The Power of Social Innovation: How Civic Entrepreneurs Ignite Community Networks for Good
by Stephen Goldsmith, with Gigi Georges and Tim Glynn Burke
304 pp., $35.00
It’s a tale of two caricatures. In liberal imaginations, conservatives think that government programs don’t pull people out of poverty but that people pull themselves up out of poverty, Horatio Alger–style. To a conservative mind, liberals appear to believe that all poor people are structurally unable to advance, and that only sweeping government intervention can work. Of course, most people, conservative or liberal, sit somewhere between these two extremes. In his new book, The Power of Social Innovation, Stephen Goldsmith stakes out this broad middle ground.
“Social innovation,” as Goldsmith uses the term, simply refers to how social service providers (nonprofit and governmental) can solve social problems by providing clients (the poor, for instance) with positive incentives and treating them as active agents in the process. The traditional, top-down, service-delivery model has created “entrenched underperforming social safety net systems of providers, government and philanthropic funders, advocates, and interest groups,” Goldsmith writes. Thus, he says, we need “civic entrepreneurs” to shift the power dynamic and make real change possible on an individual and community level. “Transformation occurs as these social risk-takers help change residents from passive recipients of government services to productive, tax-paying members of society,” he adds.
Stephen Goldsmith is the right man to write this book. He served two terms as Mayor of Indianapolis, advised President George W. Bush on faith-based and nonprofit issues, and chaired the Corporation for National and Community Service under Presidents Bush and Obama. Shortly after he published this volume, he was appointed by Michael Bloomberg to serve as Deputy Mayor of Operations for New York City—overseeing many of Gotham’s biggest service agencies.
For a politician, Goldsmith is candid about the shortcomings in how nonprofits relate to government, and he cites his own experience along with other national and local examples. Many nonprofits refuse to let go of ineffective programs, because these programs are their lifeblood and to do so would jeopardize their existence. This, argues Goldsmith, prevents people with new ideas from entering the market. “The comfort of long-term relationships often undermines entrepreneurial opportunity,” he writes. Incumbent nonprofit service providers are therefore skilled at nurturing the “political and philanthropic contacts necessary to sustain their model, regardless of performance.” Meanwhile, clients do not have choices, nor is their feedback solicited; and service providers do not have incentives to do better.
For an example of nonprofits more attuned to political patronage than service provision, Goldsmith turns to United Way CEO Brian Gallagher, whom he quotes as saying: “Columbus [Ohio] had a deep, rich history of settlement houses, and we were trying to move away from this program funding. . . . [T]hey had learned to become the best program funding recipients ever. They knew politics: how to get to a city council member. I went to the godfather of the seven or eight settlement houses in the city and said, ‘I will go to my board and get a guarantee that you will get $750,000 or $850,000 and it will not be at risk over the next three years.’” The result? The settlement houses were not interested in funding that might force them to change their top-down delivery system.
When nonprofits seek the support (both financial and moral) of citizens, however, they are in a stronger position to tackle social problems. One of the most enlightening chapters of The Power of Social Innovation is about “Building a Public”—how civic entrepreneurs build a movement by creating citizen demand for change. “Civic progress requires that those who advocate for new interventions build a community of engaged citizens to demand change in social-political systems,” Goldsmith writes. He cites the example of Sara Horowitz, who founded a national membership organization called Working Today. Horowitz asked freelancers what they wanted and provided them with what they identified as their top need: health insurance. (Working Today is now aligned with a 501(c)(4) called the Freelancers Union, which provides health insurance and a retirement plan to 120,000 independent workers.)
One reason social innovators need to invest in building a public is that choice—real, informed choice—requires a public aware of its needs and its options. Goldsmith strongly supports client choice, whether that client is a homeless man or a public school student. He makes a convincing case, based on his and others’ experience, that when clients are trusted with responsibility, offered options to choose where to get help, and allowed to advocate for what is in the best interests of their communities, they achieve “the transformative power of personal responsibility, which can lead to a cultural shift toward higher expectations among individuals and within a community.”
This is the heart of Goldsmith’s middle ground between left and right. Meeting clients’ needs addresses the left’s cri de coeur, and building an ethos of personal responsibility addresses the right’s concerns about moral hazard. A social innovation model compares favorably with the traditional, top-down model. “It’s a perverse incentive system that is focused on needs and reinforces the negative,” he explains.
Goldsmith enthuses about alternatives like Maurice Miller’s Asian Neighborhood Design. Miller created a program in which individual households report on positive behaviors, such as taking a class or getting a good grade—each of which earns them $25. Participants learn from each other about positive behaviors, and as they learn more from each other, they collect more money. “Gradually the power dynamic changes, and the participants are no longer asking the staff, ‘What do you want us to do?’ as the traditional service model has programmed them to do,” Goldsmith writes. In two years, the program increased household income by an average of 20 percent and new families asked to join the program.
Where Asian Neighborhood Design has been successful, a similar program—Mayor Bloomberg’s Opportunity NYC Family Rewards pilot program, which offers small cash payments for basic tasks like going to the doctor or getting good grades—has not. Students who participated made no achievement gains vis-à-vis those who did not, although school attendance and dentist visits went up for some. Bloomberg recently announced tat the city would not adopt the until-now privately financed program, and that cash payments would cease in August. “If you never fail, I can tell you, you’ve never tried new, innovative things,” he insisted.
Like his new boss, Goldsmith emphasizes that social innovation requires a high tolerance for failure and a low tolerance for perpetuating those failures. “Governments must be pushed to allow more open competition—even if it results in failure—as long as poorly performing entities can be closed and their funds repurposed,” he writes.
This book’s shortcomings? Apart from discussion of the well-known examples of City Year and New Profit, there is too much ink applying the social innovation framework to choice in public education and too little on how to apply these ideas to sectors such as the environment, health care, and civil rights. As a practical matter, the section on how civic entrepreneurs can find start-up or growth capital is very short: there is a mere page and a half listing tax credits, program-related investments, and community development funds as potential sources of capital. The lack of capital for innovative approaches is the Achilles’ heel of the nonprofit sector. Goldsmith also gives short shrift to the private for-profit sector and its role in civic innovation.
The Power of Social Innovation confirms what you may already have suspected about the barriers that governments and entrenched nonprofits throw up against effective programs. By staking out a middle ground on a politically charged topic, Goldsmith offers practitioners, policymakers, and donors worthy ideas about the potential of private and neighborhood initiatives to help governments find better solutions to social problems.
Perla Ni, founder and CEO of GreatNonprofits, also founded the Stanford Social Innovation Review.