Enspiral Collaborative Funding
"Anyone at Enspiral, regardless of if they have contributed funds, can start a “bucket” – a proposal to do work for Enspiral that requires funding. They write up a proposal making their case for why the work they want to do will benefit everyone, help Enspiral achieve its strategic goals, further the social mission, and why they, the proposer, are the right person to deliver the project. This process was, from day one, explicitly an experiement. Everyone understood it wouldn’t be pretty and polished until we actually all engaged with and and worked together to improve it.
People use a form on the website to submit bucket proposals. Anyone at Enspiral can propose a bucket. Everyone with allocation rights in the round – the people who contributed funds – considers the buckets and decides which ones to “fill” with their portion of the discretionary budget. If people collectively feel like a project is a good use of resources, it will get funded. If there are critical budgeting priorities taking precedence, “nice to have” projects won’t get any funds that round. Funders can split up their allocations as they like, or put it all in one bucket. In aggregate, the result is a budget that reflects the collective priorities of the group, determined in proportion to real stakeholding, in the context of the big picture goals. The entire process takes place transparently. A big reason we can run this transparent, collaborative process with minimal administrative overhead is because we use Loomio, an open-source app developed at Enspiral to solve the key question of how distributed groups can make fast, effective, inclusive decisions together, without resorting to a small group of people holding all the power. (Read the story of how Loomio grew our a meeting between Enspiral and the Occupy movement in this winning M-Prize entry). Everyone at Enspiral, even if they neither have allocation rights over funds or have proposed a bucket for funding, can see exactly what’s happening with the budget. Since we run the process on Loomio, everyone is invited to make comments and share their thoughts about what should be funded, although ultimately it’s up to those with allocation rights to make the decision about how to spend their portion. We ran the first round of collaborative funding in April 2013, and every month since. The process has been run as an MVP experiment using spreadsheets and Loomio. Now we’ve taken all our learnings from a year of collaborative funding and we’re developing Cobudget, an app that will make the process visually engaging, intuitive, and flexible – and easy to use by other organizations. Challenges & Solutions
When we first began Collaborative Funding, no one had ever heard of such a process before. So the first challenge was helping everyone understand what it was about. Luckily, we have a strong culture of experimentation, so we were able to transparently say exactly that: this is an experiment, so please just give it a try. Honesty about the process being new and untested meant people were willing to put up with it being unpolished, and we consistently asked for and reacted to user feedback to improve it. Sometimes it can be hard to get people to engage with a new process, but because we were giving them direct control over funds in a way that was easy for them to understand and act on, each participant was motivated to make their choices. And because we essentially opened up an internal crowdfunding platform where anyone could pitch for a slice of the collective pie to do the work they were most interested in, people were motivated to propose buckets. Meaningful empowerment overcomes resistance to process change. The thinking behind the process is complex, but interacting with it is simple.Find your name on a spreadsheet and see how much money you have to allocate. Look at a few choices of buckets you can fill. Decide where you want your money to go. You can easily see the rest of the budget and the big picture to give context. If funders want to hold something back for a rainy day, or they aren’t impressed with the bucket options this round, they can put their funds in reserves. To propose a bucket, you just go to to a page on our intranet and fill out a simple form explaining your idea, and it will either get funded or it won’t. It’s very much like earning points. Gamification and making the process engaging overcomes resistance to “boring” budgeting. Here’s an example of how the spread sheet version of Collaborative Funding works at Enspiral (using some made up example numbers and buckets).
Debugging the Process – we began with a rough MVP and continuously improved it. One challenge we identified was the need for keeping the bigger strategic picture in mind. We’d succeeded at providing much needed context at the level of a monthly budget. But we still had questions about whether the choices we were making around funding were going to achieve our larger goals. Sometimes what seems most important one month actually isn’t when you zoom out to the level of a quarter, or a year. After completing a collaborative strategy-setting process called Mastermind (a story for another time!) we had four key pillars of a 2014 strategy. We decided to add a requirement to bucket proposals to speak to which of the four pillars a project related to, and why it was the best use of funds to achieve the larger outcomes we’d set for ourselves for the whole year. We’ll report on collaborative funding outcomes against these goals, and hope to develop metrics over time for measuring our return on investment of the funds we put in buckets. One thing we’re still finding challenging with the collaborative funding process is forward planning. In order to make sure we weren’t spending money we don’t have, we designed the process to operate on a cash basis, only allocating funds we’ve already received. This makes it difficult when an enticing opportunity arises that would need to be funded over several monthly rounds in the future. As a first step, we’ve developed several bucket types.
- Zero or Hero – must be fully funded to target amount or the project is cancelled
- Scale to Fit – the project will scale up or down to fit the budget
- Savings – the bucket will be proposed in future rounds until the target is hit
This way, people proposing buckets can determine for themselves how they’ll deal with possible funding outcomes, and people allocating funds can make decisions accordingly. For projects that need funding over multiple rounds, the proposer can start a savings bucket, which will be included in future rounds. We have successfully funded several major projects this way, such as a major redesign of the Enspiral website, and sponsoring an Enspiral member as the “designer in residence” at a social enterprise accelerator. The biggest limiting factor of our manual MVP (the process run on spreadsheets) was that the administrative practicalities required us to run a formal monthly process. Bucket proposals and allocations are announced on the 1st of the month and allocations are closed after 5 days. Any unallocated funds are decided by the Board. Once it’s all set, the funds are disbursed to the people and teams who proposed the funded buckets. We wait until the next month to run the process again. Now we’re building Cobudget, an app to make the collaborative funding process smoother, more engaging, flexible, and beautiful. The first challenge we faced was resourcing the product team to build the app. We didn’t have the finances to fund the project internally, so we used an internal process called Fairy Gold to pay for the team (yet another story for another day!). Essentially, it is a way for people to earn a percentage of future revenue generated by a project – something like earning equity, but for internal projects. This was an empowering and enticing offer that allowed us to recruit the approximately 400 hours of design and development work required to build the first version of Cobudget. Switching to the Cobudget app is allowing us to follow a much more fluid process where people can propose a bucket at any time and have it funded on a rolling basis. It also lets people put their allocations into the ‘reserves’ bucket (i.e. not spend them right away, and save them instead) and still retain control over those funds for future projects. This substantially changes the dynamic away from ‘use it or lose it’ to longer term planning. See Charlie, a developer working on Cobudget, introduce the current alpha stage of the software in this 3 minute video. Cobudget, by Charlie from Enspiral on Vimeo. Another challenge in the collaborative funding process that Cobudget will help address is that of reporting. We found it difficult to find the right process, incentives, and triggers to get bucket proposers to report back on how their project went – simply telling people they have to report back “just because” won’t go far at Enspiral. Once a project is funded, people are focused on doing the work, not reporting on it. We manually generate 6-monthly reports about raw numbers, such as where income came from and where it was spent, but generating these reports is time intensive, and the results are quatitative not qualitative. We’re designing some exciting features in Cobudget that will make reporting a natural part of the process. You will be able to visually explore reporting information like income and expenditure flows, measures of how well a project went after being funded, how results relate to the overall strategy pillars, and data on the different ways individuals, teams, and companies are contributing to and interacting with the system. This will have profound positive effects on Enspiral’s overall ability to create engaging and transparent global reports about what the network is doing and how well it’s accomplishing its collective goals.
Management time has been greatly reduced and the cognitive load of deciding what to do and where to spend our energy is spread across the whole network. Collaborative Funding has been the primary driver behind reducing our fixed staff costs by close to 80%. The number of people engaging in decision-making around the budget has gone from just a few to over 50 in some rounds, with up to another 100 involved in observing and commenting, while at the same time reducing the total cost in terms of time and stress of the overall funding process. We collectively engage, and then collectively hold the outcomes and consequences. Transparency is vastly increased. Whereas before, any Enspiral member could technically look at the financial reports generated by the accountant, the truth is that people didn’t. Real transparency isn’t about the numbers being technically available – it’s about proactively making the information accessible in a way people can understand and engage with meaningfully. Now everyone can see exactly where Enspiral spends its money each month, regardless of whether they are part of allocating or being allocated funds. This is a major boost to trust. People actually have their heads around the numbers now. If someone is advocating for their favorite project, there’s no behind the scenes politicking or quid pro quo – if you want something funded, you raise a bucket to the whole group, and it will either get backing or not during the transparent process of funding. Supporting one thing means saying no to something else, and the process has led everyone to think not in terms of their personal perspective, but in terms of how they can support the collective goals by their individual choices and contributions. We have been able to connect our budgeting and funding process directly to our strategy, considering how each and every bucket fits in with our larger goals. This makes the strategy real on a very practical level for everyone doing work and funding work in the network, and allows us to consistently reflect on our progress and our collective choices. Collaborative funding has allowed us to really “walk the talk” of collective ownership combined with empowerment and autonomy. Enspiral is literally owned by its members (each has one share representing decision-making stakeholding, and no dividends or profits are taken out). Collaborative funding lets all members act like business owners, making the hard choices about where to allocate limited resources, and what we want to achieve as an organization. At the same time, people contributing funds retain control over where those funds are directed. People know their money isn’t going to just disappear, and they will have meaningful input to direct it to projects that align with their top business and social impact priorities, so they are willing to be very generous and open. Financial contributions aren’t a tax – they represent voluntary and meaningful participation in a collective process. One result of collaborative funding has been amazing generosity. On several occasions, various Enspiral ventures have decided to increase their contribution to collective funds beyond what they initally commited for a given period. If people see that a proposed bucket will help them better achieve the social and business objectives of their venture, they opt to put in more funds voluntarily. This only happens because collaborative funding gives them meaningful say over how collective funds are spent. We actually give our accountant headaches because companies insist on just giving each other money to support various initiatives, which apparently isn’t something you normally see in the tax code! (Don’t worry, Enspiral Accounting is used to our crazy schemes at this point and has made sure it’s all above board). For instance, this year Enspiral Space is expanding into a bigger office, a project requiring an investment of resources to pull off. We’ve been running Enspiral Space very lean, in order to keep desk rent affordable for the bootstrapping social enterprise startups and charities in the office, so the company itself had limited extra capital. But since the Enspiral Space is the physical heart of the network and creates immeasurable value for all the Enspiral Ventures through hosting events, creating space for collaboartion, and facilitating deeper personal bonds through people working together, many ventures have invested in the expansion above and beyond their normal contribution to the Foundation. Another example was the Loomio Crowdfunding Campaign, which rasied over $125,000 internationally to bring a major update of the open-source decision-making app to the world. Not only is Loomio a project everyone at Enspiral intrinsically understands the value of (since we use it every day), but the campaign received international media attention and new strategic relationships that had positive ripple effects right across the network. So it makes sense that the ventures would dig deep and give extra support financially through collaborative funding. The end result is a total win-win: because we’re collaborating, what’s good for Enspiral as a whole and what’s good for its member organizatons comes into alignment, and collective and individual needs complement one another powerfully." (http://www.managementexchange.com/)