The executive director of the Asian Neighborhood Design (AND) attempts to quantify the potential financial and social return for investors in his nonprofit enterprise. AND seeks to raise $2.27 million. However, as a nonprofit organization it cannot offer potential equity investors a share of future earnings, and it is not eligible for loans.
The Roberts Enterprise Development Fund encourages AND to apply for a grant, but requires that the organization demonstrate both that it is operating efficiently and achieving its social goals. Using innovative tools, including a true-cost accounting framework and a social return on investment analysis, the director attempts to capture the fund's likely total return on investment.
Teaching Purpose: Enables students to analyze the true financial position of a nonprofit enterprise and provides one potential method for quantifying the net social benefits. As the field of social enterprise continues to develop, such methods are increasingly important tools for managers and funders to measure real social and financial results.
Case No: E44
In January 2001, Melinda Tuan, managing director of The Roberts Enterprise Development Fund (REDF), needed to make a decision. REDF, the community development arm of The Roberts Foundation, needed to decide whether to continue its investment in Asian Neighborhood Design (AND), a San Francisco-based nonprofit housing and community development organization.
AND was one of the nation’s most highly regarded community development organizations and was one of REDF’s most prominent portfolio companies. Nevertheless, AND was experiencing challenges in meeting all the expansion commitments of its manufacturing business.
Moreover, during AND’s rapid growth over the previous three years of REDF involvement, the organization’s financial accounting systems had not kept pace with the growth of the businesses. Furthermore, Maurice Lim Miller, longtime AND executive director, had recently resigned, and a new interim executive director, Richard Scott, was hired from outside the company to replace him.
What was the outlook for the business, and was AND still a good fit with REDF’s investment portfolio?
Case No: E44B
Eli and Edythe Broad established the Broad Education Foundation in 1999 to focus on the area of Kindergarten through 12 (K-12) public education reform. By 2004, the Broads had committed nearly $500 million to the Foundation.
Although many educational reform initiatives focused on teaching, the Broads believed that public education faced challenges that needed to be addressed at the highest levels of decision making. Thus, the Foundation focused on leadership and governance, the top of the K-12 educational system.
The Foundation’s mission was to “dramatically improve K-12 urban public education through better governance, management, labor relations, and competition.”
The Broad Education Foundation had a unique decision-making and governance structure. As of 2004, the Foundation did not have an external board of directors but rather relied on outside advisors when needed. Eli Broad reviewed and approved every single grant. Staff reported to the CEO and COO of the Foundation, although several also reported to Eli Broad as well.
The Foundation’s investment of staff resources in particular metropolitan areas stemmed from its need to build relationships with diverse stakeholders, such as policymakers and school board officials.
The Foundation’s grantmaking strategy focused on urban school reform, specifically by funding “innovative efforts to dramatically improve governance, management, and labor relations in the nation’s largest urban districts.” The Foundation believed that improvements in these areas would set the conditions for improved student achievement.
The Foundation’s “flagship” investments carried the Broad “brand name” and included the Broad Prize for Urban Education, the Broad Center for the Management of School Systems (comprised of the Urban Superintendents Academy and the Broad Residency in Urban Education), and the Broad Institute for School Boards.
Looking forward, as the Foundation sought to expand its reach, its ability to effectively transition the management of its flagship investments would become increasingly important. Engaging its external stakeholders and maintaining clear accountability to them would also be critical, particularly when planning and executing the Foundation’s ongoing evolution in the areas of grantmaking and governance.
Case No: SI70
Circus Oz was Australia's premier, international circus. It was founded in 1977 on four principles: collective ownership and creation, gender equity, a uniquely Australian experience, and teamwork.
The A segment of the videocase mirrors the written case (SI69) in exploring the Australia Council's offer to fund a development officer position for two years, largely as a way of increasing income from corporate sponsorships and reducing reliance on government support.
The Australia Council had suggested a salary for this position that was considerably higher than even the highest Circus Oz salary. Hence, the organization’s leadership was concerned about the impact that deviating from their relatively flat wage structure would have on the company’s morale and culture.
The videocase also contains footage of Circus Oz performances, providing a window to the link between the organization’s culture and its aesthetic.
The B segment of the videocase covers the resolution of the dilemma around hiring the development director and the decision to hire the candidate, Paul McGill. In particular, it focuses on the shift in the conception of the position from development director to director of strategic partnerships and the implications of this for the relationship between Circus Oz and its corporate partners (rather than sponsors). The video showcases partnerships with consulting firm Empower and container shipping company P&O Nedlloyd. DVD, Total Run Time: 25:13 min.
Case No: SI69A-SI69V
Established in 1992, the San Francisco-based McKay Foundation supported organizations that addressed income inequality and poverty. The McKay Foundation focused on developing long-term, community-based solutions to social and economic problems. Robert McKay Jr. provided the philanthropic vision for the foundation and served as its executive director.
In 1998, the McKay Foundation formed and funded the Living Wage Coalition in San Francisco. In its effort to change public policy, the McKay Foundation had to operate within a series of regulatory constraints imposed as a condition of its tax-exempt status.
The Tax Reform Act of 1969 restricted foundations from: (a) making lobbying statements to a legislator or legislative staff member that contained both a reference to specific legislation and a point of view on that legislation, and (b) engaging in communication with the public that referred to specific legislation, reflected a view on that legislation, and included a call to action. However, foundations still had wide latitude to educate legislators and the public on issues relevant to proposed legislation, referenda, and ballot measures.
The McKay Foundation played a key role in convening the diverse constituencies that had a stake in the living wage issue, while navigating within the lobbying restrictions placed on private foundations. After a two-year effort, Mayor Willie Brown signed the San Francisco Minimum Compensation Ordinance on November 1, 2000, and more than 20,000 low-income workers received pay increases.
After the ordinance had been signed, McKay considered how to sustain the energy and momentum he had helped to mobilize. McKay wondered whether the living wage community could reorient its focus to address other important problems for San Francisco’s low-income residents or whether the fight for a living wage had been so focused that it could not be sustained beyond the coalition’s recent victory.
Case No: SI68/PM59
Late Palo Alto industrialist William R. Hewlett and his wife, Flora Lamson Hewlett, and their eldest son, Walter B. Hewlett, established the William and Flora Hewlett Foundation in 1966. The Foundation’s guiding principle, as stated by the board of directors, was to “promote the well-being of humanity by focusing on the most serious problems facing society, where risk capital, responsibly invested, may make a difference over time, and on sustaining and improving institutions that make positive contributions to society.”
By 2003, the Foundation was focused on conflict resolution, education, environment, family and community development, performing arts, population, and U.S.-Latin American relations. The Foundation’s assets fluctuated based on market factors but were approximately $5 billion in 2002, with grant awards totaling over $200 million.
Under the direction of President Paul Brest, the Foundation assumed a leadership role in advocating that mission-based organizations, including foundations themselves, make a more conscious effort to articulate the causal theories that guided their work. To do so, they suggested that foundations and grantees use a theory of change, also known as a causal theory or logic model, to structure their strategic planning and evaluation efforts.
In its simplest form, a causal theory took the following form: inputs, which lead to activities, and outputs, which in turn lead to outcomes. The process of designing a causal theory began with establishing desired outcomes and then determining what inputs and activities were necessary to produce them.
The Hewlett Foundation utilized a theory-of-change model to develop its own internal programs, such as the environment program’s off-road vehicle-use initiative. The theory-of-change model informed every aspect of the Foundation’s work, from grantmaking strategies to grantee selection to program performance evaluations.
As the Foundation shifted its grantmaking to align with a theory-of-change approach during 2001 and 2002, Brest and the program staff endeavored to increase the Foundation’s effectiveness and accountability by formalizing their planning and assessment practices.
Case No: SI63
The Global Fund for Women was a funding intermediary that made grants to seed, support, and strengthen women’s rights groups outside the United States. These groups worked to provide women with economic opportunities and independence, improve their health and reproductive rights, increase girls’ access to education, and stop violence against females. Since its first year of grantmaking in 1988, the Global Fund had grown rapidly, awarding more than $26.8 million to over 2,500 women’s rights groups in 160 countries as of 2002.
The Global Fund’s style of fundraising and grantmaking reflected its belief that local women could best determine their own needs and create solutions for lasting change. Kavita Ramdas joined the Global Fund in 1996 as its second president and CEO, succeeding cofounder Anne Firth Murray.
In her new role, Ramdas instituted a number of strategic, organizational, cultural, and process changes, while seeking to preserve the mission and values of the organization.
Organizational changes aimed at professionalizing the work of the Global Fund included recognizing the current staff’s contributions, expanding the staff in underrepresented knowledge areas, and creating a more defined structure and hierarchy.
Strategic changes in grantmaking included proactively involving external advisors from the field, giving larger and multiyear grants, and shifting to a discretionary grant-review timeline that would better meet the needs of potential grantees.
In the area of fundraising, the Global Fund embarked on the first phase of building a permanent endowment fund that would provide grantees and the organization with more security and longevity.
Looking ahead, Ramdas’ priorities included examining how to guide the Fund’s growth without losing the organization’s unique connections with donors, grantees, and staff. In addition, she hoped the Fund could do a better job of assessing grant outcomes and sharing success stories. Ramdas also wondered how the Fund could better influence critical policy-related decisions made in the broader external environment that affected important women’s rights issues.
Case No: SI62
The case highlights a broad overview of a nonprofit media services organization, BAVC, with a strong track record and solid market position in the regional market for media technology training (for professionals and amateurs) and workforce development (for low-income groups), as well as the national noncommercial (not-for-profit) market for creative media services.
The recent history of the organization is one of entrepreneurial dedication, strong leadership, and a dynamic culture of varied constituencies, leading to tremendous growth. In many ways, BAVC has behaved like a high-tech business, utilizing cutting-edge technology to deliver innovative services to the marketplace and constantly innovating to remain at the forefront of the high-end market.
As a nonprofit in this sector, BAVC faces unique challenges and opportunities, relative to both traditional nonprofit organizations and for-profit businesses, making it an interesting comparison to a media company (Disney?) or to another nonprofit organization. Teaching Note available.
Case No: SI6
Susan Ford served as the president and cofounder of the Sand Hill Foundation, a family foundation that made grants to organizations that benefited people on the San Francisco Peninsula. The foundation was established by Tom and Susan Ford in 1995, emerging from the Fords’ shared passion for giving and community development. The foundation focused on the environment, education, preservation of open space, youth development, and job training.
The Fords were among the original donors of the Teen Success Program, a support group for teen mothers launched in 1990 by Planned Parenthood Mar Monte (PPMM). The program encouraged teens not to have a second child and to stay in school, in exchange for $10 per week and $100 for every 25 weeks of attendance. Facilitator-led Teen Success groups of up to 12 teen mothers met weekly. Childcare was provided during meetings, and participants could remain in the groups until they turned 18 or completed high school.
After investing more than $200,000 in the initiative, Susan Ford decided to measure the effectiveness of the Teen Success Program. Her intention was to validate the program’s results and identify its strengths and opportunities in an effort to help it grow further. Yet, even though Ford had developed a positive relationship with Linda Williams, the head of PPMM, she worried that Williams might feel threatened by her proposal for an assessment of the program’s impact. The evaluation process resulted in tensions that caused both Ford and Williams to reflect upon the dynamics of the grantor-grantee relationship, as well as the role of evaluation in their future work.
By 2002, the Teen Success program was operating in over 20 communities in California and Nevada and had served 625 teen mothers. That year, PPMM won the Planned Parenthood Affiliate Excellence Award for services to teens. In mid-2002, PPMM was seeking funding for another comprehensive evaluation of the Teen Success Program so that other Planned Parenthood chapters could potentially replicate the initiative.
Looking forward, Williams, Ford, and others involved in the Teen Success Program hoped to capitalize on their learning to more constructively engage all stakeholders in the evaluation process, effectively monitor the program’s impact, and take action on evaluation results.
Case No: SI56
This case explores the economic growth issues of Bozeman, Mont., and the role that a new nonprofit organization, the Yellowstone Business Partnership (YBP), could have in directing Bozeman’s future. Bozeman’s economy had grown rapidly, but with growth came concerns over development of environmentally sensitive areas, impact on local businesses, and affordability.
YBP was formed to bolster the Yellowstone–Teton region’s economy and environment by seeking solutions, innovations, and inclusion from all sectors of the economy. As the location of the organization’s headquarters and largest chapter, Bozeman’s growth was particularly important to YBP for identifying programmatic objectives and growth implications for the region.
Case No: SI54