What are the disadvantages of a SIB?

SIBs are not for everyone:

  • They rely on strong commissioner relationships. If these relationships are not in place and there is no commissioner who is comfortable working with you on a SIB, details can put a strain on a relationship in the delivery phase.
  • They demand substantial internal impact management capabilities – a requirement which, if met, can skew or disrupt the balance of a small organisation
  • They often require continuous or intensive tracking of individual participants, so that it can be established whether intermediate and long-term outcomes have been met. Some delivery organisations have felt that this places a strain on frontline relationships
  • They come with some financial risk, despite the principle of keeping this burden with independent investors. If unsuccessful, it is possible your organisation could be working with no operating margin
  • They only recognise externally validated outcomes. Programmes which measure success on soft outcomes but don’t use externally validated scales (e.g. mental toughness, grit, locus of control) may continue to struggle with a sense that their outcomes don’t fit well with those of their commissioners. Within the SIB landscape of society-wide cost-benefit, they haven’t shown that their work leads to a socially significant outcome or one that doesn’t dissipate over time
  • Ideologically, some find it troubling that they engage private investment for public services in the social and healthcare sectors. What with the high ancillary costs that go with a SIB – intermediaries, lawyers and IT – some feel they take more money than is necessary ‘out of the system' or away from the frontline.

“SIBs really clearly don't enable innovation. A SIB allows innovation to the extent that it allows us to test it here, or scale it, if the evidence already exists. If the initial idea is untested, no investor or commissioner will touch it” SIB intermediary

“Some great organisations do not have outcomes. If for example, you aim to provide young people with a safe space to be themselves, of course there are ultimate outcomes, but it may not be practical to define or measure them up front. That’s absolutely fine, but it’s not SIB-able. In too many scenarios, providers try to measure outcomes which their service is unlikely to deliver” – Sector thinktank

Pursuing a SIB without considering these potential disadvantages poses the risk of low-level conflict either internally or between the internal team and their stakeholders, for the duration of the SIB.

SIBs also pose considerable financial risk for investors. A SIB is an extreme form of a payment by results contract. When organisations fail to deliver the forecasted outcomes, or cannot get the required beneficiary flow, investors risk losing a lot of money. Recruiting the specific cohort they are trying to help is the challenge most often underestimated.

Next: What are the alternatives to a SIB?