039: Benefit-Cost Ratio & Monetizing Impact (Slingshot Stories)

Today, Ed Gillentine and Jared Barnett discuss benefit-cost ratio as it relates to impact.

Show Links

Ed Gillentine:
EdGillentine.com
Instagram: @journey.to.impact

Slingshot Memphis
www.slingshotmemphis.org
LinkedIn
Instagram: @slingshotmemphis
Email: disrupt@slingshotmemphis.org

Transcript

00:00:00:00 - 00:00:13:13
Ed Gillentine
Welcome to Slingshot Stories, a series produced in collaboration with Journey To Impact and Slingshot Memphis. I'm Ed Gillentine, and I'm co-hosting this series along with my partner in impact, Jared Barnett, the CEO of Slingshot Memphis. Jared, how are you doing, bro?

00:00:13:18 - 00:00:16:08
Jared Barnett
Great. Excited to talk about today's topic here.

00:00:16:10 - 00:00:37:13
Ed Gillentine
This one's going to be awesome. It's in your sweet spot. It's in Slingshot's sweet spot. It's one of my favorite topics. It is also a bit of a lightning rod. Right? So we're going to talk today about cost benefit ratio of impact and poverty fighting. And how do you monetize these efforts? Right. We're talking about humans. That's the pushback I get.

00:00:37:21 - 00:00:47:09
Ed Gillentine
And yet this is a really, really, really important subject. So why don't we just start with that? What in the world is a cost benefit ratio?

00:00:47:15 - 00:01:09:22
Jared Barnett
Very similar to finance, right? The idea is what's the benefit over the cost? And so financially, right., we use we have very clear distinctions from what we do with poverty, fighting. What we replace is for the benefits. It's the poverty fighting benefits. Right. So how is it alleviating poverty? And we have to quantify that and then divide it by the cost that it takes to provide those services.

00:01:10:01 - 00:01:32:06
Ed Gillentine
So you just made that sound really easy, and I know it's not. So we've talked about gathering data. We've talked about the way the human piece of this, and we've talked about different organizations and and how they gather data and how they process it. But give us an example of how this would work in the real world.

00:01:32:09 - 00:01:52:02
Jared Barnett
First, I guess we start with what are poverty fighting benefits. So the way Slingshot has kind of defined this in our work is it's an improvement in income, an improvement in health or some sort of observable improvement in the quality of life. And so that's how we think about this. And so everything that we quantify relates to improvements in those, those areas.

00:01:52:15 - 00:02:10:18
Jared Barnett
And so what we're able to do as we think about this, as you say, okay, if this is a poverty fighting organization and they're trying to achieve these outcomes, what would be the way to measure that or understand if that's happening? So a really good example is of workforce development organization. This is a very kind of clear example.

00:02:11:08 - 00:02:33:18
Jared Barnett
So I'd help someone develop a specific skill. I've helped them, you know, with their resume. I've helped them think about organizations to apply with. That's so that's part of my programing. Well, what I can do is I can compare what was their income before they entered my program and then what's their income afterwards. And so I can do that in different ways.

00:02:33:18 - 00:02:57:14
Jared Barnett
I can say, well, what's their employability rate? Right? So what was the employment rate for? For the people I worked with and what's their employment rate afterwards? I could look at something like their wages, right? So what's their wages before and after if I've helped them transition into a new industry. So let's say that they previously they were working in kind of the food services industry and now they've transitioned into welding, for instance.

00:02:58:00 - 00:03:18:21
Jared Barnett
Right. Well, I can look at the career trajectories in terms of earning potential between those two careers and understand a difference that's being created for them there. And so that's part of it. But then you can look at the health side of it, too, and say, okay, well, let's look at the health benefits that are created here. So I had or didn't have, you know, health insurance before I started this program.

00:03:19:12 - 00:03:38:03
Jared Barnett
And afterwards, if I got a new job, I have new access to benefits. What is the value of those benefits? What does that do from a financial benefit perspective? You know, how does that the cost of that, you know, just alleviated as well as having certain types of health insurance leads to better health outcomes? And there's research on that.

00:03:38:03 - 00:03:53:19
Jared Barnett
And so you can look at that. And so you want to look at all of those factors to kind of understand, okay, what's changing and how can we put a dollar to that? And there's ways to do that for both health and income that would make sense. Just like I would do something in a financial, you know, return on investment calculation.

00:03:54:04 - 00:04:22:04
Ed Gillentine
That makes a lot of sense. I'm thinking of, of organizations that work with men, particularly young men that have been in prison, and they help them get job skills and come out and get a job. So another potential I'm assuming another potential data point is now the government is not spending money to house feed, all that stuff, someone that's in prison.

00:04:22:17 - 00:04:29:07
Ed Gillentine
And then you can compare that also to what happens when they have to go back in and cost to society and all those sorts of thing.

00:04:29:12 - 00:04:49:15
Jared Barnett
Yeah, I mean that, that would add for Slingshot, that would add a whole new element of what we do right now. We're focused exclusively on kind of those benefits to the individuals right there that we don't even take into account this broader social benefits that accrue from that. We're obviously there's cost with, you know, having someone who's in prison compared to if not and actually it flips, right.

00:04:49:15 - 00:04:52:06
Jared Barnett
It's not just there, but they're actually contributing in terms of.

00:04:52:06 - 00:04:52:16
Ed Gillentine
Right.

00:04:53:00 - 00:05:02:12
Jared Barnett
Goods and services. They're able to help others out. And so it's it's it's more impact is much more multiplied at that particular situation.

00:05:02:12 - 00:05:30:16
Ed Gillentine
Yeah, I know you and I share a finance background. It's like going from a a negative profit margin to a positive. It's not just that you gained getting back to zero, but you got more than zero. That's a huge, huge payoff. And then, you know, when you try to calculate like the social benefits I was thinking the other day about I never thought about working less hours like and that being okay.

00:05:30:16 - 00:06:15:22
Ed Gillentine
So I'm imagining a single mom with two kids having to work 40 hours a week, maybe even a couple of jobs to be able to provide for her family. But she doesn't get home till 10:00. The kids come home from school. Maybe they hit a bump with their homework. They don't know what to do, but mom's not there to help Grandma or whatever to get to a living or a sustainable wage, maybe where they the mom gets to work six or 8 hours, be home for the kid with those those school problems, how how huge of an impact is that for those kids at school or even just simply being able to not be stressed

00:06:15:22 - 00:06:35:10
Ed Gillentine
all the time? What are some of the limitations? Right. We've talked a lot about you can never take the human out of it, the humanity out of it. And as soon as you do like let's I'll even merge the heart and humanity. As soon as you remove heart and humanity, as soon as you make human beings data points and nothing else, you've got a problem.

00:06:35:15 - 00:06:41:13
Ed Gillentine
But what are what are the limitations and the way to balance the use of a cost benefit analysis?

00:06:41:17 - 00:07:03:07
Jared Barnett
Yeah. So I think step one is acknowledging there are limitations, right. So it is not the end all, be all. And it's actually in our evolution as an organization. We started with a benefit cost ratio is the primary thing that we did and we learned through experience working with poverty fighting organizations that that wasn't helpful. There had to be more to contextualize that ratio, to understand it.

00:07:03:07 - 00:07:27:20
Jared Barnett
And so we've actually expanded from one dimension to four dimensions now to try and provide a more holistic understanding of an organization's effectiveness. And so that that's kind of step one then I think other things that are here, right? It's, you know, it's only as good as the data you have and so there are limitations to it based on the data that the organizations we work with collect as well as the research that's been done in that area.

00:07:27:20 - 00:07:45:21
Jared Barnett
So the typical way we think about this is you would collect data from the organization around what they've measured in terms of outcomes that have been achieved by their participants. But then we also can supplement that with, you know, academic research has been done, you know, and studies on that that we can then use and we put those two together to kind of reach the determine what we want to ties.

00:07:46:11 - 00:08:04:21
Jared Barnett
And so if there's a lack of data or a lack of research that will limit the quality of the data or what we can even monetize. And we've had instances where we work with the organization, we're pretty confident that what this particular thing they're doing is providing benefits. But because they don't have the data and there hasn't been research done on that, we're unable to monetize it.

00:08:04:21 - 00:08:35:14
Jared Barnett
And so there's a limitation there. Then you ask if we really thoughtful to around how you interpret this as well. So just like I couldn't take, you know, financial metrics for a tech company and compare that to a manufacturing company and be like, oh yeah, that's been in fashion company stinks, right? You have to be thoughtful around contextualizing that and saying, Well, I'm going to look at after school programs and understand their benefit cost ratios relative to each other and acknowledge of that might be different than benefit cost ratios for different types of poverty fighting efforts.

00:08:35:21 - 00:09:04:11
Jared Barnett
One of my favorite examples here is when you think of emergency services, right? Those have a very kind of distinct time frame that they are helping someone and absolutely essential because without that, a lot of bad things could happen without that emergency support. But when I'm looking at that compared to something that has an impact, so say like a of a vocation or technical training program that influences the entire career of that person, well, that's going to have a benefit for them for 30 years or however long is left in their career.

00:09:04:20 - 00:09:33:16
Jared Barnett
And so to say that, oh, hey, this emergency services organization has a lower benefit cost ratio than this vocational technical training program does, that's not as helpful as saying how do those technical training programs compare to each other versus the emergency services programs compared to each other? And so we do that in finance. It's, you know, very common and it's just making sure we take that same approach as we think about benefit cost ratios for poverty, fighting, that we contextualize it within the realm of where it's best understood and applied.

00:09:33:17 - 00:09:59:14
Ed Gillentine
Yeah, there's a lot of common sense. I feel like used and sometimes we can get scared away by the the terminology or even sometimes almost the, the hopelessness of being able to get this data. But one of the things that I'm excited about that you guys are doing is building a database for the future. Not there yet, but but doing this for five years, you got a lot more data that's actually usable and helpful.

00:10:00:10 - 00:10:25:23
Ed Gillentine
And I also like the idea that you get data to learn from and so an organization may think we're going this direction is working great. You get the data back and you're like, Oh my goodness, not so much. But talk a little bit about Slingshot, you know, ten years out and this idea of of being a resource center, a database for people all over the country to be able to say this is some good data we can use to make our decisions.

00:10:25:23 - 00:10:53:01
Jared Barnett
Yes. So, you know, I view slingshots. Evolution in that regard is like a lot of these technology companies, right. Google, Facebook, they don't make their money on their search engine. Right. Right. Or their you know, their social media posts. They're they use it based on the data. Right. That they have. And so our hope is to develop this proprietary set of data that just hasn't existed anywhere else so that we can then mine it with all of the different, you know, statistical tools that are exist to understand better.

00:10:53:11 - 00:11:11:07
Jared Barnett
And so that's not just for us, but we want to make that accessible and transparent to others so that we can say, hey, these types of services produce higher benefits than these types, right? For the same type of thing. Right? So if you're going to do it a certain way, do it this way because it works and produces better outcomes than otherwise.

00:11:11:15 - 00:11:44:04
Jared Barnett
What it also is really helpful to is it helps organizations understand their relative impact of their own work. We've had several instances where, as we've done a benefit cost analysis for an organization, they've been able to understand in a different way what's producing the greatest benefits for their participants and therefore have been empowered to make incorporate that in strategic decision and saying, Well, let's expand here or let's offer some additional services here, or in some cases let's stop doing certain things because we're not producing a lot of value relative to others who could do that.

00:11:44:10 - 00:12:08:05
Jared Barnett
And rather, let's just create a pathway between us and another organization that can do that better than we can. And so that's what is exciting for me, is it creates this ability to have conversations and an evidence based way around how we allocate resources, where we focus on how we do things so that again, we're not left blindly trying to do that or doing it with, you know, less helpful data.

00:12:08:12 - 00:12:14:07
Jared Barnett
But we have a much clearer understanding and agreed upon understanding of of that impact.

00:12:14:12 - 00:12:34:08
Ed Gillentine
I really like how you said that there's like a zillion things in there that we can chase down and we need to come back to. I'm going to try to make an analogy I love finance because it was data driven and it wasn't data for data sake. It was data to accomplish the mission. And even as a young boy, I.

00:12:34:13 - 00:12:53:02
Ed Gillentine
I realized that everybody hated budgets. Right? But when I realized a budget did two things. It told you what you what was really important to you. Now, this is personal finance or business. And in it told you how you could accomplish your goals better a path to that. That's why I love it and that's why I love what you guys are doing.

00:12:53:08 - 00:13:21:12
Ed Gillentine
It's not about the data. The data is not the point, right? The point is outcomes, its impact. And that's why I think that the benefit cost ratio, the idea of monetizing this as as as crass is that sounds to some people it is not taking away the humanity. It's actually honoring the humanity of the people and saying, you're important enough, there.

00:13:21:12 - 00:13:30:05
Ed Gillentine
We're going to do the really hard, the really thankless work so that we can help people better and have true impact, true outcomes.

00:13:30:14 - 00:13:55:07
Jared Barnett
I could have put it better myself and I think that's that last point, right? That it's it's because of the humanity that this is so valuable, not in spite of it. Right. And so I think that's the whole point is because of what it's helping us do, by having this additional understanding, we could be so much more effective and so much better at producing the outcomes that benefit people's lives with this additional information.

00:13:55:15 - 00:14:17:19
Ed Gillentine
And that's I think I'm going to wrap it up right there because that is how this is what I want. Everybody to take. It's because of the humanity that the data and the collection of the data is so important, because without it, we're minimizing impact for real humans with real problems and real challenges that are all around us today.