How to make make outcomes-based funding work

Outcomes-based funding gets a lot of flack from the community sector. As Simon Smith from Wesley Mission raised in a post earlier this week, its ambiguity is taken as cause for concern.

Simon's post got us thinking about what some of the upsides of outcomes-based funding might be. So, as we like to do from time-to-time at PTP, we asked some academics to lend a hand.

In this article Dr Fiona Buick (@fibuick) from the University of Canberra, Dr Gemma Carey (@gemcarey) from ANU and Dr Pauline McLoughlin (@PJ_McLoughlin), Lighthouse Institute and Centre for Youth Mental Health affiliate, ask: 'what’s so bad about outcomes-based funding?'

 Firstly, let us be clear about what outcomes based funding is and how it differs from, say, outputs fundingOutcomes are impacts – those changes or effects arising from the activities of social programs and policies. These outcomes can be intended or unintended, positive or negative.

We can measure outcomes through various indicators, ranging from ‘hard’ outcomes (e.g. the housing; employment; educational engagement of a target group) to ‘soft’ outcomes, like emotional wellbeing; relationships; and life satisfaction. However, often when organisations say they are measuring outcomes, they may in fact simply be describing the outputs of what they do, rather than measuring impact or change.

Outputs, on the other hand, are a description of what a program is doing or who it reaches. The issue with focusing on outputs is that they are mostly descriptive – for example, the number of students attending school; the number of clients using a service; and the types of products developed through a program. In themselves, outputs cannot tell us much about what difference a program or policy is making. They also tend to encourage the pursuit of narrowly defined targets focused on one particular area, such as education, health or employment (rather than across areas).

A good example of this is education. There’s a difference between school attendance, which is an indicator of a program or policy output, and learning, which is a desired outcome. School attendance does not necessarily tell us much about whether we are seeing desired effects from a program or policy. Yes, we want to see children attending school. But ideally what we are really wanting to measure here is not school attendance per se, but the desired impact of school attendance, which might include learning-related outcomes like social and relational development, job opportunities and better health. We can see here that the desired impacts of school attendance will traverse multiple areas, demonstrating the importance of an outcomes focus.

The tendency to focus on outputs rather than outcomes isn’t all that surprising. Outcomes tend to be much more complex to deal with than outputs. They take time to define, require working from a number of stakeholders’ perspectives, and are harder to measure. But a well-designed, evidence-based and outcomes-driven approach is worth the time and effort to establish in practice.It also moves us away from just focusing on efficiency or process, and towards making good outcomes for people the main purpose of a policy or a program.

Simon Smith is right that more work needs to be done in this space and more discussion about how to define outcomes is needed. However, with ambiguity comes opportunity.

Decisions about what a good or bad outcome is can be defined by those at the coalface, who are more likely to have in-depth knowledge about what’s required and what actions are more likely to lead to real change over the long-term.

Pinpointing meaningful outcomes requires autonomy and the space to define what matters. This is consistent with recent calls for the sector to see itself as an extension of community, not government. Too much government policy and funding, Tony Nicholson argued:

“seems to be premised on the idea that voluntary community organisations are an extension of government”.

He called for a shift from

“being expert at the delivery of narrowly conceived services as specified by government funders” (outputs focused)


“assistingordinary citizens to give direction to, and exercise governance over, local efforts to provide services and to strengthen community life” (outcomes focused).

We think outcomes-based funding provides an opportunity to reverse the paradigm Nicholson draws attention to.

If outcome funding is provided, with no prescription regarding what these outcomes are, and is combined with autonomy to work with clients, it could help enable people, groups and organisations to work together to: (a) determine the outcomes required; (b) determine the course of action that’s required to achieve these outcomes; and (c) get moving!

A recent study, conducted by Deborah Blackman, Fiona Buick, Janine O’Flynn and John Halligan into joined-up approaches found that Indigenous Coordination Centres  (ICC) were able to realise change and deliver outcomes for Indigenous communities through actively working with community members to ascertain what they needed and therefore what the ‘outcomes’ needed to be.

ICC members showed the will and ability to focus on the desired outcomes and work with others to achieve those outcomes. In doing so, they managed to overcome the ‘silo mentalities’ we so often see across the public service. Their ability to do this work was made possible by their managers who adopted a broad mandate – and outcomes focus – and provided their staff with autonomy and flexibility to work with communities and ascertain what they required (see Buick, 2014). The managers also encouraged their staff to experiment with new approaches, challenge the status quo and maintain their focus on the Indigenous communities themselves (see O’Flynn, Buick, Blackman and Halligan, 2011).

This case study shows that adopting an outcomes focus can help increase the value of the sector (like Nicholson argues) – provided organisations are willing to step into the available space, demonstrate innovation and earn trust for continued autonomy.

Focusing on outcomes also breaks down the ‘silo mentalities’, so prevalent in the public sector, and reduces competition between organisations. It provides an opportunity for organisations and services to become united around the common goal of achieving locally defined outcomes for individuals and communities.

Being an extension of community means not looking to government for the answers, but to step into the available space and articulate what a good outcome is (or a bad one, for that matter). Ultimately, outcomes based funding is ambiguous because policymakers are often too far removed from the daily reality of people’s lives to know what should or should not be valued as a ‘good outcome’. The sector – who is at the coalface of service delivery – is ideally positioned to answer these questions. In doing so, not only can it secure better outcomes for individuals (through enhanced and better resourced services), the sector can do its part to create a more equitable partnership with government.

Paul Smyth has argued that contracting arrangements have created a sector that is habituated to being told what to do by governments, or ‘fighting over scraps’. This not only limits innovation; it creates a barrier to working together and forming constructive partnerships. When it comes to outcome based funding the sector has a choice to make: wait for government to step in and define what an outcome is, or embrace the opportunity to shape policy and the way the sector is funded under this new model.

Posted by Gemma Carey