Rethinking the way we invest in social services

Lynn Dovey, MIT Sloan Fellow Class of 2002Lynn Dovey, SF ’02, Associate Deputy Chief Executive at the Ministry of Social Development in New Zealand, is forging a new path in the delivery and funding of social services, and governments around the world are following suit. Dovey’s goal is to create an investment strategy for social services that will ensure that every dollar spent delivers maximum value to constituents.

New Zealand’s social development activities, like those in most countries, are geared toward the care and protection of vulnerable children and young people, employment, income support, social security services, student loans, and social housing assessments.

“We use a significant portion of our discretionary budget to contract services from not-for-profit and for-profit providers,” she says, “and like social services agencies around the world, we haven’t always known how to measure the outcomes for individuals and families. To put it another way, we don’t always understand the return on our investment.”

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  Government  

Financial literacy promotes good government

“When written in Chinese,” John F. Kennedy once said, “the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”

deborah-lucas2MIT Sloan Distinguished Professor of Finance Deborah Lucas believes that the 2008 financial meltdown is a case in point, triggering a tectonic shift for policymaking within government financial organizations. “If you’re looking for silver linings in the 2008 crisis,” says Lucas, “the chance to focus attention on financial literacy and transparency in the public sector is a big one. A large segment of the policy community agrees that we must act now to improve the accuracy of our risk assessments.”

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  Finance  

Minimum wages = maximum profits? Zeynep Ton says no.

Almost one in four working adults in America has a job that pays less than a living wage.

In large part, the situation persists because the corporate marketplace has long labored under the conventional wisdom that paying the lowest echelon of workers minimum wages is a bottom-line necessity. But is that economic truth or myth? Are low wages, minimal benefits, and inhumane schedules the most prudent way to keep costs down and prices low?

ZeynepTon.mitsloan.mit.eduAbsolutely not, says MIT Sloan associate professor Zeynep Ton. In her influential book The Good Jobs Strategy Ton contends that stranding employees in low-paying dead-end jobs is an organization’s choice, not a necessity—even in low-revenue settings. She has dubbed it “the bad jobs strategy.”

Ton draws on more than a decade of research to show how operational excellence makes it possible for companies to of­fer low prices to customers and superior results to their investors while still paying their employees a living wage. She points to four model retailers—Costco, Merca­dona, Trader Joe’s, and QuikTrip—to illustrate how investing in workers has a positive impact on the bottom line. All four companies have parlayed a generous investment in personnel into lower costs, higher profits, and greater customer sat­isfaction.

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