Transforming Public Systems for Outcomes: The Mission of Third Sector

In episode 217 of the Disruptors for GOOD podcast, I had the pleasure of speaking with Caroline Whistler, CEO and Co-Founder of Third Sector, on the organization's mission to transform government funding for social impact.

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Third Sector’s mission is clear: to transform public systems to advance improved and equitable outcomes. This mission is rooted in the belief that public services should be responsive to the needs of the community, fostering trust and delivering optimal outcomes for all, regardless of race, background, or circumstances.

Takeaways

• Third Sector aims to transform government funding for social impact by developing results-based contracts and funding formulas.
• Data analysis plays a crucial role in identifying areas of need and informing decision-making for government funding.
• Third Sector's work in early childhood care in Massachusetts resulted in the equitable distribution of funding and sustained access to quality programs for over 175,000 children.
• Integrating data across agencies is essential for government to be more responsive and improve outcomes.
• Guidance and funding from federal agencies can support the integration of data and break down data silos. Third Sector aims to shift government systems from a compliance orientation to an outcomes orientation.

Sound Bites

• "What would it take to get government in the business of paying for results?"
• "Government can't tell the difference between a nonprofit that provides services and one that provides results."
• "Data is a huge part of our work and the possibilities when you take more of an outcomes-focused approach within our government."
• "Push for what you can do versus assuming that you can't do something because it hasn't been done before."
• "Privacy is the real issue around health data."
• "Homelessness and those that are returning from incarceration have a very strong overlap."

About Third Sector Capital Partners

Founded in 2011, Third Sector is a national nonprofit organization that works with government agencies, community-based organizations, and philanthropic partners to catalyze change and confront inequities.

As a technical assistance organization, Third Sector advises its partners on reshaping policies, systems, and services to ensure they are designed with the community’s needs at the forefront.

With a track record of working in over 50 communities, Third Sector has helped deploy more than $1.8 billion in government resources toward outcomes that matter.

Their work focuses on four critical areas:

1. Behavioral Health

2. Diversion and Reentry

3. Early Childhood Development

4. Economic Mobility

Core Values: A Commitment to Excellence

Third Sector operates with a strong commitment to five core values that guide their work, ensuring that they consistently deliver on their mission.

• Results: Third Sector is dedicated to developing projects that measurably improve lives and reduce racial and ethnic disparities. They support their partners in using data and community experiences to shift culture, policy, and practice, ultimately improving the way government services are delivered.

• Racial Equity: Understanding the deep-rooted history of racism in public systems, Third Sector strives to help its partners combat the effects of white supremacy and other forms of oppression. This is crucial to fostering better life outcomes for all and achieving racial equity.

• Relationships: Third Sector believes in the power of partnerships. They build relationships based on listening, transparency, and accountability, working with a variety of stakeholders across sectors to scale impact and share knowledge.

• Respect: The organization honors the expertise of community members and public servants, collaborating to design and implement person-centered public systems. This respect for diverse perspectives is central to uncovering the causes of inequity and identifying opportunities for improvement.

• Reflection: Continuous reflection is a key component of Third Sector’s approach. By using data and engaging in honest conversations with partners, they strive to understand their impact and adapt their strategies to better serve the communities they work with.

Catalyzing Change and Unlocking Possibility

Third Sector’s work is grounded in the belief that unlocking possibility begins with making meaningful connections. They take the time to fully understand the needs of the communities they serve, ensuring that public services are responsive and effective.

This approach not only rebuilds trust in public systems but also ensures that services are delivered when they are most needed, achieving the best possible outcomes for all.

By focusing on transforming public systems, Third Sector is helping to create a future where all people, regardless of their background, have the opportunity to thrive.

Their commitment to equity, collaboration, and continuous improvement sets them apart as a leader in the field of social impact.

Interview Transcript

[00:01.942] Grant Trahant:

Awesome. Well, Caroline, thank you so much for joining me today. I’m really excited to deep dive into a lot of things Third Sector is doing, a little bit about your journey up to this point, and then the organization’s overall mission and vision, what that looks like for the future, and what you’re doing inside communities across America right now.

So, before we get into Third Sector, could you talk a little bit about your journey and career arc before Third Sector?

[00:37.068] Caroline Whistler:

Thanks, Grant. It’s exciting to be here and share a little bit about Third Sector and my journey. When I was graduating from school, I knew I wanted to work at the intersection of business and social impact, so I found myself as an AmeriCorps member supporting nonprofits that were looking to grow.

[00:57.346] Grant Trahant:

Mmm.

[01:00.608] Caroline Whistler:

As you may know, it’s pretty hard for nonprofits to grow. They often feel like they’re on a fundraising treadmill every year, making it hard to scale.

What we found out doing that work is that nonprofits have three choices: sell something (fee for service), go after philanthropy, or pursue government funding. Surprisingly, some of the most impactful nonprofits didn’t want to work with the government because of the heavy compliance burden.

This led my co-founder and me to think, “What would it take to get the government in the business of paying for results?” If our government, which spends over a trillion dollars a year on social programs, could fund social impact differently, how much could we improve outcomes for everyone in this country?

[02:39.992] Grant Trahant:

So then, looking at those different aspects of the sector and your background, what was the lightbulb moment or catalyst for really creating an organization to solve this issue? It’s one thing to have an idea, but actually pressing the button and dedicating a lot of your life to building something is a big deal.

What was the real catalyst and spark for saying, “Okay, we see an issue, we think we can solve it. Let’s start something and dedicate a lot of our time to it?”

[03:34.476] Caroline Whistler:

It’s a great question. It really took several years for us to pull the trigger on this. We had been working with nonprofits and were curious about the role government could play as a partner. We started asking around to state and local officials, and most folks thought we were crazy at first.

It wasn’t until we had a willing partner on the government side—the state of Massachusetts—that we took the leap. They were curious about allocating funding differently, focusing more on results than services.

With that willing partner, we decided to jump in and transform the relationships and collaboration between Massachusetts and their nonprofits.

[05:12.682] Grant Trahant:

What was that pitch to them? Do you remember what it was like, what you said, and why they agreed?

[05:20.586] Caroline Whistler:

The pitch was actually to a different government person than you might expect. While our work with nonprofits focused on areas like homelessness and juvenile justice, the government partner we found was in the budget office, specifically the head of finance and administration.

The pitch was about the inefficiency of current spending—hundreds of millions of dollars were being spent on homelessness and justice services, but the outcomes weren’t improving. Rather than taking a siloed approach within each agency, we proposed that the budget office could play a unique role in inspiring nonprofits to achieve specific results, like reducing recidivism or increasing stable housing.

This approach was new and inspiring for someone who sees all the receipts and spending without seeing corresponding results. That first partnership in Massachusetts has since grown to over 60 government partners we’ve worked with across the years.

[07:48.302] Grant Trahant:

That’s a great segue. Let’s talk about Third Sector’s overall mission and vision, and where it sits in the broader ecosystem of impact and results.

[08:17.846] Caroline Whistler:

Third Sector sits at the intersection of government and communities, serving as a bridge to inspire collaboration, transform relationships, and create new possibilities for change and outcomes.

We are structured as a nonprofit, but we exclusively support our government at federal, state, and local levels to help transform how they deliver responsive services in communities. We focus on how they partner with nonprofits, collaborate, collect, and use data to make decisions on taxpayer dollars.

We also provide technical assistance and capacity building to civil servants to help them focus more on learning and improvement to achieve results rather than just focusing on inputs and outputs.

[10:03.53] Grant Trahant:

I love examples and case studies. You mentioned the first one in Massachusetts. Could you give us an overall case study of a practice area, data coming from that, and how you created a roadmap for impact and results? Do you have a favorite?

[10:55.394] Caroline Whistler:

Thank you for the question, and for naming some of the areas where we work. We’ve been around for over a decade, and we’ve evolved to prioritize four main practice areas: behavioral health, economic mobility, childcare and early education, and diversion and reentry.

We focus on these areas because they represent significant spending by the government and have been challenging to achieve good results.

One specific example I’d love to share is in childcare and early childhood, which illustrates the importance of data in our work. During the pandemic lockdown, there was a crisis in childcare and early education.

The federal government responded with American Rescue Plan dollars for childcare, and states had to decide how best to deploy those funds. We worked with four states—Massachusetts, Connecticut, Louisiana, and Maryland—to develop a funding formula that equitably distributed those dollars.

We used the CDC’s Social Vulnerability Index to identify areas of greatest need. In Massachusetts, this led to the distribution of $600 million to almost 6,700 providers, sustaining access to quality programs for more than 175,000 children. Our support helped keep providers’ doors open, keep critical care workers employed, and ensure that young kids remained in quality early learning programs.

[17:33.506] Grant Trahant:

I want to double click on data for a second. We’re in a data renaissance, and the government has a lot of it. Is data the biggest tool in the toolkit for better outcomes? How has data transformed or can transform different areas to improve results?

[18:47.33] Caroline Whistler:

Great question. Data has already transformed and can still transform our government’s ability to be more responsive in our communities.

The work we did with Massachusetts in early childhood care couldn’t have been done 20-30 years ago because the Social Vulnerability Index didn’t exist then. Advances in data collection and visualization have been essential to our work and to helping governments be more responsive. It’s also been helpful in making the case that the government needs to operate differently.

Data helps build a case at a macro level, showing where programs are working, for whom, and in what context. It also highlights areas where governments need to improve. However, there’s still a long way to go, as data often sits siloed within government agencies. Our next frontier is breaking down these data silos to provide a fuller picture of what’s happening in our communities.

[22:38.794] Grant Trahant:

Is breaking down data silos something that would be easier to enact at the state level rather than the federal level? Have you had conversations with policymakers around this, and what’s their feedback?

[23:16.958] Caroline Whistler:

There’s incredible power at the state level to do this data integration work. You don’t need the federal government to combine all the data. However, there’s a fear within governments that it’s not allowed. Federal agencies like the Department of Labor, Education, or Justice can be helpful in providing guidance, encouragement, and sometimes funding for this work.

We’ve seen great leadership in states like Kentucky with their KY Stats program, which integrates data cradle to career across multiple agencies. It takes investment and commitment, but it is possible at the state level without new federal legislation.

[27:37.846] Grant Trahant:

Let’s double click on the justice system. What have you learned about this sector, and how has data played a positive role? What are some difficulties still faced in this area?

[28:08.108] Caroline Whistler:

In the justice area, we’ve learned that homelessness and those returning from incarceration often overlap. While agencies for reentry focus on stopping reoffending, they don’t focus on what these individuals need to thrive and reenter society.

Data has been incredibly helpful in helping departments of corrections understand the broader needs of their population, such as stable housing and behavioral health support. For example, in Pennsylvania, the Department of Corrections realized that some individuals couldn’t be released because they had nowhere to live.

We partnered with them to build a request for proposals for housing services, shifting the focus from just preventing recidivism to investing in the thriving of these individuals. This has led to better collaboration with housing, behavioral health, and employment providers, ultimately helping corrections agencies achieve their goals of reducing incarceration.

[33:25.346] Grant Trahant:

Has there been any work with private prisons around data? Do they work with governments to provide data on their constituents?

[33:54.498] Caroline Whistler:

Every correction system is different across the country, with a mix of publicly and privately run facilities. While we haven’t had direct contact with the private prison system, a lot of what we do at Third Sector is help the government understand how to be more responsive with both government-run and contracted services.

We believe in an outcomes-focused approach to contracting, starting with defining the North Star—what are you actually trying to achieve? For corrections agencies, reducing recidivism is a big outcome, but we encourage them to ask for other outcomes like stable housing or employment. This shifts the conversation from business as usual to one that is more responsive to achieving desired outcomes.

[38:18.166] Grant Trahant:

What does success look like for you when you look at impact measurements or results and outcomes?

[38:48.246] Caroline Whistler:

Success for us is defined by the predefined outcomes we lay out at the beginning of our projects. We ask ourselves: Did we achieve what we set out to do? Are the people the program is intended to serve accessing the support in a way that is different and improved from before?

We also engage with external evaluators to see if government innovations focused on responsive services are working. For example, a RAND Corporation evaluation of our behavioral health work in California found reduced psychiatric inpatient admissions, increased stable housing, and decreased judicial system involvement.

This is how we seek to operationalize the change we want our government to pursue—focusing on outcomes and responsive services for people.

[42:32.034] Grant Trahant:

What has your relationship with the business world been like? How have they played a role in this ecosystem?

[43:00.514] Caroline Whistler:

The business community has been a tremendous partner in many ways. They help incentivize government to change by coming together to address issues like homelessness and providing expertise and support to help the government analyze data and find solutions.

The business community often makes long-term commitments to the communities they operate in, providing a consistent thread of focus on outcomes and partnering with the government and nonprofits to improve services and outcomes.

[46:09.506] Grant Trahant:

What are some of the goals and successes you and the team would like to achieve over the next three to five years?

[46:09.506] Caroline Whistler:

At a macro level, we’re focused on culture change within the government. We’re trying to shift big government systems from a compliance orientation to an outcomes orientation. This involves building the case through our projects, doubling down on stakeholder engagement and impact measurement strategies, and promoting cross-agency collaboration.

We also aim to build the skill set of the civil service workforce to ensure that outcomes-focused skills and priorities become the norm. With millions of civil servants retiring, there’s a tremendous opportunity to think differently about who needs to be in public service and what skills they need to deliver responsive services and better outcomes for our communities.

[49:18.446] Grant Trahant:

Well, thank you so much, Caroline, for taking the time. This was an amazing conversation. I know this work is difficult, but even the smallest positive outcome can have a huge ripple effect. Best of luck to you and the team for the next decade to come.

[50:23.65] Caroline Whistler:

Thanks so much, Grant. Pleasure to be here.

[50:27.342] Grant Trahant:

I’ll go ahead and stop recording.