This research would not have been possible without The University of Wisconsin-

Madison and The University of York who collaborated for the first time on the

wider study of Social Enterprise and Innovation.

A special thanks is given to Sustain Dane, Community Shares and The Urban

League of Greater Madison for their involvement in managing the project and

involvement throughout the research.

How do Funders in Madison Support Social Innovation?

  2  

List of interviewees I was personally accountable for:

• Forward Community Investments – Salli Martyniak (President)

• United Way of Dane County – Sandy Erickson (Director of Community Impact) and William, H.

Monkeymeyer (Senior Director of Campaign)

• Wisconsin Women’s Business Initiative Corporation – Julann Jatczak (Vice President of Impact

Initiatives)

• Wegner CPAs – Scott R. Haumersen (Managing Partner)

• Urban League of Greater Madison – Kaleem Caire (President/CEO), Keetra Burnette (COO),

Peng Her (Project Director of South Madison Promise Zone)

• The YMCA – Cheri Buckner (Interim Financial Development Director)

• South Metropolitan Planning Council – Arvin K. Strange (Executive Director)

• WORT FM – Norman Stockwell (Operations Coordinator)

• Center for Resilient Cities – Cora E. White (Resilience Neighborhood Center Director)

 

  3  

Madison, WI, currently stands second internationally for containing the greatest number of non-

profit organisations per capita, behind California. Reasons for this thriving and competitive

industry is due to Madison’s affluence and Progressivism. Madison supports the non-profits

capacity due to the available resource in financial and human capital in additional to the local

resources available in combination with the social needs that require such a demand. Madison’s

Progressivism political position bears towards the left conveying greater socialist concepts of

living whereas the majority of Wisconsin follows strong traditional Conservative values that are

less likely to seek social justice above status quo prerogatives.

• US progressive market-orientated competition state: naturally transpires privately based

social initiatives to address social means indirectly from central government that creates

the networks and infrastructures for a larger non-profit/not-for-profit/third sector

economy to address the market failures and address social needs.

• UK market-orientated state has greater welfare delivery: since the 1950’s a welfare state

was established to address societal needs based upon Keynsian theories of supply and

demand however over time these have transformed into resembling US Competition

State.

• US and UK both displaying signs of welfare retrenchment: Post 2008 economic crisis has

deployed sever cuts in public expenditure and has resulted in increasing social needs

due to previous services and resources depleting, furthermore private sector has had the

most detrimental outcome from all the sectors post-2008.

• New ‘Localism’ Political agenda in the UK: Current UK trends are showing increasing

trends of privatisation whereby the government are encouraging non-profit involvement

and engagement to be accountable for delivering the increasing social needs while

previous national services retrench.

 

 

Three research associates from the University of York interviewed a total of 28

different funders and organisations for a 360 degree perspective to identify how

financial requirements limit and excel social innovations within the market the

place.

1. First task was to identify an agreed definition of social innovation within the team.

2. Secondly, understand how funders base their decisions and also how non-profits apply

for available finances.

3. A team of 4 additional stakeholders were involved in analysing and validating the findings

of the data.

4. After many discussions we narrowed down the selection of case studies to three main

organisations we thought were the most innovative.

5. We identified the key funding streams and gave an overview of the organisations financial

structure and how they were able to support their forward thinking innovative approach.

6. We discovered key themes that help explain how organisations succeed and adapt to the

new market. In addition, we identified key barriers to innovation and why organisations

face difficulties innovating.

7. To conclude the report we offered recommendations for funders and non-profit

organisations to collaboratively support one another in creating more sustainable

innovations within Madison, WI.

 

 

• Leadership and Approach

Leadership and vision are essential instigators within a team or individual that continually seeks new methods,

opportunities or processes of greater efficiency and effectiveness in line with accomplishing the organisational mission(s).

This is known as the Fresh Eyes perspective required to ensue social innovation whereby a team or individual is required to

be the visionary in the process to have a creative perception that breaks away previous preconceptions in order to see a

new order.

• Creative Destruction

A popular economist Joseph Shumpeter and his theory surrounding Creative Destruction is essential to legitimizing the

potential success of socially driven organisations and assessing the potential of whether organisational aspirations are

enough to renovate and remove pre existing service deliveries. The process of Creative Destruction is when a new

innovation becomes an accustomed norm within market infrastructure and capitalism. The micro-financing is an example of

how a new innovation 30 years ago has transformed the banking industry to internationally supply micro-lending to highly

risk-adverse citizens, a creative destruction pattern here conjures the ability to alleviate poverty to individuals who would

previously never be able to gain financial support due to negative equity and bad credit.

• Systematic Approach

Structural adjustments and adaptations evident in the organisation are key qualifiers for being identified as socially

innovative. If organisations apply the fresh eye perspective alongside creatively destructing previous methods of

operations this should transpire in a new way of addressing a social need that has not been considered before. Social

entrepreneurship is one socially innovating systematic approach to address social needs via alternative means.

T h e S o c i a l O p p o r t u n i t y

Social innovation will not be possible without the opportunity to address the social need that public goods do not meet.

The key three ingredients that help individuals create the foundation for sustainable social innovation is to identify the

social opportunity. To find a gap in the market where social needs are not being met. The social opportunity has to

contain all three of the following dynamics in order to transpire into an innovative market alternative.

• Social Need: Whether local, national or global, a clear social need is required to determine the social

purpose for the organisation and is the focal point of innovation.

• Financ ial Support: Nothing can be made possible without the capital to support and maintain any innovative

programme, this includes financial, human, cultural and social capital and everything in between depending

upon the resources required to aspire towards the aim.

• Creative Ideas: Encapsulated within the human resources that includes the leadership and expertise within

the team that encompass the visionary design elements to drive the initiative, to combine the resources

efficiently and effectively in order to aspire towards the innovating aims.  

W H A T I S S O C I A L I N N O V A T I O N ?

 

 

Relationships & Networks

Key to any organisations success is the social capital and human resources available, we are often told it’s not about what you but

rather who you know. This is significant for the success of a non-profit organisations and sustaining funding streams. Successful non-

profits require diverse funding streams that can be achieved by a wider network of affiliates. Furthermore problems arise with elitist

notions of networks and niche circles due to veto influence and autocratic control that larger funders often transpire.

Furthermore, the theme of relationships is wider encompassing and should also include how trusting the relationship between

funders and leaders/social entrepreneurs are, currently there is limited evidence of trusted expertise from funders.

Return on Investment in Double & Tr iple Bottom Lines

The measurement and undiscovered social metrics is, and can be an increasing social ill within the industry of non-profits as

currently many non-profits are struggling to quantify subjective social outcomes due the longevity required in attaining effective

results. Common market practice identifies larger funding pools providing financial assistant to reputable organisations who are

politically impartial and have been established for a long time. Often because smaller innovative organisations are more risk adverse

because of the lack of ROI, whether social or financial. Many small start-ups lack the resources to conduct on-going research of their

operations, to provide evidence for funding criteria. As funders require greater financial and social returns because of increasing

competition, this poses increasing beauraucratic and administrative obstacles that prevent SME from attaining the credibility to be

credit worth and expand operations.

Eff iciency & Funding Criter ia

Due to the nature of the current market in post 2008 organisations across sectors are expected to run more efficiently. The majority

of funding streams have decrease their spending in the past decade, hence the social need and demand for social services has

increased, subsequently leaving non-profit organisations needing to do more for less. Funders will therefore continue to fund

organisations that have shown adaption through economic retrenchment, good financial strategy and increasing or sustaining

services as before. Unfortunately, many have closed as a consequence. This has also increased the need for innovative approaches

in organisations structure. Ironically, funding streams are rigid and discourage social innovation from adapting to new markets.

 

Capital & Resources

Many organisations are struggling to expand or socially innovate current practices as current operations are restricted by lack of

additional funding and trust in human skills and leadership. Many organisations are operating at maximum capacity with limited

resources and within the last decade. Innovative productivity has decreased as most administration procedures are taken up with

business development and fundraising to sustain current operating expenditure to remain in existence and maintain current

infrastructures.

E M M E R G I N G T H E M E S

 

 

• Risk Adverse

Risk-adversity is a key barrier that discourages many funders to only fund organisations that show reputable causes for

marketing purposes and are likely to spend the money continuing medium or large scale operations, that are recognized to be

a success. SMEs are more likely to show signs of social innovation are least likely to be given the funding required due to the

lack of reputation and evidence to quantified results proving long term sustainability and demand for the service, which

renders them risk-adverse. Funders are unlikely to invest due to the financial risk in not knowing how and if financial returns will

occur, this creates barriers for funders wanting to be more experimental in social innovations as investors in social investment

organisations demand financial forecasts for their money. This attitude is typical of capitalists and is less than likely the

responsibility of non-profit funders.

• Limited Capital

A summery of all barriers can be succinctly defined by the limited capital that currently exists in result of the socio-economic

and political trends Madison-WI has experienced in the last ten years.

• Operating Funds

There exist a significant reluctency for funders to invest in operational costs to support the infrastructure (including staff, office

and basic resource costs) when investing in a social cause. Many funders are stern with a naive attitude towards non-profits

basic business requirements. Many non-profit organisations already operate with minimal operational costs and in many

instances social innovation can only be supported with the financial assistance to cover the costs of all required resources that

are unable to be accessed voluntarily. Many non-profits operate with basic resources and only those organisations that are

already sustainable will be likely to achieve funding for specific social innovations separate from core operations, however

these organisations are less likely to be socially innovative as the will incorporate any new innovations in line with their

organisations history.

• Competit ion

Post financial crisis all market segments have taken a financial restriction, many closures have occurred and this does not differ

within the non-profit sector. Those organisations remaining are struggling to meet the additional demands as their services are

being constrained. Many organisations now compete for the decreased funding available to sustain their core operations and

maintain their current services. With the restriction of available finance, this hinders all scope for innovation, expansion to the

point of innovation or further collaboration.

B A R R I E R S T O I N N O V A T I O N

 

 

 

Flexibility  in  investment  Expenditure  

W H A T C A N F U N D E R S D O T O

E N C O U R A G E

S O C I A L I N N O V A T I O N

• Incorporating Strategic Funds Through Mult i-Year Funding

Non-profits lack often lack the necessary financial expertise required to strategy long-term outcomes with the limited funding

granted on an annual or ad hoc basis. Funders can improve the sustainability of non-profits and social innovation by facilitating

multi-year funding, through dividing the gross donation or other means to aid the longeivity and successful impact of innovating

projects.

• Providing Flexible Expenditure

By increasing the freedom non-profits require to ensue innovative projects through incremental phases that often require a trail

and error approach will not stifle the time capacity or fresh eye perspective required to innovate. Providing flexible expenditure

can release burdensome administrative tasks concurrent that drain core administrative resources that take away from

progressing the social outcome.

• Investing in Trusted Leadership and Expertise

Funders can often know what’s best for those they invest in, there has to be greater tolerance in the trusted leadership and

expertise of those visionaries driving forward the social innovations within the non-profit sector. Greater respect to either

professionals should be acknowledged and more pronounced in order to achieve the greatest outcome for the social objectives

and facilitate effective collaboration and partnerships.

• Change in Attitudes Towards General Operating Funds

Funders should accept the basic requirements for any organisation, non-profits that exhibit the greatest potential for successful

social innovations are often in fetal business stages and do not have consistant funding streams to adequately support central

operations. Funders should be give more consideration and more tolerant in the obstacles small innovation organisations face

when establishing their core operations and who should be responsible for financially support the organisation and what impact

this will have.

• Adapting and Adjusting Towards Systemic and Strategic Approaches

Funders should reflect the nature of social innovations by identifying the social opportunities new organisations are trying to

address. Funders should be more informed of the potential successes and returns of correctly identifying innovative approaches

to addressing social needs beyond local context and with strategic and systematic ideals in mind in order to sustain and support

aspiring innovations.