Disrupting Inequality

Needham Hurst Grey

By Needham Hurst • March 11, 2014

Cities are at the forefront of efforts to disrupt inequality. In our current national economy of winners and losers, where only 4 percent of those in the bottom income quintile make it to the top quintile, creating opportunity is a pressing need. Faced with growing inequality, mayors and foundations are partnering to create innovative programs and performance-based funding models to transform cities into platforms of opportunity for all residents.

But how do cities and foundations work together effectively? What are the best models to spark innovative, disruptive programs? At the eleventh Project on Municipal Innovation Advisory Group, we heard from more than 30 leaders from America's largest and most creative cities about their experiences during our session, “Disrupting Inequality through City Government and Philanthropic Partnerships.”

Here were our key takeaways:

  1. Collaborations, not workarounds. Historically, foundations have funded nonprofits to fill gaps in city services. Inability to scale impact has been the major barrier to this model, resulting in cycles of defunding and organizational stagnation. But as foundations turn to cities to act as platforms for new programs, both sides are finding the perspectives of local government and foundations difficult to reconcile. Foundations take a long-run view, have an appetite for risk, and are informed and constrained by their guiding missions. Cities, by nature of election cycles and competing stakeholder demands, are much less insulated from risky ventures and short-run performance expectations. Any city-foundation joint venture requires an understanding of these competing interests.

  2. Move beyond transactions by building long-term relationships. The default interaction between cities and foundations is frequently based on one-off transactions rather than building long-term partnerships. But big or small, transactions alone do not make it easy for cities and foundations to come together in an empathetic way. If there is no history of intentional partnership, the mismatched appetites  for risk  and stakeholder accountability mean that transaction-dependent relationships can often unravel when deal conditions do not meet expectations. Some strategies can help build long-run trust, like embedding highly skilled executives into agencies in crisis. For example, one foundation lent a executive to manage and improve performance at Baltimore’s “B’More for Healthy Babies” program, a multifaceted initiative aimed at reducing the city’s high infant mortality rate.  Cities can also be intentional about partnering: Philadelphia’s Community Action Agency transformed from a service provider to a coordinator, building a model focused on impact in the long run with philanthropic partners.

  3. Use cities as platforms for experimentation and collective impact. Breaking down silos to build an ecosystem of poverty disrupters is tough business. Given the right authority and resources, special innovation engines within city government can serve as the convener and experimenter. Models like New York’s Center for Economic Opportunity (CEO) or Philadelphia’s Community Action Agency were founded to act in just such a role. In New York, Mayor Bloomberg gave CEO broad powers to launch experimental new programs in collaboration with foundations and city agencies, which allowed the city to bring together New York’s diffuse constellation of philanthropic stakeholders in new ways.

  4. Take risks, but be honest about efficacy. Disrupting poverty requires iterating through new and interesting approaches systematically. At CEO, launching new programs was not the hard part, the hard part was ending underperforming ones. Each initiative was contractually obligated to meet performance metrics. If a project did not, it was cut. CEO used MDRC, a non-profit, non-partisan research group to perform randomized trials on many of its new initiatives, but also closely tracked outcomes in-house and through regular reporting.

  5. Scale and replicate through venture philanthropy. At CEO, successful programs and the evaluations studies were shared with cities with the aim of adapting them to new local conditions. New York’s Center for Economic Empowerment, a non-profit financial literacy program, is a good example of a city initiative that leveraged venture philanthropy to scale nationally. Using a competitive grant process through Bloomberg Philanthropies, cities applied to host the program. Forty-eight cities applied for five Bloomberg funded spots, while an additional seven cities found other funds to host the expansion. But scaling exact replicas of a model isn’t always effective: good scaling requires tailoring the model to new conditions. For example, as the Center for Economic Empowerment moved to Lansing, Michigan, they realized the Bloomberg’s evaluation metrics for New York had to be tweaked because mortgage debt is such a bigger issue outside of New York’s renter-driven market.           

So how should cities undertake this intentional partnership with philanthropy? Our presenters had a few recommendations on how to get started:

  1. Rethink how government money is spent (state, county, non-profit) and find ways to reallocate funds to incubate innovative programs.

  2. Develop an ecosystem of poverty-disrupting partners to catalyze the implementation.

  3. Start by connecting with philanthropic resources that are dedicated to local issues, like family foundations and regional funders.

Please read more about other session takeaways and challenges identified throughout the eleventh PMI Advisory Group convening by browsing our other entries here on Data-Smart City Solutions.