A few takeaways:

1. The most accomplished social entrepreneurs remain frustrated about the slow pace of change, and challenged by the scale required to have a real impact on big problems. While ‘disruptive innovations’ can demonstrate a new way to do business, to affect the majority of people will require us to engage government more directly and significantly increase private investment.
2. We are not remotely assertive enough about making the case for increased individual and corporate philanthropy directed to addressing poverty and conditions related to poverty.
3. When the success of our programs depends on superior execution (e.g. outstanding, uniquely qualified staff; especially strong nonprofit organizations, etc.) those programs will not achieve real impact at scale – because that kind of superior execution cannot be routinely achieved.  Aim for approaches where success can be achieved via ‘average’ implementation.

Perhaps as a counterpoint to our frustration about the slow pace of change — in their book “Switch”, the Heath brothers argued that while big long term goals can be inspiring, it’s the concrete, instrumental steps that make us feel that rush of accomplishment.

Dr. Atul Gawande has also offered an argument for the benefits of incremental change – while also suggesting a blueprint for the kind of ‘average’ replication that may be required.  He describes successful efforts decades ago in the US to transform agricultural production which was driving food prices to unaffordable levels, and putting a damper on economic growth.  Sounds like the health care debate.

Dr. Gawande noted that change happened not prescriptively, but a little bit at a time, as individual farmers in different locales were persuaded and supported to take a chance on new techniques that had positive results, impressing their neighbors to copy those practices.  As the government made selective investments in information and practical analysis, they communicated what they learned widely.  Sounds something like the Social Innovation Fund.

Showdowns over federal and state budgets heat up, and brave citizens protest repression around the world challenging traditional thinking and dogma.  Incremental change can be productive, and demonstrating new ways to do things on a relatively small scale can create momentum and change some peoples’ lives, but until we engage larger systems in government and business we are unlikely to make sweeping, enduring change.  And until and unless as citizens and consumers are willing to challenge orthodoxy, we are not going to get government and business leaders to change direction.

I hear frequent frustration – not just from those who oppose ‘big government’ but from those who are in the social sector — about how the requirements tied to government funds and the incentives they provide make it hard to do the things we know need to be done.  I heard from a member of Congress that when we advocate for funding of specific programs, we must step up to tell them what funding can be reduced.

I noticed a new study from the Harvard School of Education challenging the notion that all we need to do as a country is set young people on a path to a four year college degree in order to engage them in the workforce.  I also saw an article from William Schambraa challenging the value of social sector measurement of results – something we at REDF strongly value.

“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew”

- Abraham Lincoln

Today we make public the names of six of the organizations that will join our portfolio.  REDF will work with these groups and others selected later this year to expand their businesses so that at least 2,500 more Californians starting working by 2015. REDF’s new portfolio includes two groups in the SF Bay Area, two groups in Los Angeles, and two groups that will operate in multiple California geographies. Together they will employ people who had sky-high rates of unemployment before the current economic downturn – people who need these jobs urgently. We’ll be ramping up businesses that deliver property management services in affordable and supportive housing; enterprises that provide fresh, local produce and recycling; and all kinds of other valued services to our communities.

As we work with the new portfolio to create jobs as pathways into the workforce, we will also pursue our second objective to reach an even larger scale so that every community in the US understands how to accomplish this cost-effectively and with real impact.

With REDF’s portfolio, alumni portfolio, and other social enterprise leaders around the country, we intend to develop even stronger evidence and business models, and promote and expand the road-tested approach that combines sustainable businesses with evidence-based employee supports.

Most employers are reluctant to hire people caught up in the criminal justice system, or those facing homelessness, or struggling with addiction or mental illness.   And many of them are without the work experience to compete; although we know from 15 years of experience that they want to work and are able to.  Once they get some experience, employers are more likely to hire them.  They just need a chance.

With so many out of work, why create jobs for these particular people?

First and foremost, these are not strangers, but our uncles, aunts, cousins and neighbors.  They are young people who grew up in the neighborhood. They are veterans who came home traumatized, and became homeless or entered the criminal justice system.  They are among the six percent of our family members and friends with a serious mental illness. We shop at the same stores, attend church or temple together, and have sent our kids to school with them.

And it’s not only that they are part of our community.  If we do not do something now that reduces their incredibly high rates of unemployment, instead of working and contributing to our communities and our democracy, they will burden the economy and taxpayers with the myriad costs that accompany long-term unemployment.  Costs that too many Americans are now learning about first-hand.

The Social Innovation Fund (SIF), a federal program supported by the President and the Congress is fueling this effort with seed funding, fully matched by REDF and our private donors.  The point is to make good on a promise that Americans are rightfully skeptical about – that we can make progress on the critical issues of our time by maximizing private support, using the efficiencies of business methods, and delivering complementary support services that are proven to work.  This is our chance.  We’re at the starting gate.  Check out the competitors on the field, and what you can do to help us reach the finish line!

From my point of view that means the time is ripe right now for innovation.  Maybe I’ve been breathing the Bay Area’s air for too long, but living in a business climate whose investments in innovation have resulted in some of most far-reaching and positive impacts on job creation and economic growth of the past several decades, I have witnessed first-hand the value that can be generated by old-fashioned risk-taking and investment combined with innovative ideas and entrepreneurial people.

For decades I’ve had the privilege of working with hundreds of people at the community level who have invented and expanded win-win approaches that maximize independence and self-reliance, use public resources efficiently, have proven results, and adapt private sector operating principles and financial tools to achieve beneficial social outcomes.

Innovation in both the social and business sectors happens at the local level – motivated, engaged people who are not daunted by current circumstances or constraints, and see the possibilities over the horizon.

The most optimistic and realistic (I hope) piece I’ve seen on the economy was Gretchen Morgenson’s in Sunday’s New York Times noting that the economist Ian Shepherdson (who accurately forecast the mortgage meltdown)  sees significant job growth at the end of 2011 because there are positive signs of increased lending to small business – the engine of job growth.

On the ‘social’ side of the small business equation, the local nonprofit-run innovative social enterprise run by Community Housing Partnership (CHP) just received a $439,000 investment to grow.  The funds came from a very small and virtually unknown federal program (as seems to be the case with many of the more impactful things the government does) administered by the Office of Community Services.  The funds will leverage private sector support to expand CHP’s businesses and create jobs for many formerly homeless people in San Francisco.  CHP has been part of REDF’s portfolio, and we were fortunate to be able to provide assistance to them in securing this welcome job-creating investment.  Los Angeles-based Coalition for Responsible Community Development and five other California nonprofits also were funded, hopefully fueling job creation around the state for chronically unemployed populations.

For the US to thrive, clearly the next few years must be all about job creation.  Finding the most efficient ways to use increasingly scarce public resources and private financing to grow businesses and expand jobs for everyone in our community is the key.  There is one thing people should be able to agree on across the political spectrum despite the obvious risks during a time of uncertainty characterized by volatile politics and an anemic economy.

Smart investments in entrepreneurial people, ideas, and businesses (for profit and non profit) will create the basis for a better future.

Icing the cake were the lunchtime remarks of Bay Area philanthropic and business leader William H. Draper III whose new book, The Startup Game, will illuminate lessons from a lifetime of work in the financial and social sectors.

Take-aways from the day:

• While there is plenty of talk about a new social capital market (SOCAP 2010; Social Investment Exchange; the Office of Social Innovation; Nonprofit Finance Fund), market realities lag behind. VisionSpring, Fair Trade, and Kiva (and of course I was also thinking about REDF’s ambitious 5 year strategy) could accomplish transformative work at significant scale with multi-year capital infusions of $10-$50 million.  The track record is there.  Growth opportunities are tantalizing but unrealized.  All agreed that loans and PRI investments are useful, but grants (equity) are needed to generate outsized social returns.  The market estimated the value of Facebook long before it made any money; but Kiva? Fair Trade? VisionSpring?  Not yet.

• Broader “ecosystems” are required to impact social problems at scale.  Professor Dees’ 2008 SSIR article detailed this idea.  But curiously, though all participants actively engage multiple actors including the private sector, their stories clearly showed that in the absence of their prodding and intermediation, mainstream business is not highly motivated to do business or address basic needs in the huge marketplace that represents low income and poor communities.  It seems counterintuitive – e.g. if there’s a dollar to made someone will be there making it.  But it’s still not the case.

All of this left me thinking differently about the cover story on mental illness in last Thursday’s San Francisco Chronicle.  The article itself was a rare bird.  A substantive piece that reinforced another surprise; a compelling television commercial I recently saw dispelling stereotypes about mental illness created by bring change 2 mind, an initiative of Glenn Close and Fountain House.  Media attention to this subject — still surrounded by stigma — generally only comes from pharmaceutical companies advertising new medicines.

We don’t like to think about it or talk about it, although it touches almost every family.  Despite the fact that an estimated 6% of the population struggles with severe mental illness; and that people with mental illness still face high rates of unemployment — with less than 40% having worked last year, less than half the rate of all other workers.

REDF and its portfolio know that many want to and are fully capable of working.  The financial value to society and taxpayers of putting more people to work is obvious.  Other, more personal elements of the value proposition are hidden but perhaps even more significant.

Last week Marin County’s Buckelew Programs held a community forum showcasing social enterprise and supportive housing, and new service approaches that bring people with mental illness into the workforce and into the mainstream.

Bringing it full circle, for society to value social innovation sufficiently — galvanizing the investment required to scale the most promising solutions; we are going to have to paint bright lines that connect the ‘ecosystem’ dots between local efforts like those Buckelew and REDF promote, the welcome media attention of bringchange2mind, and broader public and private sector economic recovery efforts.  Not easy – but the path is getting clearer.  What do you think?  Possible?

I’m thinking about them again today as we provide a sneak preview of REDF’s new 2011-2015 Strategy which we’ll announce at our Benefit on September 30, at which we are honoring our committed partners Mitchell Kapor and Freada Kapor Klein and Matthew Cate, Secretary of the California Department of Corrections and Rehabilitation.

With the support of our Board of Directors and our Advisory Council, REDF has created an ambitious five year plan to create jobs for thousands of young people and adults who would otherwise be unlikely to work due to histories of chronic poverty, homelessness, incarceration, addiction, or mental illness.

We also aim to develop a social enterprise business model that will employ many more people in a sustained way across the country for years to come. Enlarging the circle of opportunity so that many more people can work is critical to our families and communities, and also to our economic future. It’s something that should appeal to people on all sides of the political spectrum.

Think about your own work history – that of your family and friends. On a personal level, I know I am motivated by respect I have for the risk-taking and hard work of my grandparents.

Their son – my father — eventually brought my family to the other end of the job market, giving us a wholly different life. He became an attorney, and an elected official (who first honed his oratory next to that pushcart). But one thing never changed – the significance of work as a centerpiece of our lives. It meant we could earn a living, do things, and help those we loved. And it was also about more than that. Work was about relationships, contribution, opportunity and hope.

I remember the powerful stories my father heard at work on the weekends when we’d miss him because he’d be at his office. A woman came to him in tears because her son had become addicted to drugs and stolen everything she had in her home. A man in a wheelchair was devastated because he could not get a job. Creating opportunities to help people solve these practical problems motivated his work as a legislator.

I learned that transformative change — for people and communities — is possible. I learned what opportunity means in a world where the playing field is not always level.

Over the next five years, REDF will work with partners across the state to create social enterprise jobs for thousands of Californians who have been shut out of the workforce. We will learn from our work on the ground how to develop a widely-replicable social enterprise model that creates job opportunities and pathways that bring people into the economic mainstream throughout the country.

To do this, REDF is seeking eligible organizations to become part of our portfolio. We will work with organizations running social enterprises that are selected through our open and competitive process, including an online Request for Qualifications.

With your engagement, help, and support we will succeed. Join us. Spread the word. Learn more about how you can help create jobs, opportunity, and hope.

Mindy Tarlow from CEO and I visit the podium before the First Lady speaks.

The room of about 100 people buzzed before Mrs. Obama arrived to announce the initial matching commitment of $50 million by philanthropy to the Social Innovation Fund (SIF) and a companion effort with Grantmakers for Effective Organizations on scaling social innovation.

Mrs. Obama acknowledged philanthropic leaders in attendance including John and Ann Doerr, the Omidyar Network, Skoll, Open Society Institute, and other foundations. Several intermediaries, CDFI’s and nonprofits were there from the Low Income Investment Fund, to Root Cause, Venture Philanthropy Partners, New Profit, NIFTE, and REDF partner Center for Employment Opportunities (CEO).

Government officials attending included Sonal Shah, who leads the White House Office of Social Innovation, Paul Carttar, who heads up the Social Innovation Fund at CNCS, and Marta Urquilla who is the hands-on administrator of the Fund, and Office of Management and Budget staff like Xavier de Souza Briggs.

Melody Barnes framed the Administration’s actions and leadership around not only the Social Innovation Fund, but other government-wide efforts to spur increased attention to results-based partnerships between government, nonprofits and philanthropy. Introducing Mrs. Obama, Patrick Corvington stated that innovation to improve lives is one of the defining characteristics of our country; and characterized nonprofits as leaders in ‘the solutions business’.

Mrs. Obama took the stage to highlight three innovations of different sizes and shapes: the Family Independence Initiative in the Bay Area which organizes low income families in mutual support; the Bell Program in Boston, a program developed by students at Harvard Law School which tutors low income youth, and provides after-school programs, and the Juice Project – a one stop shop for healthy eating and living in St. Louis. She pinpointed the results that had been achieved to illustrate a theme of the social innovation effort – measurement of results (which she added with a smile – foundations really like).

She reminisced about her days raising money for Public Allies with Vanessa Kirsch (who is now the ED of New Profit), and said how hard it was to keep the faith and approach funders who had – at the time — never heard of Michele Obama or Public Allies. In general her demeanor was understated and humble, leaving the impression that she identified closely with the nonprofits in the room, while savoring the foundation contributions that had been leveraged as a result of the Administration’s focus on social innovation.

Mrs. Obama told us that “finding new solutions will depend on all of you – people who feel that no problem is too big or complex to solve”. She said that thankfully solving our communities problems does not depend only on Washington, D.C., but that government does have a major role to play as a policy and funding partner so that we can “go beyond the status quo”In every corner of the country.

It was a good day in Washington, despite the 90 degree heat, that left me energized about the work ahead, and the potential for meaningful public-private partnership.

A video of the meeting is below.

• Tech-Careers — founded by an Ethiopian Israeli to prepare young Ethiopian Israelis (whose poverty rate hovers around 50%) for technology careers by providing them with intensive training program delivered through a residential program based on a Kibbutz near Tel Aviv;

• Muntada, the Arab Forum for Sexuality, Education and Health addresses counseling and education related to reproductive health and sexuality, matching their methods to the local culture and needs; and

• Elem, which provides outreach, drop in centers, support services to runaway, neglected, and homeless Israeli and Arab youth throughout the country.

Many of the challenges these groups face around measurement of results resonate with those of US-based nonprofits – defining the right questions, understanding how their efforts tie to the desired results, figuring out how to find the time, technology, and funding to gather the data, analyze it, and use it to improve. Some challenges are distinctively tied to the specific nature of life in Israel. As a small country with a population of about 7 million, there are relatively limited resources available for evaluation. The volatility of the region and changes in political leadership can lead to quick shifts in priorities for government, nonprofits and funders.

Despite all of this, we were impressed by the consistent desire of everyone we met to learn more about how to improve by measuring the results of their work.

At a final convening that included most of those we had met over the past week, Paul Brest used an airline metaphor for evaluation. We expect pilots to set a course more specifically than ‘somewhere in England’, and unlike some social sector funders, we also expect to pay not only for the ‘direct costs’ of the pilot’s salary and the gas, but also for the indirect costs like training and maintenance (e.g. pay for evaluation and other ‘overhead’). One of the attendees suggested that sometimes the social sector’s work is more like that of ancient Chinese sailors who set off to discover new lands without a real sense of where they were headed, and frequently failed. A good discussion about the need for innovation and exploration, as well as honing the delivery of more or less proven methods nonetheless concluded that in either case – there’s a useful role – albeit different in different cases — for measurement.

Coming to the White House from Google, Goldman Sachs, and the Department of Treasury, Sonal Shah embodies the mission of the Office she leads: to bring together government, philanthropy, nonprofits and the business community to solve social problems. She exhibited the demeanor required to forge these kinds of complicated relationships — strikingly unpretentious, with perceptive, concrete statements and questions.

Sonal Shah listening and taking notes at a REDF-hosted discussion about the value of social enterprise in job creation.

Acknowledging that the Office’s small staff of four (!) has to focus in order to accomplish anything, she was also clear that they cannot do it alone and will need the creativity and partnership of people at all levels of government, business and the social sector. She repeatedly asked us for ideas about government’s role in creating the right environment, and also how to get out of the way as appropriate.

She listened and pressed for policy ideas about how government can help nonprofit social enterprises create more job opportunities for those unlikely to enter the workforce otherwise. She sought clarification about the costs of data collection, and the frustration inherent in providing data that ends up in agency storage boxes rather than informing practice.

Reflecting on her visit, I’d suggest that one of her most powerful levers is the very existence of the White House Office of Social Innovation. Not just the symbolism, but practically speaking Sonal Shah’s presence created the incentive and opportunity for multi-sector meetings about on-the-ground social sector innovation, partnership, performance, and results. Very unusual gatherings that hold great promise.

On the heels of this visit, the Social Enterprise Alliance’s Bay Area Chapter convened to discuss the future of social enterprise. Graciously hosted by the Kapors at their foundation office, REDF’s Jason Trimiew led a lively conversation with Tessie Guillermo, Debbie Alvarez Rodriguez of San Francisco Goodwill and Robert Wexler. Mitchell Kapor took the opportunity to suggest that social enterprise is when “the thing that makes money is also the thing that does good in the world” – e.g. making more money means doing more good. Freada Kapor Klein urged us to consider social enterprises as employers – and bake in from the start a focus on strong values and diversity.

Then the panelists each offered nuggets of good advice for the White House Office of Social Innovation: use the bully pulpit; push innovation deep into multiple government agencies; create Offices of Social Innovation at the state and local levels; pay attention not only to legislation, but to the critically important crafting of regulations and rules that govern implementation; and nurture the next generation of leaders.

A final thought – it will be up to us to seize the opening offered by Ms. Shah, and make it real. What are your suggestions? How do we do that?

Please join us at REDF’s Benefit and Social Enterprise Expo on October 1 at the Bentley Reserve in SF – another chance to talk this over with people from other arenas with similar interests while having great food, and a good time!

For more than a decade, REDF has helped to foster a social innovation that puts people to work by investing in San Francisco Bay Area nonprofits that create employment-focused social enterprises. Building on the lessons of Goodwill, which employs about 80,000 people and provides services to more than one million people nationally, San Francisco’s own Delancey Street, which not only provides housing but also creates businesses to employ people who have been incarcerated, and other iconic programs, REDF’s portfolio of nonprofit organizations has started income-earning businesses deliberately meant to employ people whose personal challenges have kept them poor and outside of the workforce. These enterprises are the key to workforce entry for those least likely to be hired by traditional employers.

Outcomes are promising – among individuals interviewed two years after hire into a social enterprise, 74 percent were working, and 12 percent more were in vocational education. [1]

Despite the existence of other similar employment-focused social enterprises around the country, scaling this model has proven daunting. Our hypothesis is that the key to scale is “procurement” – increasing the amount of goods and services purchased by government and private companies from these enterprises so that they can create more jobs.

REDF is thus increasingly focused on how to increase procurement by the public sector and private companies, while at the same time investing in and building the nonprofit enterprises’ capacity to deliver the recycling, street cleaning, park maintenance, landscaping, screen printing, and other goods and services demanded.

Jeremy Nicholls, advising the government in the U.K. on social investment, states,

“On the demand side the largest opportunity would appear to be in changing public sector procurement. Existing public contracts for goods and services will often not only include outputs but will also score on the basis of delivery, capacity and innovation, and may include community benefit clauses. In the short term, approaches to understanding and managing value could help increase the scores for delivery and capacity, and show the clear links between activity and community benefits. In the medium term, they may provide a way for potential buyers to make results of expenditure part of the core criteria of a contract, aligning the procurement with both corporate and other departmental objectives.” [2]

In the U.S., the prison population presents an excellent case in point of the value of social enterprise. In California, parolees from state prisons [3] number around 120,000. Among the myriad challenges they face is finding a job; an estimated 60 to 80 percent of parolees in California are unemployed one year after release from prison. For many ex-offenders, not having a job is related to returning to a correctional setting. One New York State study documented that 89 percent of individuals who violated probation or parole were unemployed at the time. [4] Meanwhile, California’s Legislative Analyst has noted that less than 20% of the 120,000 parolees are in an employment program and has suggested that most of them are not engaged in programs with a proven track record of success in reducing recidivism. [5]

People with criminal records face a daunting lack of employment prospects upon release, not the least of which is reluctance from employers. According to the Re-Entry Policy Council Report, “surveys have found that 60 percent of employers, upon initial consideration, would not hire an individual released from prison or jail.” [6]

There are more difficulties for this population on top of this pervasive stigma, including the challenges mentioned above – limited education, low skills, spotty job history, health issues, and general work-readiness.

Comparisons with other states indicate that California can do more to prevent recidivism. The Legislative Analyst’s Office puts California’s cost of re-incarcerating individuals on parole at $2 billion annually. [7]

The kind of employment-focused social enterprise that REDF supports is a proven vehicle for bringing those who have been incarcerated into the workforce. New York, which now has 9,000 fewer inmates than ten years ago, has actively supported enterprises, such as the Center for Employment Opportunities (CEO) in New York City, which are widely credited with helping to reduce recidivism. CEO places more than 1,000 ex-offenders in jobs each year after employing them on a transitional basis to deliver maintenance services under contract with State agencies. An MDRC study indicates that CEO cuts re-incarceration rates by 40 percent for the commitment of a new crime two years after participation in the social enterprise job.

CEO and REDF have formed a new partnership and are working with State and local officials and local nonprofits to bring the CEO model to California. REDF has acted as a procurement “agent” for the project and is negotiating with the State for a potential $1.5 million contract that would provide the wherewithal to local social enterprise to create jobs, while leveraging additional resources to replicate CEO’s placement and job retention services. Stay tuned for updates on our progress.

This article is from REDF’s Summer 2009 eNewsletter

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