Tracy Palandjian

CEO & Co-Founder, Social Finance

How old is your organization? Nine years
What sector do you work in? Impact investing nonprofit
How long have you been working in this sector? 15+ years
How long have you been with your current organization? Nine years

If you have worked with CRE in some capacity, what impact did it have?
Back in 2017, we were honored to become part of Ford Foundation’s BUILD grantee portfolio, which provides nonprofits with funding to optimize their capacity and sustainability. Through this grant, we partnered with CRE on an effort to examine our organizational strengths and areas for growth. CRE fostered such an open and enlightening conversation that we decided to re-engage them in a six-month organizational design effort. The team helped us clarify our strategy and realign our organizational structure to best achieve it. Since concluding that work in the summer of 2018, we have taken action on almost every CRE recommendation, helping to propel us from a start up to a sustainable, mid-sized organization as we approach our 10th year.

What has been the most significant development in your sector over the last 40 years?
Social Finance brings together government, nonprofit and capital markets, so we really sit at the nexus of a number of sectors. And from our view, one of the most significant developments of the last several decades has been the dramatic rise of impact investing.

While the concept of negative screening for investments has existed for centuries, investing intentionally for measurable impact, as expressed in the current impact investing movement, is much more recent. The term “impact investing” wasn’t even coined until 2007! The impact investing landscape has now grown to include over $500 billion in assets under management that are dedicated to impact.

In what ways have nonprofits adapted business practices that more similarly reflect for-profits over the last four decades, and has that been a necessary shift?
We are seeing increasing accountability for nonprofits on the outcomes they achieve for participants. Through this transparency around outcomes, we are also better able to understand which nonprofits are most effective and support them with flexible, catalytic capital to scale. The model Social Finance is pioneering, Pay for Success, brings private sector accountability and private sector capital to social service programs.

Equally important is what we are seeing with business adopting nonprofit sensibility. Private companies have impact in the world and paying attention to that impact often makes good business sense.

What is the single greatest challenge you face today in your sector?
As impact investing grows, one of the greatest challenges we face is around how to define and measure impact. With no consistent measurement tool, no alpha for impact, how can we compare impact across investments? Underlying this challenge are questions of data collection and quality control, of value accrual, and the tension between the quest for long-term outcomes and nearer-term returns. I am energized by the creative solutions being generated by those in the field and through approaches like Pay for Success, which tie returns to direct and measurable impact.

What opportunities exist now for nonprofits to break through into success that did not exist 40 years ago?
With the rise of impact investing and the advent of models like Pay for Success, there are new opportunities for nonprofits to access the capital they need to scale. Pay for Success brings nonprofits into the world of private capital. It brings in people who run homeless shelters and do job training and says “if you’re good at what you do, you can access the capital markets.”
It is not just in the province of philanthropy or the social sector or the public sector to drive social progress; there is a role for capital markets to play, as well.

What leadership qualities are necessary to succeed as a nonprofit executive today?
I think succeeding as a nonprofit executive is very much about persistence and maintaining a spirit of experimentation. I’ve found over and over again in my work that there is no perfect path to achieving our vision. It’s in starting, failing, and trying again that we figure it out.

What will nonprofits need to do to remain relevant and necessary to their clients over the next 40 years?
Over the next 40 years, nonprofits will adopt even more practices of business, of the private sector. What I mean by that is that, given the incredible amount of data that we have available to tell us what works and what doesn’t, nonprofits will need to be accountable for the products their offer their clients, the outcomes they produce for their clients. Proof of impact will be an integral component of nonprofits efforts to remain relevant for participants in their services.

Alongside this, I think of Bryan Stevenson from the Equal Justice Initiative, and his wise words: “there is power in proximity.” To understand the needs of their clients and to design programs that serve them, nonprofits need proximity. They need to create opportunities for feedback and for input from program beneficiaries.

What are some of the trends you’re seeing today that will impact your nonprofit and your sector in the future?
There are three trends that Pay for Success builds on that are absolutely critical to the nonprofit sector. They are: an abundance of data that allows us to better manage for impact, the growth of impact investing which allows us to harness the capital markets in service of society, and the growth of tri-sector models which are blurring the old boundaries between the public, private, and social sectors.

Where would you like to see your sector in 40 years?
When I look ahead over the next 40 years, I am energized by what I see as a rising tide and a shifting zeitgeist. I imagine that all of this work, around data and measurement and around impact investment, will become less novel and more standard course of business. Impact will be at the heart of consumption and investment decisions. High-performing nonprofits and social enterprises will be rewarded for delivering results. And, governments will make funding decisions based on outcomes.

Why did you want to become a nonprofit CEO?
I very much think of myself as an accidental entrepreneur. Before I co-founded Social Finance in 2011, I had been on a fairly predictable track. I’d built a career in management consulting and asset management. But something was missing — I wanted to have an impact outside of myself. So when Sir Ronald Cohen and David Blood recruited me to start Social Finance in the U.S., I embraced the opportunity.

This opportunity presented itself and I decided to, I guess, jump into the ocean and embrace it. And it was super-risky because nothing in my life had prepared me to be an entrepreneur. It has been the hardest work I have ever done, but it has also been the most enjoyable and rewarding. Over the past nine years, we have built not only Social Finance from the ground up, but also a brand new field for social change.

What are your organization’s values, and specifically leadership values, and how do you ensure everyone who is part of your team embraces them?
Our organizational values are people, performance, integrity and collaboration. We really try to live these values every day in our work.

Find out more
Social Finance

En Español »