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    Monday
    Dec032012

    How fruitful can 'payment by results' be, in a complex world?

    “Payment by results”. Turning this on its head you might get “no payment without results”, or “I won’t pay for something that I don’t get”. This sounds like a sensible and fair way to conduct yourself, your business or the procurement by the Government of socially beneficial services from innovative charities (like VPF's portfolio ventures).

    PBR has already arrived in the UK voluntary sector in the form of the much-publicised Social Impact Bond. You, innovative charity, reduce re-offending rates of Peterborough Prison leavers by 7.5% and you’ll be contractually entitled to a Government payout larger than your projected costs, meaning you can turn a ‘profit’ if you are as good as you say you are, meaning you can raise private sector investment from anyone you can convince of your economical recidivism-reducing credentials. Brilliant - Government doesn’t have to face its fear of risk, good ideas get financed, investors make money.

    You may be catching a feint whiff of ‘yeah but…’

    Our blogger of the week is Liam Barrington-Bush, who neatly argues (here) that PBR is an inherently flawed system of incentivisation. This makes VPF think of the challenges in measuring social impact, the extreme difficulty of comparing (for a change) pears with pineapples, the importance of qualitative reporting by charities, and the fascinating conundrum of applying business principles in a sector that has more than one bottom line.

    For this reason, Mr Barrington-Bush’s VPF badge is in the post.

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