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Bostonians Changing the World

Tracy Palandjian’s push for social impact bonds

The Boston start-up she heads, Social Finance Inc., seeks to fund social service programs in a very different way.

Tracy Palandjian.

Webb Chappell

Tracy Palandjian.

LESS THAN TWO YEARS AGO, Tracy Palandjian’s resume was typical of an upwardly mobile management consultant. Undergraduate degree in economics and an MBA, both from Harvard. Jobs with McKinsey & Co., Wellington Management Co., and The Parthenon Group. But now Palandjian has stepped off that career ladder to head Social Finance Inc., a Boston start-up that seeks to fund social service programs in a very different way.

“Life is random,” says the 41-year-old native of Hong Kong who lives in Belmont with her husband and three daughters. “I am definitely not the kind of person who knew at age 18 that I was going to be a social change agent.” Volunteering at a public service organization when she was an undergraduate and a summer job Palandjian had with a Boston nonprofit while earning her MBA whetted her interest in that sector. That interest grew during her 12 years at Parthenon, where she created and headed a section serving nonprofits. In the process, she learned about the concept of impact investment, especially social impact bonds. With such bonds, private investors cover the upfront costs of social service programs. The government pays them back with interest — but only if the programs achieve certain goals. So programs get funding they desperately need, but taxpayers foot the bill only when the initiatives succeed. 

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“When I first heard about social impact bonds, it sounded too good to be true,” says Palandjian. “For the right, it could mean more accountable, outcome-based spending. For the left, it could mean funding for more and better services for vulnerable people. And everyone wins — government, the nonprofits, and investors.”

At Parthenon, she saw a company called Social Finance Ltd. apply the concept to reduce criminal recidivism in the United Kingdom. Nearing the age of 40, Palandjian was given the chance to start a similar company in Boston. “I didn’t really know what I was getting into,” she says. “But was I going to be a consultant for the rest of my life and give advice from the sidelines but not actually do anything?” So she cofounded Social Finance Inc., associated with but independent of its British counterpart, in January 2011. The organization recently responded to a Patrick administration initiative to allow Massachusetts to enter into such “pay for success” contracts in the areas of chronic homelessness and juvenile justice. “It’s been an amazing 18 months,” says Palandjian, “and I have not looked back.”

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