Paul CarttarPaul Carttar will be officially announced today (April 7) as director of the Social Innovation Fund at the Corporation for National and Community Service. April 8th is the due date for the first round of proposals from entities that want to be designated as re-grantmaking intermediaries. These intermediaries will collectively distribute $50 million in Social Innovation Fund dollars plus a dollar-for-dollar or higher private sector match that they will bring to the program. Carttar talked with the Rick Cohen of the Nonprofit Quarterly on April 6th to share his perspectives on the Social Innovation Fund.

Carttar inherits a rapidly moving program to lead, the subject of lots of public attention and commentary, including some in the pages of the Nonprofit Quarterly (see here and here). But he’s no newbie to the concepts behind this program.

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According to his official bio provided by the Corporation, Carttar was one of the co-founders of Bridgespan in 1999, the nonprofit management consulting firm affiliated with Bain and Company, the prestigious for-profit global business consulting firm where he worked from 1983 to 1992. More recently, he has been chief operating officer for the Ewing Marion Kauffman Foundation (with a mission of promoting entrepreneurial success), Executive Vice Chancellor for External Affairs at the University of Kansas, Executive Partner with New Profit, a national venture philanthropy fund emphasizing innovation and entrepreneurship, and a Senior Advisor with the Monitor Institute, a nonprofit consulting group and self-described “think tank” helping “innovative leaders develop and achieve sustainable solutions to significant social and environmental problems.”

Carttar’s former and recent employers all have interest in and connections to the Social Innovation Fund: Bridgespan has a Social Innovation Fund Resource Center on its Web site containing tools such as “Diagnostics for Social Innovation” and, like the Monitor Institute, includes in its client list a number of large national foundations that could well end up as SIF intermediary re-grantmakers and nonprofits that might turn up as sub-grantees; and as a national venture philanthropy fund, New Profit could well turn out to be one of the intermediary re-grantmakers, and was the founder of the America Forward coalition which during and after the 2008 elections promoted the concept of a social innovation fund. As a result, Carttar is recusing himself from SIF decision making, but he brings a level of knowledge of the social innovation field to the Corporation for National and Community Service which he shared in responses to questions from the Quarterly below.

Carttar: From the outset, I’d like to make just two pretty simple points. One is that I deeply believe that the SIF (Social Innovation Fund) is truly a distinctive opportunity of our time to put in motion a lot of really, really productive forces within the nonprofit community and to accelerate progress of a sort that a lot of people acknowledge we need to pursue and achieve. And, the gist of that is creating this mechanism whereby the very limited resources of the federal government will be effectively leveraged to potentially drive really transformative change within our communities, especially low-income communities. The totality of my experience in the nonprofit sector, first of all, suggests that this is needed, it suggests that it’s timely, it suggests that it has been designed with great care, and that against formidable odds, it really presents us with the possibility of making something very productive and progressive happen.

Secondly, of course, I’m quite enthusiastic about the opportunity to have a level of involvement in this personally as director that would not otherwise have been possible. For me personally, that’s a very exciting prospect, but I say that very mindful of just the extraordinary number of people, both inside the government and outside the government, in philanthropy and the nonprofit sector and the social innovation, social entrepreneurship community who are really enthusiastic about this idea and, as I understand things, appear to be really deeply engaged in generating very creative proposals.

Cohen: What do you envision as the political realities that you’re going to have to deal with as the director of the SIF in this environment that’s pretty partisan and divided?

Carttar: I think the main thing to emphasize there, Rick, is that this is a complicated time politically.

The fact is that the SIF itself is rooted in the Serve America Act, which was arguably the highest and best moment for bipartisanship thus far in the Obama administration and there are a lot of factors that contributed to that. Certainly great leadership. The SIF from the get-go is an idea that’s been perceived on both sides of the aisles as one that has merit. We have also seen very strong explicit support from both sides of the aisle. Certainly, literally with Senator Hatch’s engagement, [and] Steve Goldsmith, though he’s not a member of Congress, [but] a well known Republican, who has been quite a significant champion for this cause. So, that’s for whatever the realities are, there is reason to believe that in this particular arena that there is strong support.

The second thing I’d say is that [SIF] represents a new way of the government doing business in terms of taking on a certain kind of role that really trying to leverage its resources and trying to be a catalyst for developments within the private philanthropic economy. We believe that the way it’s constructed, what it’s trying to do, will also stand the test of time. We understand why people have questions and some of those questions are just because of lack of deep knowledge. Other questions really go to questions around what is the appropriate role of government or what dynamics will it put in motion. We look very much forward to engaging anyone in a dialogue around the SIF and we’re confident that with the right kind of dialogue, even those individuals who are most skeptical about it will, first of all, understand it and second, that we’re confident that many of them, if not most of them, will be persuaded that this is something that’s really worth supporting.

Cohen: The structure of the SIF appears geared to nonprofits that have the wherewithal to bring private matching funds to the table. Nonprofits that have promising innovative ideas, but may be located in areas of philanthropic undercapitalization or are just simply not connected to foundations with that kind of matching money, might be out of the running [for SIF grants]. Doesn’t this make the SIF priorities subject to the private decision making of entities and particularly the rather opaque decisions of foundation regrantmakers that have the resources to devote the matching funds. How you would temper the potential private decision making, structural bias in the SIF Program to achieve public goals?

Carttar: Well, first of all, this question actually highlights one of the most distinctive aspects of the SIF, which is that it’s a public-private partnership. It really is the federal government trying to be a catalyst for effective private decision making. So, are there going to be nonprofits that are at least at the get-go less able than some others to position themselves for engagement in the Social Innovation Fund? I think the likelihood is, yes, that out of the gate that some will be. But a couple of things on that. First of all, starting with the NOFA, the other work that those who preceded me have done so effectively, and trying to get word out about the SIF, that a lot of things have been constructed with an eye toward casting as broad as possible a net. Awareness is almost always the first enemy, so, we’re trying to deal with that.

The second thing is that specifically with respect to matches and that sort of thing, we’re trying to provide incentives for the intermediaries actually to be creative and to look where they’ve not historically looked and so forth, which we have every reason to think will be effective. Now, of course, we haven’t seen the applications yet. There are a lot of rumors around this but my understanding is that a lot of intermediaries are working really, really hard to come up with very creative innovative proposals that drive impact.

We are also trying to address potential pools of matching resources separately that are not dependent upon a given intermediary or a given subgrantee’s connections to money. So, we’re hopeful that, and this goes back to the President’s original rallying cry nearly a year ago to some of the philanthropic interests, to be alert to provide matching capital to organizations that do participate in the process but might otherwise have some difficulty raising the matching funds.

The final and possibly the most important thing I’d say is that we’re looking to this to be a long-term build process and process of transformation. Ultimately, you’ve got to start somewhere with any type of change process. Is it possible that in the initial year or second year that there will be worthy nonprofits, who, for whatever reason, aren’t able to connect into the process? Absolutely possible, but, our expectation will be that however many there are the first year, there will be fewer in the second, there will be fewer still in the third, and ultimately [the SIF] becomes a vehicle for actually creating light around organizations that wouldn’t otherwise have access to these kinds of resources.

Cohen: A lot of our readers from smaller nonprofits might say [that the SIF is] something that we’re not going to be part of, because this isn’t geared to small nonprofits. How do you envision the SIF being relevant to the vast majority of nonprofits that are really quite small and that don’t have the kind of involvement with entities such as Bridgespan, New Profit, or the Monitor Institute [and] the kind of dialogues that have been held around the SIF? How do you reach out to those small nonprofits that are the bulk of the nonprofit sector?

Carttar: We would argue that far from the SIF being a problem for the small nonprofits, that we hope to be the solution for small nonprofits, at least [for] the small nonprofits that actually have, first of all, a program model that is able to actually drive discernible impact on the population that it’s trying to serve and, second, is able to actually demonstrate that and provide support to “prove it.”

Really the problem or much of the problem in the nonprofit sector right now is that if you look at the sheer numbers of nonprofits, the size distribution is just extraordinary. The vast majority of nonprofits in the U.S. are actually very, very tiny organizations. Some would say, and we subscribe to this, that one of the major problems in the nonprofit sector is not that there are a lot of little nonprofits that are created by people with great ideas and passion around social change. The problem is that after years and years of effort and toiling in the trenches and focusing on serving populations, even those that have actually demonstrated tremendous ability to drive impact are still consigned to being small subscale organizations because they don’t have access to a New Profit or a Bridgespan or whatever. So, one way to think about what we’re trying to do, is to democratize the funding market [so] that small organizations that actually are demonstrating real results can get access to financial support without having to know people. We think about how the world is different ten years from now. If we’ve been as successful as we think we can be, we can really develop the market, the capital market around funding results as opposed to funding stories, funding founders, university alumni connections, funding [a] CEO’s ability to weave a yarn to compelling foundations or what have you.

Cohen: In one of your published comments a long time ago, you said that 6 percent of the nonprofit sector consumes 80 percent of the resources. We aren’t surprised that you’re thinking in terms of resourcing the sector to [have the SIF help create] a more vibrant kind of capital market. But one of the issues for small nonprofits is to be able to show themselves as attractive to the SIF, [and to do that] they have to be talking about replication and scaling up. Is that correct?

Carttar: Well, a qualified yes. We’re looking for organizations that would want to scale up, but the reason for that is because we have a fundamental belief that there are significant numbers of nonprofits who are demonstrating really significant impact in improving the lives of real people, who actually have the wherewithal to scale up in the sense that their models would be applicable in a lot of other circumstances and hold the potential to drive significantly greater benefits to large numbers of people, but who, given the current configuration of the nonprofit funding market, just don’t have access to the resources that would enable them to do that.

So, certainly, we would say that if you envision two nonprofits of equal size, both of them have equally robust program models, both of them have the ability to compellingly prove their impact, but one has a desire and the wherewithal to really grow and carry their innovation and their effectiveness to increasingly large numbers of populations and the other doesn’t, then we have an interest in the first. It’s grounded in our desire to improve communities. So, there is absolutely a hugely significant underlying assumption in the SIF, which we stand by, that in communities all around the country, there are programs that are adding real value to people’s lives, which have the potential to benefit significantly greater numbers of people if certain things happen that right now don’t generally happen, and [that] awareness of the existence of these organizations, an ability to understand the greater value added that they provide, and the wherewithal to channel to them financial resources and other non-financial resources actually would enable them to grow and expand their impact effectively.

Cohen: How do you plan to overcome this bias that I hear from nonprofits that they don’t see the SIF is for them?

Carttar: The SIF hasn’t even begun its work. This Thursday, we get our applications. So, on one hand, I understand that the vast majority of nonprofits in the United States are very tiny, they work in relative isolation of one another, and they’re led by people who are fueled by passion and commitment for their cause and so, in that respect, this is a very lonely sector. We can all understand here that in that [nonprofits’] hearing about a program like this, especially with the speculation about who may be involved and that kind of thing could in the first order actually exacerbate their feeling of isolation rather than diminish it.

But, you know what? We’ve got to start somewhere and after next Thursday, we’re going to have ourselves a much better idea of where we stand relative to that test. Victory is not the first year of this. The first year of the SIF is just the first year. The Chinese proverb, you know, [is that] the journey of thousands of miles starts with a few steps. Where we are headed, though, is absolutely aligned with the interests of those nonprofits that are toiling out there in isolation but which have aspirations not to do so. They have aspirations to grow, to help more people, and they also have evidence [about] their ability to actually deliver these kinds of results. If they have those aspirations and results, then we are all about trying to find them.

Now, one point on that that I want to make absolutely clear too is when I say “we,” I don’t mean “we,” [just the federal] government. I mean “we,” the entire community that the SIF would ultimately engage and try to catalyze. So, what’s really remarkable, we believe, about the SIF, and this really bears understanding and really emphasizing, is that in part this is about what it’s trying to do, but it’s mainly [about] how it goes about doing it.

This is not about the federal government deciding what’s innovative. It’s not about the federal government finding that nonprofit we were just describing that’s small and toiling in isolation. It’s not the government’s job to find that nonprofit. We think the government through its limited amount of money [in SIF] has the ability of catalyzing communities and getting people’s attention and exhorting people to consolidated effort in a certain direction. We believe that the government has a really unique role to play here in actually putting things in motion that ultimately will enable intermediaries and others to find that nonprofit and to help it develop in very productive ways.

Carttar isn’t coming to the SIF job with the expectation that he has to read the files and learn about how to administer a standing program. He takes over to lead and craft a program that may be a bellwether federal initiative characterizing the Obama Administration’s strategy for resourcing the nonprofit sector, as he says, to build or create a new and improved capital market for building and expanding what nonprofits can do to help the communities they serve. Although in charge of the SIF, a relatively small program in the grand scheme of federal government resources for the nonprofit sector, Carttar’s mandate may be larger. According to the Corporation’s press office, Carttar has been charged to—or maybe he simply thinks he needs to—“build a model that other federal agencies can use to engage social entrepreneurs and innovators as well as building a learning community.” Many nonprofits might not see themselves as a likely or early constituency of the Social Innovation Fund. But if Carttar succeeds with his emerging vision, the Social Innovation Fund could broaden and deepen its constituency in the nonprofit sector and expand its impact as a model throughout the federal government for good or for bad.