Future of PFS: Reorienting government to achieve systems change

The standard way of delivering public services is broken. Currently, governments pay for outputs, such as nightly beds for homeless individuals staying in shelters. But what the public, service providers, homeless individuals, and other stakeholders really care about are long-term outcomes: Do individuals experiencing homelessness secure stable housing and employment as a result of services? Are they able to avoid unnecessary hospitalizations or involvement with the criminal justice system?

Fixing this system requires a revolutionary systems change: a reorientation of government toward outcomes.

This topic was recently tackled by three prominent thinkers on government innovation—Josh McGee of the Laura and John Arnold Foundation, Tracy Palandjian of Social Finance, and Antony Bugg-Levine of Nonprofit Finance Fund—during a panel at the Urban Institute’s National Symposium on the Future of Pay for Success.

But, as the panelists noted, systems change, particularly in one as complex and massive as public service delivery, is hard. Although few benefit from this current system and key stakeholders recognize its shortcomings, path dependency, risk of innovation failure, an environment of skepticism and distrust, and cultural and institutional challenges throw up obstacles to reform.

This suggests that what’s needed is a slow, gradual shift to an evidence-based and outcomes-focused mindset through vehicles that can advance these concepts in tangible ways.

The pay for success (PFS) model builds efforts around measurable and meaningful outcomes and incentivizes delivery of those results, and so is well-suited to help push broader systems change. Palandjian suggested that the process itself of building a PFS program is valuable: sitting across the table from uncommon partners to collectively think differently about the delivery of social services can itself be transformative. She emphasized that improved and expanded use of data (aligned with PFS planning and implementation needs) advances “active performance management”—critical to improving outcomes. Once implemented, a “maniacal,” long-term commitment to monitoring and continually refining program performance can help promote systems change by instilling and maintaining a culture of evidence and accountability.  

A further benefit of PFS, as noted by McGee, is that it helps build governments’ “evidence capacity muscle”:  by using existing evidence in project design on the front end and building additional evidence through evaluation on the back end, PFS helps grow the demand and supply for evidence within government.

Pay for success has the potential to transform the way we think about the social safety net. As Bugg-Levine put it, “PFS is a catalyst to unlocking a much broader transformation in delivering [social] outcomes.” By paying for what works and achieving sustainable outcomes for society's most vulnerable, we can change the often negative, partisan narrative surrounding social support. While the goal of systems change across government is daunting, the driving motivation—improving outcomes for vulnerable people—is worthwhile, and innovative tools, like PFS, are causes for optimism. 

This is the third blog in our Future of PFS blog series. 

On June 22nd and 23rd, 2017, the Pay for Success Initiative hosted a National Symposium on the Future of Pay for Success in Washington, D.C. The invite-only Symposium brought together leaders from government, nonprofits, and organizations active in pay for success to consider the big questions facing the field, as well as highlight lessons for engaging in PFS efforts. More information on the Symposium can be found here.

Over the next several months, the Initiative will be releasing a series of blogs highlighting important conversations, themes, and questions that arose during the Symposium. To join the conversation, visit pfs.urban.org, follow @UrbanPFSI and #FutureofPFS on Twitter, and subscribe to our monthly newsletter.

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As an organization, the Urban Institute does not take positions on issues. Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. Photo via Shutterstock.