Finding the Incentives and Leadership for Change

August 3, 2010

I wrote last week about how new tools like the Strategy Landscape data visualizations can help promote the adoption of new behaviors and practices in philanthropy by making it easier for people to work in new ways.
But new data and tools can only take us part of the way. In What’s Next for Philanthropy, my co-authors and I also explore two other critical ingredients for change in the coming decade: new incentives and new leadership.
New Incentives
While new technological tools may help facilitate change in the field, it’s not ultimately a technical challenge. It’s a very human one. Nothing will change until people change the choices they make. Unfortunately, one of the biggest barriers to individual change is a misalignment between the desired behaviors we’ve highlighted and the incentive systems that support (or discourage) their adoption. Funders want to encourage risk-taking and systems change, but then demand immediate results and don’t tolerate failure. They want to promote learning and knowledge sharing, but then provide no benefits for doing so. They talk about collaboration but then resist sharing or ceding power to others. Without rethinking the incentive systems that guide behavior, change in philanthropy will likely remain elusive.
The problem is that individual behaviors are difficult to shift, even when the end logic behind changing might be clear. If we could all just close our eyes and a new system for sharing information and coordinating effort could be magically put in place, everything would be better. But because we work in a networked world, every individual’s choices are linked to those of others and the status quo becomes difficult to shake. Bhaskar Chakravorti has written eloquently about this in his book The Slow Pace of Fast Change. He uses the example of electronic medical records. Everyone knows the health system would be cheaper and better if medical records were maintained online. But it doesn’t happen. Why? Because the choices of each stakeholder are tied to the choices of others, and no one has the incentive to make the individual sacrifice to make things change. The pharmacy doesn’t go to the expense of creating a system to accept online prescriptions because doctors still write them out by hand. And doctors still write them by hand because pharmacies don’t accept online prescriptions. Each player’s decisions are reinforced by the decisions of others, and no one player has the incentive to unilaterally switch, since there’s no assurance that the others will shift with them.
Chakravorti proposes a framework for helping spread innovation in a networked world that I think those of us trying to change philanthropy would be wise to consider. He emphasizes working back from the “endgame” to identify the key players who would need to change, and then understanding why they would do so. He refers to the process of enlisting these other actors in adopting a new innovation as “dividing up the middlegame.” Any effort to change practice in philanthropy—either within a single foundation or across the field—will need to think carefully about how we divide up the middlegame. What specific incentives can be created to encourage each of the critical players to change?
New Leadership
New data, tools, and incentives will not really matter without new leadership and the will to change. The best ideas and most thoroughly proven solutions will fall flat if they encounter a human system that is not ready to embrace them.
In looking across the many innovative leaders in civil society, government, and business we have worked with over the last decade, we have seen a number of common themes beginning to emerge. Leaders have to be comfortable bridging boundaries of all kinds. They have to be comfortable with technology and with speed. They have to be skilled at listening, sharing control, and empowering others. And they must be comfortable with ambiguity.
In other words, the old models of hierarchical, heroic leadership that have worked well in an organizational context may not be as good a fit for today’s more networked environment.
That’s because many of the problems leaders face, inside and outside their organizations, can only be addressed by involving more of the people who must solve them.
Roger Martin, dean of the Rotman School of Business at the University of Toronto, has written a great deal about the need for this sort of collaborative and adaptive leadership, a style of emergent problem-solving which he refers to as “design thinking.” He argues that it’s not just a matter of coming up with the right answer. It’s about recognizing and engaging the people who will have to act, working together to test a range of possible solutions, creating feedback loops to facilitate learning, accepting and learning from failures, and practicing continuous adaptation.
We already see these characteristics in a small but growing number of philanthropic leaders who are already taking steps to behave in new ways, opening themselves up and looking at how they can better align their actions with those of others. Warren Buffett set a powerful example when he did just this, joining forces with Bill and Melinda Gates rather than setting out on his own. And I hope that we’ll start seeing more of this type of behavior in the coming years, especially as the millennial generation, who have been raised with a very different set of attitudes and technologies, comes into power.
I’m hopeful that new data and tools, new incentives, and new leadership can, taken together, help push philanthropy toward acting bigger and adapting better than it does today. And I’m excited to see how people are going to experiment with new approaches that combine these elements into new innovations that can push the field forward. For those who are interested in joining in for the journey, I’d recommend taking a look at the What’s Next Innovation Toolkit that accompanies the report. It aims to provide funders with a do-it-yourself guide to applying the ideas of What’s Next in your own organizations, to create new innovations that can help you act bigger and adapt better over the next decade.
And as a final note, I want to thank Barry Varela, Ed Skloot, and their colleagues at Duke for giving me the space to ramble like this for several days. For any of you who are still reading, I’m looking forward to continuing the conversation as we move ahead.

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