a relentless march toward profit.
The growing crisis of economic inequality in the United States is a clear example of “success” for some—but possibly becoming disastrous for us all. Nobel laureate economist Joseph Stiglitz agrees, saying that the real solution to the inequality crisis is focusing on community rather than individual self-interest: “Indeed, we are a community, and all communities help those who are less fortunate among them. If our economic system leads to so many people without jobs, or with jobs that do not pay a livable wage, dependent on the government for food, it means that our economic system has not worked in the way it should.”20
HOW CAN WE GET BETTER OUTCOMES FOR ALL?
To live up to our collective potential to solve these complex challenges, we believe that a core value of sharing success—between organizations, individuals, local communities, and our environment—will enable society to transform how it defines and accomplishes its goals. Professor Stiglitz has outlined policies that could increase economic growth and equality, creating what he calls “a shared prosperity.”21 We agree that society can do better, and in often unnoticed ways we are already accomplishing great things, frequently through new and exciting collaborations. That is really what this book is about. We discuss how important it is for partners to establish clear and mutually beneficial goals, agree on appropriate and feasible performance measures, bring together those who can get the job done, identify the places that want and need help, and implement processes that will lead to success.
Technology and innovation alone will not carry us forward. Economist Robert Gordon has attracted a great deal of attention for his theory that the rate of innovation is slowing dramatically and, therefore, expectations for future improvement in the human race should be lowered.22 Even if the rate of innovation slows, we can still substantially improve our societies through performance-driven management. Management expert Peter Drucker believed that leadership and management contribute as much or more to progress as technological innovation does. How well we measure success can dramatically affect our results. As Drucker wrote in the early 1970s, “it is the task of this management generation to make the institutions of the society of organizations, beginning with the business enterprise, perform for society and economy; for the community; and for the individual alike.”23
What Drucker was saying forty years ago is similar to what millennials are saying today: private firms should make money and do good at the same time.24 Drucker also advocated for cross-sector collaboration with the nonprofit sector to make the world a better place.25 Over the past several decades, the number and influence of nongovernmental organizations (NGOs), including nonprofit aid agencies, community-based organizations, foundations, and advocacy organizations, have increased almost exponentially in most countries around the world.26 From tiny neighborhood associations to mega-foundations and global service organizations, these groups are feeding the hungry, housing the homeless, curing the sick, educating children, and promoting sustainability. In many cases, when philanthropic initiatives are taken to scale, they are done so in partnership with government.
Cooperative efforts such as these are not a twenty-first-century phenomenon. Governments have contracted with for-profit and nonprofit organizations to complete projects, supply goods, and deliver services for centuries. What makes current and future partnership models different are the reasons the parties come together, the collaborative manner in which they design and implement their agreements, and how they measure individual and collective success.
SOCIAL VALUE INVESTING CAN HELP PRODUCE BETTER OUTCOMES
An important message of this book is that we must be smarter in our attempts to make the world a better place. “Doing good does not excuse us from doing better,”27 and throughout this book, we explore new ways to add or increase value for society through better management, planning, and performance measurement. Ours is not the first attempt to be more analytical about the effects of our public or philanthropic investments, and we hope to build on this quickly developing field. We argue that partnerships combining the strengths of multiple sectors—government, corporations, and philanthropy—can yield the most public benefit, especially when they are structured with integrity and inclusion.
This book presents a framework for creating social value that is modeled after one of history’s most successful investment paradigms: value investing. Like value investing, social value investing employs a long-term investment strategy that attempts to unlock hidden or intrinsic value, and it focuses on effective management through a five-element approach: process, people, place, portfolio, and performance.
In chapter 2 we introduce this framework and describe its origins, history, and development. The chapters that follow present case studies of cross-sector partnerships, each exemplifying one of the five elements of the framework. These cases are paired with an analysis and the theoretical underpinnings of each element. In all but one case, the partnerships we describe were developed independently and without knowledge of the social value investing approach. While they are not necessarily a perfect adaptation of the framework, we believe this independence reinforces the validity of the broad applicability of the model.
This new management framework begins with the first element: the need for an effective process to structure how organizations partner successfully. This is especially important in complex situations that require coordinated action and comprehensive programs. Partners must develop a fully integrated approach, relying on organizations from across sectors, to develop solutions that will outlast their initial investments. To illustrate this element, in chapter 3 we present an initiative in India designed to spur economic growth and opportunity through a partnership led by the national government. The initiative provides official biometric identification for the country’s 1.3 billion residents, resulting in a more efficient, effective, and honest distribution of publicly funded benefits. These programs also facilitate savings, investment, and job growth, and raise the standard of living for low-income families. Following the case, in chapter 4 we detail the framework’s first element and draw examples from the partnerships in India.
In chapters 5 and 6 we discuss how cross-sector partnerships rely on people as their most important asset. Leaders must build teams of diverse human capital and work with other leaders in a collaborative, sustained, and decentralized manner. To understand how well this can work in the real world, we look at the leadership of the Central Park Conservancy and the network of partners that created the High Line. Today CPC is partnering with other conservancies in cities across the United States to bring private resources and expertise to the management of public spaces. CPC has worked with Columbia University and others to design and implement training and certification programs for urban park managers—supporting the next generation of leaders who will help bring the CPC’s best practices to parks around the world.
In chapters 7 and 8 we illustrate how successful partnerships empower constituents as co-owners of outcomes by using a place-based strategy and cooperative planning mentality. This emphasizes the importance of designing, operating, and implementing a partnership’s efforts in support of stakeholder-developed goals. To better assess the opportunities and challenges of applying this element, we explore a cross-sector partnership to strengthen the rural economy in western Afghanistan despite decades of conflict.
In chapters 9 and 10 we discuss ways in which partners from different sectors can coinvest their resources in a portfolio to diversify risk and achieve greater impact. To illustrate this aspect of social value investing, we describe the work of an innovative NGO made up of private sector leaders in Brazil called Comunitas. These leaders created a program called Juntos, which brings together corporate expertise and finance, philanthropic donors, and Comunitas staff to partner with willing local governments to improve the efficiency and effectiveness of jointly selected government programs—all in close collaboration with local residents.
Finally, in chapters 11 and 12, we discuss the fifth element of social value investing, which focuses on projecting and measuring performance to understand the intrinsic value a program or partnership may create for society. We document how former New York City mayor Michael Bloomberg used performance-based partnerships to revolutionize public safety, saving lives and property and dramatically improving the quality of life in the city. We then present a formula that can help partners—whether in the public, private, or philanthropic sector—compare the predicted positive social impact of different programs that serve the public good. By inputting key variables and a measurable social impact goal (in areas such as fire safety, renewable energy, or smallholder agriculture), partners can calculate an impact rate of return per dollar expended. Enabling partners to compare similar programs seeking to bring about positive outcomes means they can determine which options will achieve the greatest benefit for society. The formula is a starting point and an important step toward an accessible and robust cross-sector partnership measurement methodology.
We believe the full potential of the process, people, place, portfolio, and performance management framework can be realized when applied through cross-sector partnerships. Our case studies and their analyses illustrate how the talents and resources of one partner can complement the others and magnify positive social impact as well as the efficiency of an endeavor.
However, not all partnerships are successful. In chapter 13 we explore a cautionary tale of the complex public-private investments in preparation for the 2016 Summer Olympics in Rio de Janeiro. This chapter examines the government-led partnerships to revitalize the city’s dilapidated port area and public transportation system. In this case, a number of elements from the framework were missing, and the results were uneven: corruption ensued, some stakeholders were disenfranchised, and many Olympic venues were virtually abandoned or fell into disrepair.
HOW DID WE GET HERE AND WHY DOES IT MATTER?
The modern cross-sector partnership model developed over nearly a century of experimentation in how the government engaged with the private and philanthropic sectors, beginning with New Deal programs led by President Franklin D. Roosevelt. The Great Depression left millions of previously self-reliant families destitute, and only government agencies had the size, scope, power, and leadership to partner with private companies and charities to ease their poverty. As many countries deteriorated into anarchy and dictatorship, the U.S. government engaged private businesses and charities to work together toward recovery. World War II boosted the authority of the government to “lead” its private partners and supply the demand for weapons and provisions for all of the Allied forces. However, resulting decades of government-led partnerships bloated the public sector, and public trust in the government’s ability to accomplish important work efficiently was lost.
The privatization movement followed. Ronald Reagan and Margaret Thatcher led a growing antigovernment groundswell, and privately run public projects followed. Many of these programs moved faster, cost the government less, and produced visible outcomes. But privatization had its own drawbacks, including a predominant focus on short-term profits over other important considerations, bidders who oversold their outcomes, and contractors who avoided serving hard to reach communities and constituents (who were often in the greatest need). Some scholars argue that, in certain cases, privatization simply replaced an inefficient public monopoly with a private one, offering consumers little more at a higher price.28
The reinventing government phenomenon of the 1990s focused on improving how government works rather than replacing it with private companies. This reinvention included some decentralization of decision making, increased community participation, and additional contracting with nonprofit organizations for service delivery. In many ways, it set the stage for the rise of cross-sector partnerships by highlighting successful relationships between governments and community-based organizations, as well as collaborations among federal, state, and local agencies, and occasionally private companies. But reinvention also reinforced the now outmoded idea that government should be the sole source of new policy ideas, of program development, and be the architect of measures of success. Nor did reinvention anticipate the substantial growth in funding and innovative social and public policy solutions that would flow from the philanthropic sector in the twenty-first century.
Today large foundations and nonprofits are leading partnerships with a willingness to provide no-cost and low-cost capital over the long-term and with a keen focus on measurable social impact. Challenges exist here too, as we will discuss, and what these organizations perceive as the desired social value may differ from what community stakeholders want.
To solve many of the most important challenges we now face—whether destabilizing inequality, declines in the number of living-wage jobs, degraded soils and food production, damaging climate change, or a shortage of quality, affordable housing and education for all—we must work in partnership. This is because no single sector acting alone is adequately equipped to design the necessary long-term approaches, to deploy the large amounts of required capital, and to catalyze community-led program development.
Partnerships have the potential to maximize the positive attributes of each sector while minimizing their weaknesses. The partnerships that cleaned up Central Park and created the High Line, among others that we discuss in greater detail, provide us with helpful examples of cross-sector partnerships that achieved higher social value than one sector could accomplish on its own. At the same time, in these cases and the others we discuss, it is easy to see that successful partnerships can be difficult to form and maintain.
BUILDING A BETTER WORLD WILL TAKE TIME
Fundamental problems of hunger, poverty, and inequality cannot be solved with short-term approaches. Meaningful progress on making the world a better place for everyone requires long-term strategies and management frameworks measured by how well we share success. Many of our biggest problems, those most worth solving, may not be solved in our lifetime—but they can be solved.29 It will require investment in all kinds of people to bolster their ability to succeed. It will take thoughtful, contextually appropriate processes that align organizations’ goals with local and global needs. It will mean investing time and resources in communities in ways that transform beneficiaries into shareholders of their outcomes. And it will mean putting the right measurement and performance systems in place so that we invest in opportunities that have the highest intrinsic value for society.
We live in a postrecession, globalized, collaborative, young, hyperconnected world.30 More so now than in any earlier time, we have the tools, the science, the best practices, the momentum, and the impetus to bring about positive change on a global scale. Many of us—from baby boomers to millennials—believe our new reality is challenging but that we have the knowledge, technology, resources, and new ways of organizing ourselves to meet our needs more efficiently and equitably. As authors, we each represent one of these two very large and influential cohorts, and we share a strong conviction that we can, in fact, dramatically improve our world. We believe that it begins by coming together and redefining success. Our hope is that future generations will focus less on traditional definitions such as wealth, power, or fame and be equally or more interested in making a positive impact on their communities—both locally and globally.
We have developed these observations over a decade of researching, studying, teaching, and working with cross-sector partnerships around the world. We hope this book provides you with inspiration for learning how, by working together, we can make the world a better place.