Improving government performance through pay-for-success and pay-for-performance approaches
Governments around the globe are trying new approaches to solving complex social problems. They are increasingly moving away from the direct provision of social services towards more collaborative partnerships with the private sector. Pay-for-success, also known as pay-for-performance or Social Impact Bonds, is a method for engaging the private sector that has been gaining attention and support for their ability to raise non-government funds to finance social programs and increase collaboration between the public, private and not-for-profit sectors. Pay-for-performance mechanisms are not new, however, the unique Social Impact Bond model is a relatively novel concept. The first Social Impact Bond was launched in 2011 and four years later there were 41 projects in development and operation. Although the approach shows promise, scholars have raised some concerns and questions. Some researchers argue that the pay-for-success approach might not be as effective and efficient as advocates claim. There is a clear need for theoretically driven empirical research into these new forms of financing government programs to determine if they are indeed more effective and efficient at helping those in need compared to more traditional public service delivery mechanisms.