Thursday, February 21, 2013

Reality revealed by a scorecard

I highly recommend reading Mark Rosenman's opinion piece in The Chronicle of Philanthropy about the new College Scorecard. He argues that the scorecard is bad for all nonprofits because it represents an individualistic definition of value, not a societal one. As he writes:
"We seem to be falling for the idea that we should measure nonprofit programs only for how much good they do for individuals, not for how our larger society benefits. Colleges, hospitals, arts institutions, international aid groups, and others will be valued based on how much they better and enrich the relatively few people they serve, not society itself."
Especially in light of our recent #RecodingGood discussion on philanthropy in democracy, I think Rosenman raises an important issue - there is a value to the sector itself that is lost when we focus on the instrumental and individual outcomes of each enterprise. Colleges are an interesting example  - perhaps no other field has been as fraught with the need to "justify" its value than that of liberal arts education. At the same time, the most well endowed and longest lasting (i.e. sustainable, in today's philanthropic parlance) institutions in the U.S. are not-for-profit liberal arts colleges and universities. Colleges are also an interesting "test case" for this scorecard use of public data as there are countless other "Best of" lists of colleges, geared toward almost every conceivable point of view and measures of value.

But the most interesting thing about the scorecard - in my opinion - is that it puts for-profits on the same footing as nonprofits and allows them to be compared on equivalent data. What could be a clearer acknowledgement that we are in fact operating in a social economy - in which every type of social good from education to healthcare to eldercare to cultural expression to volunteer mobilization - is available from either a nonprofit or a commercial enterprise or a hybrid of the two? This is the key "reality check" for nonprofits - in most cases they no longer are the sole purveyors of the "good" they provide. Rosenman argues that comparing nonprofits to each other on the basis of their individual outcomes is bad for colleges and bad for nonprofits - but his article misses the bigger picture - college education is not just a nonprofit "good" anymore (if it ever really was).

What is particularly notable about the scorecard is that it reflects the reality of higher education choices. Unlike any of the dozens of nonprofit comparison sites or ratings agencies that have emerged over the last decade, from GuideStar to GiveWell, the scorecard reflects the real choices we make when it comes to using our private resources for public good. We are choosing among different kinds of providers. Whether we are a potential college student or a large foundation seeking to decide whether to make a grant or an investment we are comparing enterprise options in pursuit of a mission.

The Scorecard's use of comparative data is what others are seeking when they ask, "Why can't we mashup impact investing flows with philanthropic grants, or see social enterprises and nonprofits on the same map?" The Department of Education accomplished this because it provides revenue  - student loans  and federal funding - to all providers. Those dollars then became the data that the Department used to reveal the real landscape of college choices. Health care, conservation, arts and culture, international aid - all can be shown this way (and probably will be, very soon).

More so even than Rosenman argues, this reality requires that we consider the value of an independent sector, an associational and expressive space. We use many types of institutions to support our desires to assemble and act as private citizens for a public interest, separate from the market and the government. It is no longer reality to describe this "space" as the nonprofit sector, for those shared public interests that have long been provided primarily by nonprofits are available from a mix of vendors. In some cases, the nonprofit vendors will be deemed to provide greater value (see my post on the College Scorecard comparing Yale (a nonprofit) to the University of Phoenix (a commercial college). In some cases, they may not.

But that won't answer our question - what is the purpose of this independent space? Does democracy need a space separate from the market and government where people do things together for their own definition of a public benefit? I think the answer is absolutely yes. But we shouldn't conflate the need itself with the most familiar provider of the need. We need ways to act together as individuals, free of market or government pressures, using our own resources in pursuit of shared public interests. While this has been the primary purview of philanthropy and nonprofits, it isn't anymore. It is the realm also of social enterprises and impact investors, crowdfunding and informal networks, B corporations and flash mobs.

The new constellation of actors providing these shared social goods already represent new forms of enterprise and new rules and regulations to guide the use of private resources for public good. I don't think we're done yet. We will see more enterprise forms emerge, we will need modifications of the forms (nonprofits) that we already have and we need, as Rosenman argues, to think about the value of the whole, not just the value of the pieces.


Phil Buchanan said...

Thoughtful post, Lucy. Thank you.
I also agree that Mark Rosenman's piece is important and should be widely read.

A few, hopefully not too random, or too disconnected, thoughts...

First, I think the data being put out on the scorecard the Administration is creating – regarding costs, graduation rate, loan default rate, average amount borrowed, and employment – should absolutely be widely available.

Every reputable and ethical college should make that data easy to find – and aggregating it centrally is great (although I am not sure it is as novel as Obama made it sound; my understanding is much of this data for many colleges is available elsewhere). Anyone deciding on a college should have access to this information: sadly, many who have attended for-profit colleges and universities, including many of our military veterans, have been lied to about this information by recruiters, as has been well documented.

Second, I don’t think making this data widely available need necessarily suggest nor imply that it is only the economic value to the graduate that matters. Data should inform decisions, not make them. I attended college almost entirely on loans and institutional grant aid – my expected contribution was what I earned working during the academic year and during the summers. But I did not make my college choice solely on economic grounds, although I was well aware of all the data.

So while I agree with Mark that economic return should not “be the exclusive or even the principal measure of the value of a higher education” I don’t think that the Obama initiative, as I understand it, really suggests otherwise.
Rather, it suggests that this information should at least be easily available so it can factor into a decision.

Third, I think it’s important to remember that there is nothing new about for-profit higher education institutions – although they certainly have proliferated since the early 1990s when, as I understand it (correct me if I am wrong), it became easier for students attending for-profits to receive federal aid. So I question the notion that the scorecard is some kind of wake up call for nonprofit institutions, which have, after all, been operating in an intensely competitive environment – with each other and with for-profits – for some time.

Fourth, to that point, the available evidence would, I think, suggest that it is the for-profit institutions that stand to lose if the truth comes more fully out about the low graduation rates and high indebtedness of so many of their graduates. I think where we differ, Lucy, is that I believe nonprofits are generally better at providing certain kinds of services – like education and health care – than for-profits and that there is a fair amount of data and research to back that up, some of which I allude to here.

And there is also the simple logic of the fact that philanthropy allows nonprofit colleges, universities, and hospitals to provide services at below cost. This is tremendously important for those basics that provide a foundation for opportunity.

So my sense is we shouldn’t be concerned only with the potential loss of an “an associational and expressive space,” although this matters very much. We should also care about preserving spaces in which financial profit is not sought – spaces in which, to the greatest extent possible, it is mission, and mission alone, that guides our decisions. Will there be resource considerations? Of course. But, as I wrote in the post I reference above, there is a crucial distinction between an institution that reinvests surpluses in its mission and one that faces unrelenting pressure to distribute profit to shareholders.

I love free market capitalism and I applaud the “movement” – if that’s what it really is – to seek profits while also seeking positive social impact.

But I believe that nonprofits play a unique and vital role in this country.

Lucy Bernholz said...


Thanks for chiming in. I appreciate your taking the time to elucidate points 1 - 3, all of which I agree with. And I agree that the current state of the field is such that the data on the scorecard does make for-profit colleges look worse than nonprofits. There is, no doubt, an important political backstory to the choice of data used and the timing of the release - just as there is a long history of "justifying" a liberal arts education there is a loud, recent history of distrust of for profit colleges, many of which seem to be doing a far better job of accessing public funds than of educating students.

And I agree with the need for an independent, associational space - free of profit and free of majority-rule politics. That is the value of civil society. I don't mean to imply that the growth in hybrid or commercial business models, or that a comparison on "value" or "Values" or that any form of "free market competition" within the "social good" market is going to make it easy to determine which goods are better provided by nonprofits and which by other enterprise forms. I don't think it's that simple.

I do think that we need to recognize just how these services and products are produced and delivered and recognize the value of each kind and don't make rules that don't unfairly favor one over the other unless there is a clear, stated, majority-supported policy agreement about why we are doing so.

I also think that the frames we've been using to distinguish "private resources for public good" from commercial and public sector is getting harder and harder to distinguish and the enterprise form itself - the 501 c 3, nonprofit, tax exempt organization - may not be the best, only, or sufficient enterprise form to ensure we can continue to work together as "private citizens for a public interest" It works well for some things and less well for others. Our nonprofit - as represented by the scorecard and Mark's problems with it - is not always seen as associational and expressive - in the scorecard's view it is simply one of two "distribution channels" for publicly financed AA and BA degrees...We might not like that perspective, but that's what we've got

Thanks again