Dude, where’s my client?

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One of the worst things you have to endure in graduate school is crappy IT services.  In order to be a functioning student – pay my tuition, register for classes, read syllabi, email – I have to log in to nearly a dozen different platforms.  Printers are a nightmare to configure.  Necessary software is often incompatible.  I’m not even sure how to get on the internet in some places.

Animosity towards the technical backbone of the school is practically universal.  Considering that students put forth a lot of time and effort to get something out of these degrees, not to mention a ton of money, you would think there would be more effort to keep us happy.  I began to think about how universities can get away with such poor client relations and concluded that the IT problem has to do with the unique model of higher education:

In.  Up.  Out.

With the possible exception of the umbrella-salesperson who seems to materialize out of thin air as soon as it starts raining, almost all businesses require repeat customers in order to survive.  The failure of a customer to repurchase a good or service is an indication it was provided inadequately.  This implicit feedback mechanism is one that keeps businesses on their toes, relentlessly focused on improving their product and keeping their customer satisfied.

Universities, on the other hand, have an in-up-out model that precludes this critical feedback mechanism.  Their core customers are the students, who enter the university, soak up whatever knowledge possible and then leap back out into the world.  Poof.  They are gone, they almost never come back, and the school no longer need concern itself with the pesky grievances those students had with wireless printer configuration.  Problem not solved.

(Some will say alumni donations can play the feedback role, though I don’t think this argument holds water.  First, when alumni make donations, they are not repurchasing the university’s services.  Instead, they are often actually donating to improve those services.  Second, they often do so under the misguided assumption that the university provided them with a service that helped them to succeed, when in fact it was either the simple act of getting that degree checkbox marked off or the illusory prestige that the top-tier universities have managed to preserve.  Either that, or they just want to support their football team)

The bottom line is that IT remains crappy because, with no expectation that a customer will return, there is no incentive fix it.

But worry not, because my experience led to a profound realization about non-profit management: the basic model does not inherently promote self-improvement because it follows the same in-up-out model.

Most non-profit organizations do not want return clients.  Some even define success by the rate at which their clients leave.  Think about homeless services: perfect execution would bring clients in, let them soak up whatever services they can (transitional housing, rehab, job-training, etc.), and have them leap back out into the world, never to return again.

But if you do not expect your client to return, how can you truly know whether or not you adequately provided the service?  Failure to return may mean that your client is off the streets and working, but it may also mean they have relapsed and are back living on the streets, having determined that your organization is useless.  You will never know for sure and you will never improve.

Hell, you may even use your useless non-return metric to raise money, claiming that all of your clients moved on to bigger and better things.  And this, in my opinion, is how donors got all crazy, paternalistic and problematic.  After years of funding in-up-out organizations with little or no tangible improvement in outcomes, they felt compelled to come up with their own metrics.

This is a welcome step, but the absence of standards makes it unsustainable.  Non-profits today are forced by donors to jump through hoops and maintain metrics that are often irrelevant to the organization and the context in which it operates, further straining their resources.

I am not sure what the answer is, but I am certain that it involves the client.  We must know where they go when they walk out our doors and we must find ways to get their feedback.

Thoughts?

Posted on January 24th 2010 in ideas

The awesome power of markets, ctd.

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As mentioned, I think the power of markets holds some potential for the public and social sectors.  Imagine.  Could a mechanism exist whereby funders, taxpayers and investors could assess the potential impact of an organization or program in real time and reflect the value and potential of that impact immediately?  Could there be a social stock market?

Durreen Shahnaz seems to think so.  She has tested many waters in her career, which includes time at Grameen Bank, the World Bank and Morgan Stanley, and now is the Head of the Programme on Social Innovation and Change at the Lee Kuan Yew School of Public Policy in Singapore.

Today, Shahnaz aims to develop an Asian social stock exchange.  According to her:

It is a stock market where investors who care about social and economic returns buy stocks and bonds of companies that have strong economic and social returns. Interestingly, in a social stock exchange both not-for-profit and for-profit companies can participate. For-profit entities can either issue shares representing ownership in their companies or issue bonds. Meanwhile not-for-profit companies can utilise the stock exchange to issue bonds an action in itself that can bring operational accountability to the not-for-profit sector (as opposed to carte blanch donations from foundations).

It is quite a compelling idea, and many iterations exist.  In Europe, there is the FTSE4Good, which measures the performance of companies that meet globally recognized responsibility standards.  The Canadian-based Green Stock Exchange allows trading in companies the exchange has deemed as promoting environmental sustainability.

There are still links missing between these models and the ideal.  The companies on these exchanges are pre-screened and, once listed, the investment criteria becomes the same old financial returns.  There is no opportunity to assess social impact in real-time and use it to make investment decisions.  It lacks that responsiveness that makes financial markets so powerful, that lets them weed out those who can’t deliver.  Investors must accept the potential for social impact from the assumed wisdom of the exchange gatekeepers.

And when the metrics are only financial, there is still that sticky problem of what to do when the solution has no price.  The impact may not be quantifiable in the company’s potential profits and we miss out on the chance to fund some good.

Brazil’s BOVESPA Environmental and Social Investment Exchange has thought of an alternative model.  They merely mimic the idea of a stock exchange, but attempt to replace financial metrics with social ones.  The listings are purely NGOs and funders can follow the impact and adjust their “investments” accordingly.

I like this, but why can’t we have the best of all worlds?  If the Benevolent Barons of the world want double- and triple-bottom line companies, then why can’t the social stock exchanges have two or three lines instead of one?

I can see it: an exchange with multiple lines, side-by-side, measuring the gains and losses in both social and financial terms.  We could then even run correlations, and have some empirical data on whether or not profit comes at the expense of social impact, and vice versa.  And if the thought of drawing conclusions from more than one metric (egads!) drives you into convulsions, there is no reason we can’t compress it into a single line that simply places weights on each component based on where the financier falls on the spectrum of socially-driven to commercially-driven investor.

That’ll do just fine for what I have in mind.  Any takers or makers?

Posted on January 19th 2010 in ideas

The awesome power of markets

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Ok.  I know its tough; markets haven’t exactly put their best feet forward in recent memory.  But leave aside for a moment the systemic failures and just think about what financial markets are able to do the majority of the time.

I came from a non-profit and social sciences background, and therefore had little understanding of financial markets before I began attending business school at NYU.  And I have to say that I am often in awe of what they do.

The power of markets lies in their ability to allocate capital to those institutions that would use it best (defined by returns in the world of finance).  What amazes me is how responsive markets are to the news of potential success.  If a rumor about the Apple tablet proves to be true, markets respond instantaneously, sending Apple’s stock price (NASDAQ: AAPL) streaking upwards in a fraction of a day before settling near a new equilibrium price that represents the product’s potential for increased returns.  Dell’s price (NASDAQ: DELL) may accordingly drop.  All of a sudden, Apple’s fundraising capacity has mushroomed.  It is able to attract even more capital that it can invest in its next cool doohickey.  And the cycle continues, as long as the market sees potential.

I imagine the potential for applying this to the social and public sectors.  A public school develops a new curriculum that proves successful in narrowing the achievement gap, or a government health agency makes a major breakthrough in the development of an AIDS vaccine, and funders are instantly drawn to the solution like moths to a flame.  The “stock” rises and, all of a sudden, there are financial resources readily available for these organizations that would use them best.  For training teachers on the curriculum.  For mass production and distribution of the vaccine.  For the potential to solve a problem.

In the markets, those who demonstrate the most potential become great institutions and those who don’t fade away.  We are left pining over what the Apple tablet may bring and quickly forget about those who failed before.

There is a powerful logic to this I find compelling.  Non-profits solicit funding; it rarely comes to them, and many ineffective organizations remain afloat because they are simply able to find some funder somewhere.  We accept failed companies so that we can have iPhones.  Should we not accept failed organizations so we can have those that create real impact?

I am not yet finished with this thought…

Posted on January 14th 2010 in ideas

On names, and their ideals

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You would think that at some point during the five or so years I begged my parents to get me a dog, I would’ve had some name ideas stored up for the day they inevitably caved in.  But when I finally brought my 12-week old yellow labrador home, I had nothing.  After nearly two days, I settled on Ruby at my sister’s suggestion.  I had no idea that she had drawn the name from ABC‘s General Hospital, the soap opera she had gotten hooked on in those lazy summer days of high school.  As wikipedia informs me, Ruby’s character was a prostitute that, having grown too old for her profession, settled near family in Port Charles, opened a diner and grew to be “by far one of the kindest characters on the show.”

Some things draw inspiration and character from their names.  Others are named in the hope of creating some sort of ideal for which the thing might live up to.  Ruby did have a tendency to hump anything in sight, though we surely did not intend for her to develop such habits when we named her after a fictional prostitute.  She did, however, after many reckless years of running around on the streets, grow into the one of the kindest dogs ever.

Like Ruby, the idea of this blog existed long before its name.  I lingered a while before settling on the Benevolent Baron, which also like Ruby, came to me long before I ever pondered its origin, a mashup of the ideal of the benevolent dictator and the industrial revolution-era demagogues known as the robber barons.  As I think about it now, I am forced to reflect upon the ideal that it represents.

I thought of the robber barons because they conjured up an image of fervor to me, one of success at any and all costs.  I had hoped to capture and nurture that fervor in the pursuit of social and economic justice, not just rational self-interest.

And so I thought of the benevolent dictator, the ideal that we Western liberals created in our minds and placed aside for those days when we are particularly estranged with the slow, partisan, bureaucratic, political and sacrificial nature of representative democratic governance.  It is the image of an omniscient leader who, armed with perfect information and a proper conception of public interest, cuts through all of the bullshit and manages the books, solves problems and serves the people.

And so the Benevolent Baron came into existence, meant to be seen as an individual, armed with perfect information – about what social programs create genuine impact, about what benefits outweigh what costs, about the equity-efficiency trade-off – who could cut through all of the bullshit of politics, fundraising and data manipulation and serve the people with Carnegie-style greed.

The name, of course, is nothing more than an ideal, like equilibrium pricing or the efficient market hypothesis, or the first post I wrote in 2008 when I came up with it.  The ideal is difficult to fathom; there are too many uncertainties, too many tradeoffs, too many transactions costs, too many sticky things.  But it is an ideal worth looking up to.

The name may represent an ideal, but named things often have a stubborn capacity to evolve on their own, despite the namer’s best intentions.  I hold no illusions that the ideal can become real, or that this blog will always strike a harmonious balance between profit and welfare.  I can only wait and see what this thing grows up to be.  Hopefully it won’t prostitute it’s ideal for a little wealth.  And hopefully it won’t be too kind to those with good intentions but poor outcomes.

Somewhere in the middle there is a treat for humanity.  It’s time to go fetch it.

Posted on January 12th 2010 in ideas

Benevolent Thoughts

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It’s time to see what this is all about.  I am a Benevolent Baron, he who seeks to harness the power of the market to bring sustainable social good.  He, who is at once a capitalist and a socialist; individualist yet public servant; an entrepreneur, yet I have my boss: Humanity.

At the turn of the 20th century, there were men who changed the face of the world.  JP Morgan monopolized markets and fattened his pockets.  John D. Rockefeller amassed a personal fortune to rival gods.  They pursued personal gain with a fervor unknown in previous eras, with a disregard for public welfare unfathomable in democratic society.  They were the robber barons, and they won.

In the new century, the Benevolent Baron marches into the fray, infused with a similar greed, though not for money.  Not for fame.  But for social and economic justice for all.

The Benevolent Baron seeks to integrate capitalist ideas into the public and social sectors.  To ensure that aid organizations maximize the social returns on their investments.  To found businesses that solve human problems.  To tear down the ruthless ethic that has left far too many behind in the race for survival and joy.  To redefine the bottom line.

The robber barons eyed the bottom line as if it were an EKG on their own lives.  They rose and fell with the schizophrenic swoops of the market.  Yet the success and failure implicit in that bottom line has been of one measure, the easiest and most universal to mankind: numerical.  The Benevolent Baron embraces the numbers, yet applies a secondary measure.  A second bottom line, parallel to the first, measuring the social profit.

Admittedly, this is harder to measure.  Man became obsessed with cash only because it is so easy to count.  It is linear.  The second bottom line is multivariate, swaying from side to side, lurching upwards at times and falling freely at others.  Kicking and screaming, it struggles to break free from our traditional ideas about gains and losses.  It thrives in democratic debate, feeding off the individual moral and ethical codes of free thinkers.  The Benevolent Baron though has faith that the great equalizer that is the market can pin it down and chart it out.  We can redefine the bottom line.

Are you a Benevolent Baron?

Posted on August 7th 2008 in ideas
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