I just read the Harvard Business Review article “Creating Shared Value” by Michael Porter and Mark Kramer (also here) and highly recommend it. (Thanks to Paul Shoemaker at Social Venture Partners for the tip.)
The article makes the case for businesses to create shared value – “policies and practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it participates.” In short, reconnect the success of a company with the success of its community in a way that goes beyond charitable giving and social responsibility. One of their example corporations, Nestle, has even snagged www.creatingsharedvalue.org for its own work.
The article focuses on how businesses and social enterprises are doing this, and touches on how government agencies and nonprofits need to re-think creating shared value with businesses. Porter and Kramer describe five characteristics of government regulations that encourage companies to pursue shared value. I think their list also applies to grantmakers and donors as they pursue more strategic and effective philanthropy. Here are Porter and Kramer’s recommendations with my quick takes:
1. Set clear and measurable social goals
Clear and measurable goals are watchwords for smart philanthropy. My experience is that most donors and foundations can do well on this point without creating complex theories of change, but most could be better at being clear to the public and potential partners.
2. Set performance standards but don’t prescribe the methods (leave the methods to the innovation within companies)
How refreshing is it when a funder focuses on the ends rather than the means, encouraging grantees and community partners to develop solutions based on their own assets and experiences? I have found this method of giving builds the most durable working relationships with grantees and can provide the most welcoming invitation for other funders and partners to co-invest.
3. Provide phase-in periods for meeting the new standards, allowing the companies time to develop and introduce new processes and products
Again, how refreshing is it when funders give nonprofits time to learn, adapt, and test new ideas? There’s no question that there are circumstances when a funder may want and need to incentivize quicker action in a nonprofit or a community. But I’ve found, as Kramer and Porter suggest, that the new standards and ideas will stick longer when nonprofits can adopt them in a timeframe that is consistent with their business cycles.
4. Establish universal measurement and performance-reporting systems and invest in the infrastructure for collecting reliable data
I’ve seen the power of shared measures across a set of nonprofits or even a group of foundations, and I remain a true believer in the idea. Coming to agreement on those measures and performance systems isn’t easy, but it pays off in terms of evaluation that’s easier for the nonprofits, their donors, and the public to understand. And Porter and Kramer are right to say that it takes purposeful and proactive investment to ensure the right data is available often enough for continuous improvement. The results-based accountability process and the software provider Social Solutions offer a couple easy ways to accomplish this idea, and I’m sure there are many others.
5. Develop efficient and timely reporting of results rather than expensive, detailed compliance processes
Again, a focus on the ends rather than the means. The best funders and nonprofits use these results as a basis for ongoing conversations about what’s working well and what needs changed – conversations that are more productive than long performance contracts and grant reports. I’d add the idea of “public reporting of results” by both the funder and the nonprofits, encouraging public dialogue (and even action) around issues that impede better results.
What do you think? Does this set of ideas around creating shared value translate to your idea of effective and meaningful philanthropy? Would this type of grantmaking be easier for nonprofits too?
Tony Macklin 
I’m don’t think that any of this is new. Its all custom and normal practice for the state govt for which I worked. As I read it I was thinking, how is this ground breaking or innovative thought in any way? We’ve been doing this for years…its how the state decides appropriations, and mandates strategies and goals for each agency. Seriously. Are you saying that the private sector has been so out of it that they haven’t been doing such basic tasks as those you’ve listed here? weird…
Erica – thanks for your comments. Glad to hear a state agency is working with shared value practices. My experience is that these practices are not common in the philanthropic sector, especially in foundation grantmaking.