I’ve been following the federal government’s emergency aid announcements closely, and I remain perplexed by the criteria to qualify for the 75 percent wage subsidy: organizations must demonstrate that gross revenues have declined by 30 percent when compared to the same time in 2019. 

But the thing is, a non-profit (established or startup) can’t demonstrate that kind of revenue drop in the same way a business can.  

As of this writing, the novel coronavirus has spread to more than 170 countries around the world. It’s an acute, rapidly unfolding crisis that we are facing all together, as an entire global community. Governments everywhere are working around the clock on measures to contain the spread, support the vulnerable, and keep their economy going. And certainly Canada is no exception. While many complain that the federal government should be acting faster on aid, this is actually lightning speed for government spending. 

To address needs with speed, the inclination is to be efficient. The problem with efficiency, though, is that it can create blind spots. At a time when every minute matters, even the smallest blind spots can yield massive issues.

So, how does one solve this? You announce first and design later.

It’s a common tactic, especially made prevalent by the world of startups to validate an idea with users — crowdfunding campaigns to public prototyping are all ways to validate ideas before moving forward with production or implementation. Idea validation is an important phase in startups, because you find out whether your assumptions about your users are true or false. You can validate that your research is correct and design a solution that reflects any new insights you gain. 

That’s what the federal government did. The problem is that we’re not announcing a new pizza delivery robot (although that’s not a bad idea during physical distancing) — these are unprecedented times when anxiety is already high, and this approach doesn’t translate well to the complex social impact world.  

Social impact organizations of all kinds and sizes have been frustrated and confused by the federal government’s aid announcements. If the commitment is to support vulnerable people at this time, then why don’t the policies make sense for organizations whose missions are to enhance lives at the margins? 

Let’s go back to the recently announced wage subsidy. It’s a 75 percent wage subsidy to businesses and non-profits that have lost 30 percent of their revenue as a result of the pandemic. To qualify, organizations will have to show that their gross revenue in March 2020 was 30 percent less than it was in March 2019.

The federal government came up with an aid solution based on internal assumptions, declared it publicly, and gave themselves time for design. Then they let the voices about what won’t work for users trickle in, in order to analyze and tweak the solution they announced — in time for the implementation date. It’s not perfect, but in a context where there is no playbook, it might be the best we have. In that spirit, here are two pieces of feedback for the federal government to re-work its assumptions and design of the wage subsidy for social impact startups as well as established organizations. 

Revenue rarely comes from a single source. Unlike small business, where it’s safe to say that all revenue comes from the sale of goods and services, revenue for social impact organizations are varied and include donations, government and foundation grants, sponsorships, earned revenue, and memberships. Each revenue stream has varying levels of longevity, volatility, and risk month-to-month. Using one criteria doesn’t work in multiple-revenue source contexts.

Revenue is not a proxy for impact. Social impact organizations have a mission to generate, well, lasting impact. Rather than look at how much revenue has dropped, also consider how much impact would drop — today, six months, and 12 months from now. A better criterion is: how does an organization, at a minimum, maintain its gains in impact — which could have meant an atypical spike in revenue last year or may not have? Focus on maintaining the gains in impact six months from now. 

Every economic policy decision, from the legalization of cannabis to the bailout of the auto industry, has had societal implications, and the negative implications are left largely to the social impact organizations to manage — from employment training to supporting victims of domestic abuse. That means, if we don’t have right-sized supports for social impact organizations in the short term, they won’t be ready when demand increases in the medium term. 

According to innovation expert Steve Blank, if you do not validate your assumptions, you only push failure off into the future. There is one page the federal government should take out of the startup playbook — get out of the building (virtually) and validate ideas with real people, because the fewer the blind spots, the better off we all will be. 

Vinod Rajasekaran

Publisher & CEO

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