The Real Work of Collaboration & Sharing: What Fiscal Sponsors Can Learn from the Behavioral Sciences

On March 24, 2022, we were grateful to welcome Syon Bhanot to our Member Conversation to discuss the potential applications of research from the applied behavioral sciences field to some of the most persistent problems faced by fiscal sponsors. Syon is a leading scholar of applied behavioral economics, teaching at Swarthmore College, but also a member of a number of research groups, including the MIT Applied Cooperation Team and his own burgeoning practice as a consultant in the study and application of applied behavioral economics. Other leaders in the applied behavioral sciences include these folx and in the popular press, the likes of Richard Thaler, Cass Sunstein, Daniel Kahneman, and others.

The behavioral sciences hold tremendous untapped potential to inform transformative solutions for fiscal sponsorship. This area of study is concerned with how real people behave in real situations, with all of our manifest imperfections. The behavioral sciences field was founded nearly 60 years ago in direct critique and opposition to classical economics, which still dominates a great deal of thinking in the field. The classical school is grounded in an idealized view of human beings as rational optimizers in all cases. If such were true, we would be more able to resist that late-night piece of chocolate cake, or more tragically, we would not have experienced the raging bonfire of moral hazard that led to the 2008 subprime mortgage crash.

Regardless of your model or philosophy for fiscal sponsorship, we are all in the business of sharing resources and infrastructure with our projects. We also rely on the cooperation of our project directors and their teams to work with our sponsor staff in a true co-management relationship. Creating cultures of mutuality, accountability, and sustained cooperation are essential to our work. More broadly, you could argue that the entire nonprofit sector is dedicated, in one way or another, to nudging people to overcome their lesser angels and behave more generously, or “prosocially” toward each other, rather than indulging in pure self-interest. You might also argue that our sector exists, at its core, to mitigate the negative impacts that result from our failure to resist those lesser angels: prejudice, racism, and the extractive, exploitative, and inequitable dynamics of neoliberal capitalism, to name a few.

The question of how we encourage “better” (more prosocial) decisions and actions is a core enterprise of the behavioral sciences. But doesn’t that sound like mind control? And who decides what is a “better” decision? Well, this work is also not to be undertaken without a great deal of thought and consideration as to when and how you apply its ideas. In fact, there is a whole field of ethics that has arisen to address the moral implications of behavioral science.

Syon shared with us a few of the concepts that are studied in his field and that underpin a great number of applications, from government to the private sector, and hopefully with greater embrace, the nonprofit sector as well. Below are some reflections on those concepts and how they might apply to our everyday work as fiscal sponsors.

Repeat Interaction & Reciprocity

There are many studies around the positive/reinforcing effects of repeated interaction as a motivator of behavior, as well as the power of reciprocity, a deep-seated way in which humans relate to each other. While our field talks a lot about mutuality and “community,” many sponsors still maintain very transactional relationships with their projects/sponsees and then wonder why they are treated merely like a vendor of services. There’s nothing wrong with that approach, but if you are preaching a culture of intentional community and mutuality and then work and operate transactionally, some dissonance may result and lead to behaviors you don’t want. Greater degrees of mutuality help build trust, which may allow sponsors to weather bumps in the road more readily as a community.

What might happen if you framed your sponsor-project relationship as much around what the project is bringing to your community as what you are doing for the project–from the moment of application and discernment, through the relationship?

Do you offer opportunities to have your projects support your work as a sponsor through services they have to offer? Do projects get financial or other consideration for such reciprocal support? How else do you engage in intentional reciprocity?

Social Proof & Observability

Another major motivator of behavior (good, bad, and ugly) is social (“peer”) pressure, as we well know. Key to leveraging social proof (or the fact that a significant number of people are doing or are interested in a particular thing) is observability–the ability for people to observe behaviors, register preponderance, and adjust their behavior accordingly. Social media provides a platform for social observability at massive scale and accelerated velocity. The behavioral science wing of the U.K. government conducted an experiment for the British taxing authority several decades back aimed at trying to get delinquent taxpayers to pay. They sent a range of collection letters out with a variety of messages from the expected punitive “or else” letters, to various incentives - but the most effective message in motivating folx to pay up was: “Nine out of ten people in the U.K. pay their tax on time… and you are one of the few who hasn’t paid yet.” The desired behavior became observable – and the deviant behavior was highlighted.

How much of your management behavior is focused on mere reminders and penalty-based incentives to motivate actions: submitting time sheets, reimbursables, and others?

How often do you hold up in very visible (communications) form the number of projects that DO submit on time, for example?

Are there other ways in which you could use social proof and observability to nudge projects toward certain behaviors (or vice versa)?

The IKEA Effect & Sunk Cost Fallacy

The IKEA Effect is so named for the fact that we tend to value something more that we build ourselves. This applies as much to nonprofit organizations, programs, processes, and policies, as it does to pieces of affordable furniture. Closely related to this syndrome is the Sunk Cost Fallacy, which describes the escalation of commitment we enter into when we throw good resources after bad in the hopes of finally seeing the efforts we’ve put into something finally come to fruition. While sustained investment is often needed to realize a successful program, we also need to be mindful not to become the gambler who keeps on losing in the hopes of recouping losses with the next hand. Both of these behavioral attributes lead to reticence to end ineffective programs, substantially re-think our models, or undertake any significant change for that matter.

These dynamics are also particularly prevalent in founder cultures, which constitute a vast quantity of fiscally sponsored projects, and may be the reason that culture or behavioral shifts in founder-led projects are often difficult to undertake–especially the decision to wind down, if a project has served its purpose or becomes unsustainable. For-profit start-up cultures tend to valorize and celebrate “exit” as a badge of achievement. But in the nonprofit sector, we tend to think of exit in negative terms, even as a moment of failure. The behavioral sciences also have studied how we register loss more acutely than gain (aka “loss aversion”), so both the IKEA Effect, loss aversion, and the Sunk Cost Fallacy can conspire to create unhealthy founding dynamics.

How can we create space to speak more frankly about these dynamics, embrace change and transition/succession, and celebrate exit as a moment of success for projects and sponsors alike?

How might sponsors harness the IKEA Effect positively, as a means of strengthening social ties within a community of projects through fostering a sense of ownership and participation in the design and development of sponsor resources?

Overconfidence

Lastly, we discussed our tendencies to be overconfident in our estimation of many capacities and abilities, which has been well studied and demonstrated by the behavioral sciences. For example, this may lead to organizations under-estimating their capacity to support a new project coming into our portfolio, especially if it is of significant size and complexity. Saying no is never an easy thing, and our empathic desire to extend a helping hand, coupled with some manner of overconfidence can find us over our head quickly.

We may not just overestimate our organization’s capacity to manage and operate, in our drive to achieve greater social justice we likely often overestimate our ability to understand the cultural contexts of the leaders we support. Even with the growing discourse around equity and inclusion, implicit bias training and awareness building, we also need to take care that mere awareness doesn’t lead to overconfidence in our ability to overcome such biases. Such work will never be finished.

How might we provide space and support for our staff and project teams, allowing them to celebrate the impact they have on some of the world’s most intractable problems, while acknowledging the limits of our agency. Practicing humility without helplessness requires intentional space for mindfulness, conversation, and healing for sponsors and projects alike.

And how might we engage in sharper portfolio management and other, more regular, organizational health assessments to support more intentional conversations around operating capacity limitations and strategic growth?

The above are just a few ideas from the vast field of the behavioral sciences. We encourage our peers and colleagues to delve deeper into this exciting area of research. It may just hold clarity about and answers for some of the most perplexing questions our field faces.

To continue your exploration of the behavioral sciences, visit Syon’s personal page with links to peer resources.