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Let’s not ‘make the most’ of Payment by Results

Tuesday, April 30th, 2013

There’s a lot of talk in the UK voluntary sector about Payment by Results funding and what it means for our work. While there is a certain amount of criticism of this approach to allocating government money, there seems to be a strong view that we should still ‘make the most of it.’  But doing so would be a failure to our organisations, staff and critically, those we support. This is why I’m saying “No” to PbR.

Dia del Nino happy boy
Not a happy blog. But this boy sure is. I thought you’d like him better than a  generic PbR-themed image.

Payment by Results is not just an imperfect system, with flaws like any other. As a way of distributing public money, it really falls afoul of every indicator of accountable spending and quality public service:

  • It emphasises action over impact
    Even Health Secretary Jeremy Hunt recently admitted this, after a GP told him, “Payment by results doesn’t separate results from activity,” highlighting a fundamental flaw of a system that pretends it can measure impact, by measuring ‘the actions that we think lead to the impact.’ The result, as with target-based funding before it, is that in order to maintain funding, funded organisations have to make sure that ‘they do enough stuff,’ rather than making sure they do it well.
  • It encourages manipulation and ‘gaming’ of its own criteria
    When salaries and costs become directly linked to being able to demonstrate particular numeric achievements, it shouldn’t be surprising that people start finding ways – with varying degrees of honesty – to demonstrate those numbers. This is an example of the kind of system that breeds the very behaviours that it claims to avoid, bringing out dishonest and manipulative tendencies in those who didn’t previously show them.
  • It undermines frontline workers’ ability to respond flexibly to complex situations
    The same doctor who called out Jeremy Hunt over PbR’s emphasis on producing activity rather than results, also said “We don’t have the flexibility to bring about the change we need.” This highlights that if, receiving money you have already done the work for (and effectively spent), is contingent upon certain pre-defined criteria, you simply don’t have the choice to put your efforts into something else, no matter how critical it may be. PbR takes away workers’ and organisations’ ability to make judgements about particular cases or situations that may require putting effort into something that they aren’t being measured against. It creates machines that treat every situation with the same ‘objectivism’ that ignores the differences between any two people or situations.
  • It crowds out smaller organisations, leaving only large scale providers
    By making an organisation wait until it has finished (and ‘proven’ that it has finished) its work in order to receive compensation, most organisations will be unable to compete with the large reserves of large-scale private providers. This means that contracts will continue to go to a few large-scale, for-profit, scandal-plagued businesses (SERCO, A4E, etc) and smaller community organisations will have no way of bringing their local knowledge and experience of local issues to play for the people in their area.

In brief, it makes it harder to know if good services are being delivered and if money is being spent effectively, while encouraging worse results on both fronts. This is why PbR needs to be scrapped, not ‘made the most of.’ We owe that to everyone who relies on public and voluntary sector services, and who will see those services turn into box-ticking exercises if we keep our collective mouth shut on this one.

If you agree, please add your name to the “Say No To PbR” declaration and encourage others you know to do the same!

PS – If you’re thinking, “yeah, sure, but what do you replace it with?” I’ve written a bit about an alternative approach here.

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Don’t bank on Payment by Results

Thursday, November 8th, 2012

…Still frustrated by ‘payment by results’ funding. Even more so when someone from Barclays bank decides to explain to charities how to make it work. Because it won’t, and we need to make that clear. Its costs will be significant, if we let it become the standard for public funding.

Diego Rivera w/ a monkey: better than payment by results

Diego Rivera w/ a monkey: better than payment by results

I’m going to offer David McHattie the benefit of the doubt and assume his recent piece on how charities should prepare for payment by results (PBR) funding was based on a naive pragmatism, rather than a more cynical attempt to make public services run more like the disgraced bank he works for.

There are so many fundamental and damaging problems with the Payment by Results model, that no one article could give them all the space they need. From crowding-out smaller organisations who can’t afford the financial risk, to encouraging exactly the types of ‘gaming’ approaches that target-driven funding has long-fostered, and ignoring the unpredictable complexity of social problems (that most funding regimes are guilty of), PBR is a powder keg for the voluntary sector and anything shy of an outright denouncement can only lend it a legitimacy it doesn’t deserve.

What McHattie has done is offered some seemingly innocuous steps for voluntary organisations to begin adopting the same toxic metric culture that has recently put his own employer into disrepute for fixing interest rates.

…Let me explain.

To start, for all of its claims of being ‘outcome funding,’ PBR is still target funding. But with bonuses attached.

Here’s why:

  • An organisation receives funding based on achieving its outcomes
  • Those outcomes are measured by outputs – ‘x’ number of ‘y’ achieved = outcome
  • The number of outputs deemed to represent the completion of an outcome are set in advance
  • Outputs set in advance, and required to achieve funding, are targets.

With this in mind, all the arguments against target funding continue to apply to this supposedly new system. PBR is no improvement on what has come before. The addition of bonuses – much like at Barclays and the other big banks – will only worsen the effects of older target-based approaches.

The core of what’s wrong with both the old and the new target-driven funding regimes, is what former Bank of England director Charles Goodhart called ‘Goodhart’s Law’; that when numbers are used to control people (whether as bonuses, targets, or standards), they will never offer the improvements or accountability they are meant to. David Boyle of the New Economics Foundation has gone a step further, arguing that such systems create worse results than not having them in place, as a range of dishonest means are inevitably devised by those being judged on their abilities to create particular numbers, to make sure those numbers are created!

If your job is on the line over the number of people who have received work-readiness training, you will find a way to make those numbers add up to what they need to, to keep yourself in a job. The training might get shortened, 1 full-day course might become 2 half-day courses, people might be counted multiple times for what are essentially the same efforts, those who are more difficult to reach will be ignored in favour of the easiest recipients. Whatever the definitions set, you will find ways around them. And so will your organisation.

When this happens, learning opportunities are lost, accountability is destroyed, and those who are meant to be helped become numbers to be gamed.

These problems are also reinforced by a reality many of our organisations struggle to admit: that we live in a world far too complex to be able to say in advance that ‘a’ will lead to ‘b’. Even in broad-brush terms this kind of organisational fortune telling is hit-and-miss, but when it gets taken a step further (‘this many ‘a’ will lead to this many ‘b’), we are truly taking the piss. We are giving ourselves (and those who fund us) false illusions of control over situations that are the emergent results of countless interdependent factors beyond our organisational reach, whether individuals’ family lives, the economy, or the communities they are a part of, to name but a few.

And if we acknowledge that we can only play a partial role in preventing even one former inmate from reoffending (to draw on McHattie’s example), then the rest of the PBR/targets house-of-cards comes crumbling down. The only ways to keep it standing are through luck or dishonesty.

And dishonesty has been a hallmark of similar systems at Barclays and other banks. The impacts that ‘bonus culture’ has had on the financial sector were made clear by the 2008 economic collapse; from the most local level, to the most global, bonuses incentivised not ‘better performance’ but a range of quasi-legal and outright fraudulent activity designed to benefit particular individuals, rather than whole systems.

This is an inevitable result of what Dan Pink describes as if/then’ motivators (‘if you do this, then you get that’). Whether as bonuses for individual bankers reaching sales targets, or bonuses for charities hitting targets supporting former inmates to stay out of prison, the results will be the same: more dishonesty, less accountability. The paperwork might tell us that ‘more is being achieved for less,’ but the on-the-ground reality will tell us otherwise.

Taking charitable advice from a bank is like taking health advice from a fast food chain, and our sector deserves better than to quietly apply the models that have brought so many problems to the rest of the world, to the practicalities of our own critical work.

Going along with PBR might feel like a necessary evil in the interests of those we serve, but we have far too much evidence to the contrary to honestly think that might be the case. This is a system that needs to be scrapped, not ‘navigated.’ The people we exist to serve deserve nothing less.

This is the 3rd in our unexpected series on the issues of Payment by Results funding:

Give Trust, Get Accountability

Bonzo funding: Payment by Results

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Give trust, get accountability

Monday, October 8th, 2012

In the last post, Paul Barasi took the recent government move towards ‘Payment by Results’ funding to task. Today we introduce a radical alternative means of achieving funding accountability: Trust!

Kittens: Better than 'Payment by Results'

Kittens: Better than 'Payment by Results'

‘Payment by Results’ is the UK government’s latest attempt to achieve greater accountability with how public money is spent. Or so they say.

In practice, they’ve decided to apply it only to certain questionable public services, but as Paul pointed out the other week, the Olympics, Trident, and recent wars will not be held to the same standards of ‘we pay you when you have delivered what you said you would.’

David Boyle’s powerful paper against the approach, demonstrates that it poses the very same problems as ‘target-based funding,’ encouraging ‘gaming’ of the system to the detriment of all involved. You lose honesty, you lose learning, and you lose the accountability the whole system was created for.

We’ve long used numbers as a replacement for trust – ‘you said you would do ‘x’ but how can I know you did it?’ By measuring it!

Which is kinda ok for some tasks, but in many others – let’s say you’re trying to measure ‘improved wellbeing’ – there is an infinite number of ways you can fiddle the definitions to make sure your counting ‘succeeds.’

But beyond this, even if the definitions were fixed (presumably by government, but by anyone, really) they would immediately fall afoul of the first rule of complexity: things change. Therefore, as Paul wrote in relation to women feeling safer walking around their council estate in at night, fixed aims – whether as ‘targets’ or ‘results’ – will fail to take into account many of the most important impacts of a project, because they weren’t specifically what the funding was meant to achieve. And thus their value is lost on the funding systems that help enable them.

Learning to trust each other again

So what’s the alternative? You can never sew up all the loopholes and opportunities to ‘game’ a system to someone’s advantage, so let’s go back to the drawing board and give ‘trust’ the opportunity to reclaim the space ‘numbers’ stole from it, way back when…

We don’t usually associate trust and money, but a lot of people have begun experimenting with the combination lately, as the shortcomings of compliance-based accountability are gradually becoming clear. Here are a few anecdotes:

In 2010 I met Paul Story in Edinburgh – an author who had maxed-out his credit card printing 10,000 copies of his novel, Dreamwords: The Honesty Edition. His business model? Give the books to people, in the streets, in bookstores, at events, with a request to a) pay for the book online if they liked it, or b) pass it along to someone they think might enjoy it, asking them to pay for it if they liked it. Two years on he’s just published part two of his series…

Also in 2010, Toronto Star journalist Jim Rankin gave five prepaid credit cards worth $50-$75 to five different homeless people, encouraging them to get what they needed. Two were returned to him, partly used; one was never used or returned; one was stolen; and one was partially used, but never returned. For the people with maybe the most reason to exploit Rankin’s generosity, these seem like pretty good results. Imagine the costs that could be saved by adapting certain elements of organisational homelessness service provision along similar lines?

The other day I discovered Mgnetic Music, who pride themselves on a business model for independent musicians that means not having to “sue your fans to make money from your music!” Their approach? Let people download your music and pay for it if they want to. If they like it, they might pay you. If they don’t pay, you still have a new fan who will likely support and promote you in other ways. If they don’t like it, they won’t pay and wouldn’t have otherwise. Let them make the choice – it’s a lot less hassle for you, as a musician!

Now these are small and far from perfect examples, but our current systems can only pretend to be working by digging their heads deeper into the sands of compliance measures that simply allow abuses to be more thoroughly hidden in endless numbers.

Trust-based funding?

A while back, Paul Barasi, Veena Vasista and I started exploring ‘Trust-based funding.’ While it never got past an initial conversation with a funder and another with a law firm working on public sector commissioning processes, we began to imagine it what it might look like at the different stages of the grant process:

‘What we want to support’ (Guidance)

  • Providing very loose definitions, perhaps starting from a ‘these are the things we definitely DO NOT want to fund’ perspective to weed-out those who are absolutely unqualified, without boxing those who might be qualified into terms they don’t fit

‘What you want to achieve’ (Application)

  • Jointly-developing means of demonstrating impact, to give funded groups a real sense of ownership over the process and a sense of responsibility to themselves, as well as those funding them
  • Not creating any direct relationship between what is stated initially and what is expected later, leaving room for changes and on-the-ground learning, as the most effective projects tend to do, but often have to hide from those funding them

‘What you are delivering’ (Delivery)

  • Recognising that funders and recipients are working towards the same goals and must hold each other to account throughout the process, helping create a relationship in which ‘funding’ and ‘delivery’ are seen as two equal parts of a joint-process, where both parties can constructively challenge each other, without retribution
  • Trusting people who have been through an appropriate application process to do what they say they will with the money they are given, offering support and connections, rather than oversight and one-way accountability

‘What we have achieved together’ (Evaluation)

  • Emphasising the qualitative impact of services, shifting the inclination from ‘box-ticking’ and ‘target-chasing’ by both parties
  • Assuming that recipients will spend their money appropriately, and asking them to provide the story of their work in whatever ways they feel best conveys its full breadth
  • Weighting valuable, but unexpected/unplanned outcomes on par with predetermined ones

We also added a further stage:

‘How those we support are better prepared for the future’ (Potential)

  • Ensuring that at the end of the funding period, recipients are better placed to continue doing good work, viewing the process as developmental, rather than simply about the fixed funding period

Putting it to work

What’s above is barely a skeleton of an approach, but no matter how much work we put into it, someone putting it into practice is going to have to stick their neck out if it is going to get a fair hearing.

Paul, Veena and I have put forward an idea, with a tiny bit of meat on the bones, but now we’d like to turn it over to you.
In this spirit of the guidance stage above, what we DON’T want is simply highlighting the things that could go wrong. These are largely no-brainers. The trust approach accepts that ‘things inevitably go wrong’ in any system, and with that in mind it is not worth perpetually trying to mitigate against them, by dragging down all the honest people to a ‘lowest common denominator’ compliance model.

So here’s the question for you:

What would make the idea we’ve outlined above BETTER than it currently is?

Looking forward to seeing where you might take this…

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Bonzo Funding: Payment by Results

Tuesday, September 11th, 2012

Paul Barasi spent eleven years developing the Compact – an agreement between government and the voluntary sector to help both sides work better together. But recent government plans to bring back ‘payment-by-results’ funding for services are about as far from a ‘more like people’ approach as you can get. Paul takes their hypocrisy to task in his first Concrete Solutions blog.

Raiders of the Lost Compact

Paul Barasi

Paul Barasi

The Compact was first conceived in a chat on a train between local activists and MPs and led to the 1998 agreement for ‘Getting It Right Together’ between the Voluntary Sector and Government. It eventually graduated to a more holistic ‘Compact Way of Working,’ yet could be buried to government officials singing ‘Never Mind the Cash Flow, we’ve got Payment By Results.’

Around five years ago, many local partnership relationships peaked with the emergence of ‘a Compact way of working.’ This approach transcended a Ten Commandments-style written declaration. It was about far more than just following the rules. It meant living the shared values like treating partners fairly; working together from the start on issues affecting the voluntary sector; and above all, trust.

Fast forward to the Coalition Compact and we can still hear such hits as “Social action over state control and top-down Government-set targets,” “Shifting power away from the centre,” “Equal treatment across sectors,” “Proportionate Risks” and that chart-topper: “Payment in Advance”. But recently the tune has changed; instead we are hearing “Retrospective payment” which will reward Efficiency through professional top down control and take us back to a More Like Paper approach.

But will the voluntary sector be able to match government professionals in delivering pre-set results on time and within budget?

And why should the voluntary sector have to play by one set of rules, when the lion’s share of government spending seems to have none of the same stipulations attached?

Games with results

The London Olympics taxpayers’ subsidy rocketed tenfold from £1bn – with results measured by what: 29 UK gold medals for £10bn? Number of unethical sponsors or school playing fields sold? Who decides success? Imagine if the voluntary sector tried to play by these rules!

Wars with inhuman results

Afghan and Iraqi wars were a snip for the UK at just £20bn. Who’d know they’d be no weapons of mass destruction – as if the 2m demonstrators, dismissed as misguided by Blair, had been any advance indication. Who bothered to define what success would look like: maybe keeping the human cost of liberation down below 300,000 civilian deaths. Who pays for failure?

Subs and planes

Or the hopelessly misnamed “Astute” nuclear submarine: just £1bn over budget and delivered 4 years late. That makes the £100m cost of the May 2012 U-turn on picking Navy fighter jets hardly worth mentioning.

(OK, our subs won’t know where they are without US navigation satellites nor could these launch the leased Trident ‘independent’ nukes without the Yanks, but hopefully the jets will be able to do u-turns and somersaults in mid-air before more of our cash disappears into thin air.)

Rewarding Government efficiency?

The Home Office could get paid on the basis of how many Brits are extradited to the US or how many decades this takes or how much it spends on legal costs to do it, or not to do it?

It’s not just officials getting bonuses instead of the sack, but would anyone trust either of these government departments to do their weekly shopping?

Thatcherite Retrials

The crude payment by results regime that government wants to impose seems a throw-back pre-dating even the 1990s. Back then the Department of Health was experimenting with Outcomes Funding for alcohol counselling which valued not just the number who achieved total salvation but the progress people made along the way. After all those battles over sustainability, not funding on the cheap (rebranded more for less), full cost recovery, unfair claw back, down-pricing contracts, is government returning to rip-offs like a supermarket displaying one price and charging another?

What counts in the community?

I remember one housing estate project which achieved the wonderful result of women no longer being afraid to go out after dark. It didn’t count, as government hadn’t included this as a pre-set target. I recall a street theatre group destroyed by funders making it not just perform but have performance targets, and board meetings, too. Or take a project for young volunteers who cleaned up the environment: they made lots of new friends, were more likely to volunteer again, and acquired skills and confidence to do new things – what a result!

Saying goodbye by shaking the crap off our feet

The dehumanising organisational culture of the Civil Service can’t even compare with the traditional voluntary sector, let alone new grassroots social movements, in terms of its understanding of what kinds of systems will help people to realise their potential and make change happen. Trust-based funding is the right way forward (more on this model to come). This way, funders accept an element of risk, knowing projects will fail, and trusting the intentions of those doing the work to do it with the right intentions and define their impacts in the ways they feel are most appropriate. Payment-by-results is a backward step and if government funding can’t pass the More Like People test, the voluntary sector should walk out, walk on.

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More Like People is an association of freelance consultants, facilitators and trainers, working primarily in the voluntary, community and campaigning sectors in the the UK and elsewhere.