Episode notes:

• Follow Kristen on LinkedIn

• Learn more about Lever for Change

• Get the full story on Dr. Sam Tsemberis & the Housing First movement

• Check out the MacArthur Foundation’s 100&Change Challenge

• Get inspired by Sesame Workshop

• Explore Lever for Change’s Bold Solutions Network

• Read about Lever for Change’s $1 billion goal

Transcript:

In 1992, Dr. Sam Tsemberis introduced a new method for addressing homelessness in New York City. Up until then, programs focused on treatment compliance. People with mental illnesses or substance abuse problems couldn't access housing unless they engaged in treatment first.

But in talking directly to people experiencing homelessness, Tsemberis found that treatment compliance-based approaches weren't working for them. They said they needed housing without contingencies. That feedback led to the creation of Housing First, a new approach that aimed to get people into permanent housing as quickly as possible without asking them to jump through any hoops.

Sam and his team faced a ton of doubt. Some people said he was delusional to even try this approach but that didn't deter him. Good thing because in the end, Housing First proved to be an incredibly effective way to address homelessness.

In fact, studies show it's about twice as effective at keeping people in housing over the short and long term compared to traditional methods. Plus, the stability ripples outward. It soon became clear that Housing First reduces other metrics like ER visits and incarceration rates.

Today, cities all over the world use a Housing First approach to address homelessness in their communities. The success of the program begs a much bigger question for philanthropy, who exactly gets to define a problem and its solution?

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Welcome to Impact Audio. I'm your host, Sam Caplan, vice president of social impact at Submittable. Today I sit down with Kristen Merlino, vice president of program strategy and learning for Lever for Change. In her role, she tackles the big question of who gets to define a problem and design a solution. Five years ago, she helped launch the 100 and change challenge for the MacArthur Foundation.

The challenge aimed to move money on a much bigger scale than had ever been seen before, $100 million to one organization. And rather than donors imposing solutions, the organization got to be completely self-directed and how they used the funding to address community needs.

At the beginning, I was a little bit nervous and had some reservations about giving $100 million grant to a single organization but it ended up being an incredible experience. Both giving organizations a chance to think big and blue sky think and what would you do if you had the resources at your disposal to do the kind of work that you want to do in this world and solve the kind of problems that you want to solve.

And not only were we successful in launching that challenge, getting a huge amount of interest from all sorts of donors who said, Oh, this is great, what else did you get? Did you get anything in health? Did you get anything in these other areas?

It was such a huge success that we ended up from that, spinning off Lever for Change or creating Lever for Change. And really, the impetus behind it was our board and others came to us and said, we feel like this is a tool.

Using the challenge model is a tool for all sorts of donors who want to move larger amounts of capital but maybe don't have the staff, don't know how to vet organizations, aren't quite ready to create a foundation yet but are looking to move more dollars, bigger dollars, larger amounts of money to solve the problems of today. And so we embarked on creating Lever for Change to do just that.

The size and structure of the 100 and change challenge was a big departure from traditional grant making. This was part of the appeal for Kristen and her team.

I think it might be one of still, the single most largest grants in history. And that was another reason for why we were doing what we were doing. The average grant size is $50,000 over about an 18 month period of time.

And while all donors and philanthropic entities have a desire to do really big things and make a really big difference, it's very difficult for organizations to have impact when they are on an 18-month grant cycle, fundraising every few months because they need to cover payroll, they need to cover their expenses or project related work, their overhead, et cetera.

And if organizations are kept in that cycle, it's really difficult for them to make change in the world. You can't solve homelessness with $50,000 in 18 months. It's just not possible. So we thought, what would happen if we gave organizations the runway not only to do the work but to not have to focus on fundraising every step of the way.

To provide them an opportunity to think big. Again, blue sky, what would you do if you had the resources to be on the ground for five plus years with funding and to be able to pivot and adapt and learn. Like giving them the time and space to say geez, this didn't work.

Let's pivot to something new. Let's try something different. Let's take what we've learned and shift our programming a bit. So we really wanted to give organizations a different type of opportunity and so that was really what was behind the 100 and change challenge.

Kristen and her team found that decades of short grant cycles had not only limited organizations resources, but had constrained their thinking as well. They were so stuck on the hamster wheel of chasing funding they rarely had the chance to stop and consider the bigger picture. The challenge gave teams an excuse to do exactly that. They had to imagine what they would do with $100 million. And even for organizations who didn't win, this exercise was transformative.

When you actually give people the space to take a step back and really think about their strategy, what we've found over and over again, is sometimes--

I'll admit, sometimes organizations, say this is a lot. It's a lot for us to do on top of our daily work, right?

Going through this process, thinking about this at a large level, rethinking our strategy or really pushing on our strategy during this process but at the end of the day, it made us a stronger organization. It gave us a reason to have those meetings. It gave us a reason to have those conversations internally or with our board or with our other funders.

And in some cases, organizations have come back to us and said our board of directors was so impressed with this new plan that we put together that they are more excited about going out and helping us fundraise and have been more successful with fundraising, right?

It didn't just energize the few people that may have been on the project or were working on that proposal but it really rippled out through the rest of their organization. And, of course, every organization's experience is going to be different with that but we have heard repeatedly, that it gave them a space and an excuse to take the space in order to do that thinking.

As much as Kristen and her team wanted to free organizations up from short grant cycles, they also wanted to shift the traditional funder grantee dynamic. Because when donors dictate the solutions, we sometimes end up with things like housing programs that perpetuate homelessness.

What we said was when we ran this challenge, we don't want to prescribe the problem. We don't want to prescribe the solution and people said, you're crazy. How are you going to run a challenge and compare these organizations that's apples and oranges to one another. But the idea was, you tell us what those problems are.

You define the problem in the way that it is important to you and your community, not how we define it as you know philanthropists and an institution and you tell us how you think it can be solved and the partnerships needed and the kinds of people that you need to have at the table in order to solve that problem and the types of programming that need to get you there.

And what we saw were organizations taking a step back and saying, nobody's really asked us to do that before. We're so used to philanthropists telling us exactly what they're looking for or donors telling us exactly what they're looking for and then us having to fit into that box but this is a completely different experience.

And for many, the feedback that we got was it an opportunity for our organization to take a step back, to pick our heads up out of the weeds and say, what is the impact we really want to have? What is it that we really want to see five years down the road and how do we really think we're going to get there, not as defined by some external donor and their specific agenda or strategy but by our own strategy and our own solution and what we think it's going to take within our community to get there.

And we heard over and over and over again from many organizations and we've heard it over and over again with the 12 challenges that we've run to date that it was one of the first times if not the first time an organization was asked to do that.

And so for us, that was both eye opening and exciting and it showed us an opportunity to shift the dynamic and the power dynamics between organizations and donors and really flip that on its head and say, you tell us. We shouldn't be prescribing the problem and solution. You know better. You're the ones out there doing the hard work every day so you tell us what that should look like.

Letting the organizations lead the conversation opened up possibilities whereas a donor-directed approach tended to hem them in. Right away, Lever for Change saw a distinct difference in how teams were building solutions.

I think what we saw that was different were organizations who were proposing to us what the problems were in their communities or in their sector of work and solutions that were not pushed into a box with very narrow parameters, right?

So with all the intention and good intentions that we have as philanthropists, right? And I'm part of that larger cycle having been a program officer at the foundation and even prior to at a different organization.

We go out, we set our strategy. Oftentimes, it's in a black box. We bring in academics, we have all sorts of consultations and we say, geez, where we think we can have a real impact in the field of education is if we focus on after school programming for adolescents to get their problem solving skills and critical thinking skills increased and ready for the next level of university or something, right?

And that's great but then you're then you go out and you look for organizations that fit in that box, right? And you say, this is what we're trying to solve, can you help us solve this problem in this way with these types of strategies.

And that's great for a certain type of making but what it doesn't allow is the kind of cross-sectoral, big picture, complicated messiness and complicated solutions that might have pieces of leadership, and education, and advocacy, and the technical work around evaluation. All of those pieces rolled up into it. Instead, it tends to bifurcate organizations and they have to focus in these siloed ways in order to have impact.

The Lever for Change team has seen, firsthand, how this systems level thinking can transform an organization. Not only does it shift their internal operations, but it puts them in conversation with a broader coalition of partners. In short, it gives them a real seat at the table.

Sesame Workshop is a perfect example of this they received. They first $100 million grant in our challenge in partnership with the International Rescue Committee. They received $100 million to support displaced Syrian families in the MENA region. Specifically, Iraq, Lebanon Jordan and in Syria itself.

And that organization has--

they've been--

the thing that I think is exciting about giving longer term grants over time that are large enough for organizations to staff up and to learn and to pivot is that it also provides them the opportunity to be at the table and in the rooms where decisions are being made and build trust at various levels of implementation.

So whether that's the local community level, whether that's the local government level, the regional government level, the country government level, et cetera that after a couple of years, they start to see real gains in their ability to move some of their work into a more systems based approach, right?

They're partnering now with government, they're partnering with local schools, they're partnering in these spaces and in these ways that they wouldn't have been able to necessarily do before. It would have been much harder because they weren't at that table year after year after year with consistency.

And I think those are the kinds of opportunities that we're not allowing organizations to realize when we're keeping them on these short grant cycles with limited funding or not funding overhead or not funding their advocacy efforts, right? And so giving them that runway really made a difference in the way that they were perceived within the space and the opportunities that came into their purview because they were there.

Seeing these outcomes makes Kristen and her team think beyond their own work. They hope to inspire more donors to get creative in how they get funding into the hands of the organizations who need it most.

We're trying to shake up philanthropy a little bit and move the needle and create more innovative ways and more equitable ways for organizations to access funding. Do I think that, for example, running a challenge is the one and only tool that donors need to use?

Absolutely not. I think it's one tool in the tool chest of things that you can do as a donor, whether it's a large institutional donor, a family foundation, or an individual. But I do think that there is a place for this kind of big thinking within various portfolios, right?

And I look at some of the foundations that we've worked with. In particular, the older institutional foundations who've just said, we don't have the staff capacity to run an open call or we want to service organizations through an open call but it's a lot of effort. It's a lot of work to do it and to do it well and to give organizations feedback and to make sure that it is meaningful enough for organizations to want to participate.

And this is one tool that allows the organizations to do that. Running a challenge allows organizations who maybe wouldn't ever be able to get a foot in the door anywhere else or in any other way to a foundation. This allows them that opportunity.

So I hope that it shifts, at least, the field into providing more open opportunities for bringing ideas forward in ways that can get on the desks of program officers without them having to figure out how do I meet a program officer at a conference and then get a proposal on their desk, right?

It's all very cloak and dagger sometimes I think it feels like to organizations. But this is a tool to do that, right? It's a tool in the tool chest and I think that it's an opportunity for donors to have this as a part of their portfolio to think differently about what they could surface and what they could do if they made one larger grant, right?

It doesn't have to be 100 million. I know that is outsized and definitely abnormal for the field but even a $1 million grant to many organizations is outsized for what the average organization is getting. And so there's a large spectrum from 1 million to 100 million.

As exciting as it is to get that much funding, the reality of it can be a bit overwhelming at first. Expectations are high. Kristen and her team really focus on trust and flexibility. They want to give organizations the runway they need to create transformational change and sometimes, that means finding answers along the way.

For some organizations, it's a little bit like, Oh, it's the dog that caught the car, right? Like, Oh, we have to make this happen now. We just received $100 million, how do we implement, right?

Because you put all these great ideas on paper, but then you really do need to take that time to go, OK, now we have to make this happen. And so I think it's a range of emotions from incredible excitement to panic to OK, we've got to do this and we're going to pull together as a team and do it.

And then I think one of the things that we really pride ourselves on and working with donors to instill this idea that it really is about getting out of the way and letting the organizations do the work and being there as a support and being there as a sounding board but also trusting in them that they are closest to these problems and closest to the work and they know how to best pivot and have the impact happen.

And the more you can build that trust relationship, I think organizations are more comfortable coming back to you and saying, this didn't work and we've got to change paths here and we've got to change courses. And I'm a firm believer as having been a former teacher that we learn far more from our failures than from our successes.

And we don't make enough space I think, oftentimes, in the philanthropic world to talk about those failures because A, those failures are important. If that didn't work, then let's not invest in it in the future but let's invest in what is going to work.

So giving organizations that space and not kind of marching them down. Oh, this is what you said the implementation plan was going to look like and now you're saying you want to change it you know and That doesn't seem to make sense versus saying, no, these organizations know what they're doing. Let's go on that journey with them and build that trust and move together.

I think that that's the kind of--

once you can build those relationships, I think then that fear goes away of Oh, gosh, we've got to make this happen and it becomes more like, this is a donor that's in it with us and we're going to do it together and that's an exciting place to be.

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More details are coming soon so please stay tuned. Now, back to the episode.

As essential as trust is, it's also important for donors to reconsider how they think about innovation in the nonprofit sphere. Risk is part of the equation and too often, nonprofits aren't given the latitude to take real risks.

This also comes down to how donors think about risk, right? And donors particularly, I would say, donors that have maybe made their wealth in venture capital, right? There's a whole host of risk that's associated with venture capital but what we see is that those donors, they're more comfortable with that type of risk and it's probably because they understand it more that that's like their world, right?

Of what risk is and what it looks like and how do you assess it and then you're like, Oh, well, if I have three out of five things fail or three out of four things fail but one thing doesn't fail, right? Then that's an acceptable amount of risk.

And with nonprofits, we just see that there's a much more heightened sense of what risk is. And I think part of what we want to push on is, well, how are we looking at risk?

Is risk just the budget? Is that what we're talking about or are there other ways to think about risk? Like who's leading the organization? Who's on the board? Is it representative of the communities that they're trying to support? Whose voices are at the table?

Are foundations and donors really listening to the communities in terms of what they want and what solutions they need, right? Or how are you building that into your processes? So there's lots of different ways to look at risk and how to think about risk and where the organization sits in that space of risk than just looking at, well, they didn't have a budget.

And there's a lot of startups out there that have been given a lot of money, right? And are able to figure out how to deploy it and how to deploy it effectively and whether that's startups like Lever for Change. We received startup funding and we figured out how to deploy it and staff up and get ourselves to be a fully functioning organization and there's lots of other organizations out there who have done that successfully and some who haven't.

But to just base it on one thing, which is the size of the budget I don't think is fair to a lot of nonprofits, right? I think there's a lot of great ideas out there who just--

they have not been able to get their foot in the door to the right donor at the right time as we donors are often constantly under strategic review.

So even if you do find your way to the program officer at the foundation, chances are you might hear, we're in the middle of a strategic review. We're actually not funding this kind of work anymore type of response, right? So I think there's a lot of ways to think about risk and to think about risk mitigation but just looking at the budget I think is not the end of the story.

Lever for Change has gone all in on challenges but that's not the totality of what they do. They're also building an ecosystem to better connect donors with community organizations. That's why they created their bold solutions network.

We're really trying to leverage all of the work that these organizations have already done to get organizations funded, right? So we help donors design and run challenges to give away $10 million or more in funding.

Obviously, when we do that, we surface a lot more things than that particular donor can fund and we have a set of finalists at the end of every challenge, some of whom get funded, some of whom do not. And so all of those finalists and those top performing organizations go into our gold solution network and through that network, we continue to raise their visibility.

We try and amplify the work that they're doing through social media and other avenues. We get their organizations in front of donors and we continue to provide these ongoing organizational technical supports. With getting their work in front of other donors, on a regular basis, we're regularly having conversations with donors who are like, hey, we're a small Midwest foundation that works in these three areas, education, health and whatever.

Do you have anything that came in for education or girls' education that specifically in these states that we're interested or in these communities that we're interested in? Did you get anything from Uganda that's focused on health because we have a strategy in Uganda that's health specific, right?

So we have conversations like that all the time with donors and we're able to go into our network, find organizations that fit and map on to whatever it is their strategy is or what they might be looking for and then provide that application, that revised proposal, due diligence that we've collected, et cetera. We can provide that information so that we can help jump-start donors giving.

So for donors who don't want to run a challenge, they don't want to commit to that long a period of time, maybe they want to give larger grants but they're not ready to make a $10 million commitment yet, there's a lot of ways that we can help support that giving and provide them with a whole host of organizations that are compelling, they're impactful, they're ready to do the work and they've gone through a really rigorous process to outline some really strong ways in which they're having impact in their community and are ready to receive funding.

So we're happy to help donors do that and we're constantly doing that and we've actually already unlocked $1 billion in capital, which was our goal when we founded lever for change back in 2019 and we've reached our $1 billion goal in over half of that funding has come from this secondary market where we've shared proposals with other funders who have been looking for pipeline for their own funding processes.

The secondary market of funding is so important. To help organizations take advantage of it, Lever for Change provides resources and support to help teams strengthen their initial proposals.

We encourage organizations when they are in our process. Part of what they do is they work with a technical advisor for anywhere from 3 to five months to build out a revised proposal. We have a pretty short application process for Lever for Change challenges.

And then they work on a revised proposal if they're named one of the finalists and we set them up with a technical advisor and that's really there to be kind of a critical friend to ask questions and really push the team, right? On their implementation plan, on their strategy, their theory of change, et cetera. And one of the things that we have all of the organizations do is build in monitoring and evaluation funding.

And oftentimes, organizations don't have the money to build in robust monitoring and evaluation because if it's not included in their original proposal, it might not get funded. So we really encourage the organizations to build that in and give them some guidelines around what they should think about in terms of the amount of their budget that goes to that monitoring and evaluation.

Again, because oftentimes, these are donors that are making--

they don't have a strategy that's a specific strategy, they don't often have common indicators that they want these organizations to track, it's very much so aligned to, what is your strategy? What is the impact you're trying to see and then what are the indicators you think you need to be collecting in order to be able to track your own progress towards these key milestones that you've outlined?

So rather than us dictating that or looking over their shoulder, it's more about tell us what you're trying to hit and those milestones will have the technical advisors work with you to make sure that you're setting yourself up for success in that way and that you're going to be able to track against those milestones.

The other thing that we do is we continue to provide all of the organizations in our network with ongoing capacity building services on an a La Carte on demand way. And so we offer everything from strategy development, fundraising, storytelling, monitoring and evaluation, all different types of capacity building or organizational supports that they can use in any way that they want.

If they feel like it's something that their organization needs or needs support on or they just want a thought partner on they have access to that on an ongoing basis.

Over the past five years, Kristen has seen the pool of applicants evolve. The ones that stick out to her most are initiatives that are truly community-led.

We're really starting to see a lot more proposals from native organizations supporting native causes. So whether they're--

most of them are indigenous-led organizations that are focused on land rights or on entrepreneurship or building wealth within indigenous communities.

I think another one that I really enjoyed reading was organizations that were focused--

again, indigenous populations and Hawaii focused on keeping children out of the juvenile justice system, right? So like how do you prevent putting kids in prison? How do you create a new form of reform for those kids that is more rooted within the community?

And those are the kinds of projects that I feel are really interesting. And a lot of those organizations, one of the things that we are really pushing back on is this idea that small organizations can absorb larger amounts of money or can't absorb large amounts of money or are unable to they don't have the track record to show whether or not they're able to spend larger grants.

But a lot of that is that these are organizations have perpetually been underfunded, right? They're organizations that have been led by Indigenous people or they've been led by women or they've been led by people of color and they've been systematically underfunded for years.

And so it's exciting to see more and more of those organizations applying and it's exciting to see more and more of those organizations starting to get funding and rising to the top of the process and really showing that there is a whole host of those organizations out there that are ready to receive capital and how do we start getting more opportunities to them so that they can, again, as the people who are closest to those issues, really be able to get that money into the community and start putting it to work to solve problems within their community in ways that are really important and much more impactful than probably a lot of other stuff that we've seen in the past.

For organizations seeking funding from Lever for Change, Kristen doesn't recommend chasing the narrative you think donors want to hear. Her advice is a refreshing departure from the donor centric way of thinking.

The biggest advice I would have is be your authentic self. Tell us your vision. Tell us what it is you want to see for the world. Tell us the partnerships that you have in place. If there are new partnerships, let us know that just.

But be your authentic self and don't try to constantly assume what it is that we want to see or what the donor wants to see. We get a lot of questions sometimes but yeah, but what is the donor really want? And in most of the challenges or actually in all of the challenges that we've been running, the donor doesn't have a strong perspective.

They want to know what you are doing and what impact you want to have and how you plan to get there. And so I think that would be my biggest advice is don't worry about what the donor is looking for or wants.

Tell us your story and what it is that you plan to do in order to have impact. That's what's going to be compelling. Being your authentic self, telling us that journey that you want to go on and at the end of the day, what your vision for a better future is going to look like. That's going to be the most compelling thing that you can do.

Thanks for listening. We hope this encourages you to think about how you can be part of building bold solutions. Let's not be afraid to shake things up. To hear more conversations like this, be sure to subscribe to Impact Audio.

Later this season, we sit down with three organizations from Lever for Change's bold solutions network to hear from their perspective and what this approach means for their work.

Until next time.