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Pay for Success: A New Way to Solve Communities’ Most Costly Problems

January 20, 2015 | Jennifer Stoff and Oyinade Koyi, Social Innovation Fund

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Social innovation can be defined in many ways but essentially means finding new solutions to solve old problems faster, cost-effectively, that are rooted in evidence and lead to better results for the public good.

Social innovation can be defined in many ways but essentially means finding new solutions to solve old problems faster, cost-effectively, that are rooted in evidence and lead to better results for the public good. Here at the Social Innovation Fund, we are proud to be working with the National Council on Crime and Delinquency to help city and state governments tackle some of the country’s most pressing issues in racial and ethnic disparities within the juvenile justice and child welfare systems by using an innovative model called Pay for Success.

Government entities can sometimes be risk averse when it comes to adopting new and innovative methods of preventing social problems. However through Pay for Success, state, local, and federal governments can use evidence-based, evaluated interventions to at once solve social problems and save the government money from continually funding programs that don’t show results.

Here’s how it works:

A government entity identifies a recurring, costly, social problem, such as gang violence, for which an evidence-based programmatic solution exists. A service provider, using the proven evidence-based model, is selected to deliver services to the target community, thereby making a positive impact on that identified social problem.

External investors such as commercial investors, philanthropies, and community development financial institutions provide the upfront capital needed to scale the program to the jurisdiction, and undertake the risk associated with scaling and implementing a new intervention. 

The government, service provider and investor all agree on certain outcomes that must be achieved to constitute “success” of the program—such as a certain percentage of reduction in gang violence. These outcomes are, in turn, tied to government budget savings—for example for fewer youth in the juvenile justice system due to the reduction in gang violence. Once the program achieves these agreed-upon, measured results, the government repays the investor out of the savings achieved by the program.

The promise of Pay for Success is based on the notion that using evidence in policymaking is not only better for individuals on the ground—like keeping youth out of the juvenile justice system—but also better for government entities, at the local, state, and federal level. The Social Innovation Fund is committed to identifying and scaling these social interventions. We look forward to working with NCCD in the coming years to see this vision become reality.

For more information on Pay for Success, check out the Social Innovation Fund’s Pay for Success: A Primer for Social Innovators.

Jenni Stoff serves as Senior Program Officer at the Social Innovation Fund, a program of the Corporation for National and Community Service. Jenni works with innovative social sector organizations to scale evidence-based, impactful solutions to social and economic challenges like homelessness, education and health disparities and juvenile justice, through Pay for Success–a new approach to funding social services. She has served as Special Advisor for Social Innovation for the District of Columbia Government, as a Legislative Fellow for a US Senator Sherrod Brown, and the National Programs Manager of the Canadian Centre for Diversity. She holds an MPP from the Harvard Kennedy School and BA from Washington University in St. Louis.

Oyinade Koyi is the Communications Program Assistant at the Social Innovation Fund, a program of the Corporation for National and Community Service, where she works with government agencies and various nonprofits and foundations to communicate social challenges and solutions to the public. She has completed two AmeriCorps service terms with Public Allies MD and recently achieved her Master of Professional Studies degree in Public Relations/ Corporate Communications from Georgetown University’s School of Continuing Studies.