Can Targeted Funding FOR Talent Development Lead to Higher Impact and Lower Risk for Social Enterprises?
Rippleworks is looking to challenge the status quo with a new program offering targeted grants for people development
After many years making high quality healthcare more affordable and accessible to his fellow Brazilians, with little thought given to developing the skills of his team, Thomaz Srougi, founder of dr. consulta, had an ah-ha moment — if they didn’t start investing in the dr. consulta team they were never going to improve the well-being of Brazilians. “We were spending a lot of time and money on recruiters to help us find and hire the right people. We found great people who were passionate about our mission. But because we didn’t have the infrastructure in place to support their development and growth, we ended up with somewhat of a revolving door which led to increased costs, destabilized the team and made it harder to achieve the impact we knew was possible.”
Srougi’s story is common among social enterprise leaders; ventures seem to only justify investments in people when it’s in response to an acute and urgent need. Rarely do venture leaders have the resources to proactively invest in improving the performance and well-being of employees who are so critical to their ability to grow and achieve impact. Why? One reason: funders’ singular focus on programs alone as the most direct way to achieve scale and impact.
And the current global economic crisis further exacerbates the situation as funders become more risk averse. “The irony is that providing funding that strengthens and stabilizes teams- which helps to mitigate risk and accelerate the desired impact- is often the first to get cut when we start to see market volatility,” notes Doug Galen, Rippleworks’ CEO.
The team at Pivot exemplifies this challenge. “Human capital is the first thing that gets cut when we have a budget crunch. So if we’re building next year’s budget and it comes out to $7.2M, but we know we can only raise $7M, that $200K overage always comes out of our People budget,” states Tara Lloyd, Executive Director at Pivot, a social venture that increases access to basic healthcare in Madagascar.
The truth is programs can’t run without people. The team at Rippleworks believes investing in building strong and stable teams can translate to lower costs, less risk and, most importantly, more impact.
After realizing the need to invest in not only recruitment, but also retention, culture-building and skills development, the dr. consulta team has been able to reduce corporate turnover from 45% to 20% (half of the industry average) and meaningfully increase their impact. In a three year period from 2019 to 2022 they were able to increase their impact by delivering high quality healthcare to more than one million Brazilians.
Funder Focus on Short Term Results Undermines Opportunity for Long Term Growth and Impact
During a panel presentation at Rippleworks headquarters in October, Thiago Rached, Founder and CEO of Letrus spoke to his team’s challenges balancing organizational needs with funder priorities. “While impact at scale is a long term goal we all agree on, expectations usually run high for short term results. Consequently, investments in people development — which usually don’t have an immediate effect — are hard to prioritize.”
Finding and retaining talent has been a long-time challenge for social entrepreneurs. A 2016 report published by Rippleworks, in partnership with McKinsey, entitled The Human Capital Crisis found that finding and keeping the right talent becomes more difficult as a social enterprise scales. In fact, the percentage of those surveyed ranked talent acquisition as very or extremely challenging rose from 25% to 45% depending on the maturity of their company.
Another major factor undermining the ability to recruit and retain talent is funder priorities. Too often performance milestones are linked to impact and scale but don’t include some metrics around recruitment, employee satisfaction or churn. Funders, in an effort to prioritize impact, are loath to support overhead, leading to what The Bridgespan Group calls “the non-profit starvation cycle”.
Adds Rached, “Investment in people is crucial in a growing competitive job market. However, the perception is that it is hard to predict the financial result from this kind of investment compared to marketing or product initiatives for instance. Therefore, it is challenging to align internally and with funders to allocate a significant portion of the budget in people development.”
A New Grant Program To Support Recruitment, Retention & Team Development
Although there are some indicators across the ecosystem that funders have started to recognize the importance of investing in people and operations, not much has changed in the years since the Bridgespan and Rippleworks reports were released.
In early November, a Rippleworks convening drew 45 venture leaders to discuss the challenges of investing in their teams. In a pre-event survey, a majority of respondents cited retention and staff development as their most significant challenges. “Retention and people development are VERY intertwined for our organization right now,” wrote Lindsay Stradley, Co-Founder and Executive Director at Sanergy. “Developing great leaders who can increase their impact and are motivated to stay with us for the long journey is one of our highest priorities.”
Looking to break the cycle of under-investing in talent development, the Rippleworks Capital team launched a pilot grant program in late 2021. The grants provide $500K over two years, and are intended to help build the teams and people systems so important to achieving growth and impact.
“By targeting the use of funds to invest in people, these grants give ventures the resources and the liberty to focus on the important needs of their teams, before those needs become an urgent crisis,” notes Ayesha Wagle, Managing Director of Rippleworks’ Capital Team.
So far, grants specifically targeting team building and development have been awarded to twelve social ventures across sectors including WASH, health, agriculture and education. Allocation is at the discretion of each recipient and many plan to use the funds in a variety of ways across the people acquisition, development and retention spectrum. Examples include: filling critical open positions, supporting retention through salary harmonization and improved benefit packages and new coaching and training programs that support skill-building and career development for current employees.
“Receiving this grant has provided us the opportunity to focus on our employees,” notes Gina Trieste, Chief People Officer at Root Capital. “With the additional funding, we are investing in developmental needs across the organization and more robust People systems. It has been refreshing to be able to say “yes” more often as we continue investing in the potential of our employees as the drivers behind our ability to grow and achieve impact. It’s exciting to be able to offer new learning & development programs to give them the tools to grow their careers.”
It’s early days for this new talent-focused grant program and the focus is on understanding if investments in people lead to more impact and ultimately lower costs. Key areas of interest include how funds are applied across the three big areas of need (recruiting, retention and development); whether there’s a reduction in churn; and the effectiveness of new learning and growth programs.
“We want to challenge the status quo in the funding community,” adds Wagle. “And we’re excited to learn how these funds address issues across the people space, including things like staff turnover, skills development, time to recruit and employee satisfaction.”
Ideally, the learnings from the new grant program will help demonstrate the value of targeted funding to support arguably the most important asset when it comes to growth and impact — people.
