Optimizing

I describe Goodwill’s overall objective in general terms as “Maximizing mission-related impact while maintaining a financial position that enhances long term viability.” Of course, such a definition requires that we be able to define mission-related impact. And, despite the use of the word maximizing, the overall challenge is really one of optimizing.

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Many of our management challenges involve finding optimal solutions. For example, how much of our revenue should we spend on General and Administrative expenses (In the not-for-profit world, this is typically referred to as “overhead.”)? Some people believe not-for-profits should minimize G&A. In the long run, that is a recipe for ensuring less than optimal performance, as it results in inadequate value-added support of the high mission impact parts of the organization. Spend too much, though, and there could be legitimate questions about whether the organization is being a good steward of its resources. In this, as is in so many situations, one size does not fit all. Two very important factors in arriving at an optimal percentage are the size and complexity of the organization. In our large, very complex organization, somewhere around 10% of revenue seems to be close to optimal. While to some it might seem counterintuitive, a well-run smaller organization would likely have to spend a larger percentage of its revenue on G&A, as those expenses should not increase at the same rate as revenue.

Another example: One of Goodwill’s historic roles is to provide work for people whose options are limited by disability, criminal history, low education level, or other significant barrier. This is a very important part of our mission and one way we can add unique value in a community. Obviously, then, we want to provide as many jobs as possible for individuals who don’t have many options. However, because retail is the financial backbone of our entire organization, we must have a sufficient number of people with skills that enable us to be competitive and efficient. If we do not have enough people with barriers who have the necessary skills, we must hire others who can fill the gap. In recent years, filling approximately 2/3 of the jobs in donated goods/retail operations with people who have employment barriers has generally seemed to result in an optimal mix.

There’s another optimizing challenge embedded in that example, though, and that is the mix of full-time vs. part-time employees. We have quite a number of employees who for any of a variety of reasons are not able to work full time. However, if we have too few full-time employees, productivity can drop, and that will affect financial performance.

External factors can also have a powerful influence on optimization challenges. For example, the Affordable Care Act has resulted in a large increase in the number of employees who have signed up for coverage under our health plan. While we’re glad more of our employees now have health insurance, this has greatly increased our operating expenses – so much so that we might find it necessary to reprioritize and determine a new optimal mix of operations and services and/or full-time vs. part-time employees that will enable us to continue maximizing mission-related impact while maintaining a financial position that’s good for long term viability.

Nothing is static. Conditions are constantly changing, and we must constantly adapt or suffer the consequences. Optimization issues are always before us, and we’re always striving to find the best balance point – at least until something else changes.

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Thanksgiving

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As this is my last Thanksgiving while serving as president of Goodwill in central Indiana, I am a bit more reflective than I usually am in the early days of what is typically the busiest time of year for me. And when I start thinking of all of the reasons I have to be thankful, the list just keeps growing.

Of course, all of us at Goodwill are grateful for the hundreds of thousands of people who donate goods, shop in our stores, give money, or hire our graduates. We’re grateful for those in many other organizations and units of government who work with us to make opportunities available to thousands of people who haven’t had a lot of opportunities. We’re grateful for the good business relationships we have with companies and other entities that enable us to provide jobs for people with significant disabilities or other barriers that limit their options.

We’re also grateful for those who take advantage of the opportunities we can offer – individuals who put forth much effort – sometimes overcoming major obstacles in the process – to improve their lives and the lives of their families.

I’m particularly grateful for our 3100 employees who do their work so well day in and day out and who work well with each other to help our organization have significant impact. And I’m grateful for the leadership, guidance, and support we have received over the years from boards of directors that have given us the freedom to try many different ways of growing our businesses and accomplishing our mission. And I’m especially grateful that those boards have also given us the freedom to fail at some of what we try and learn and grow from the experiences.

And, of course, it was a board of directors who took a chance and gave me the opportunity to be CEO of this organization when I was only 30 years old and had only three years experience in a management role. I’m grateful to them not only for that opportunity, but also for being patient with me as I made many mistakes trying to learn how to do my job reasonably well – most of the time, at least.

And now, after 40 years, I find myself even more grateful to have been in a position where I can honestly say I cannot recall a day in my entire career when I woke up in the morning wishing I didn’t have to go to work.

Of course, I have much more to be thankful for. I’m thankful for good health, friends, and family. I’m particularly thankful for my wife, who’s put up with me for nearly 35 years and willingly done so many things that have made my life easier and much more pleasant than it would have been otherwise. And I’m thankful for our two grown children, who are good citizens engaged in vocations where they work directly with many people who haven’t been dealt a good hand in life.

And on Thanksgiving Day and the upcoming Christmas and New Year’s holidays, I’ll also be grateful for the wonderful desserts and other foods I seldom let my disgustingly disciplined self enjoy at other times of the year.

If I keep thinking about it, I’ll add more to my list of reasons to be thankful. But you get the idea. And if you haven’t already made your own list, I recommend you do so. It’s a good way to help bring a bit of perspective as we deal with the problems and hassles we frequently encounter in our day-to-day lives.

Happy Thanksgiving!

Posted in Giving, leadership | Tagged , , , , , , | 2 Comments

The Millennials

A lot has been written about the generation known as Millennials – some positive, some less so. Of course, ascribing a particular set of characteristics to an entire generation of people is a bit absurd, given the enormous variability one can find in any large segment of the population at any point in time.

Nevertheless, what I see in many of today’s young people – i.e., many of the Millennials – is very encouraging. They give me hope.

We have a lot of people in their 20s and 30s working for us. They work in many parts of our organization – quite a few of them in our schools. They are typically bright, energetic, eager to learn, and excited about life. I enjoy talking with them.

I’ve also had several opportunities in recent months to speak on university campuses and interact with some incredibly bright, talented students. Most of those I’ve been fortunate to meet are interested in more than just getting into a career that will enable them to earn a good living. They’re also interested in helping make the world a better place. They want to make a difference.

I’m not just referring to liberal arts or social science majors either. Many of the students I’ve been meeting are majoring in business, engineering, or computer science. And some of the opportunities they are having on a number of university campuses today are helping them learn creative cross-disciplinary approaches designed to better prepare them to develop innovative approaches to help reduce some of the persistent social problems in our country and around the world.

One such program is being offered at my alma mater, Georgia Tech. It’s called Grand Challenges. Established in 2012, Grand Challenges each year accepts 110 entering freshmen and is open to students of any major. They live in the same dormitory for a year and learn how to work in multi-disciplinary teams, developing problem-solving skills to find possible solutions to real world problems. Students learn how to give and receive feedback, how to listen, argue, analyze, and persuade.

During the second semester, each team of students identifies a problem they want to tackle. Projects have dealt with a wide variety of food and water, energy, and health issues. One team last year worked on a project to benefit Goodwill of North Georgia. At the end of the semester, they can “pitch” their proposal for funding to continue working on their concept into their upperclassmen years.

A lot of my interest in Grand Challenges stems from what we’ve learned at Goodwill in central Indiana in recent years about how so many of our major social problems are interrelated. And yet, in our society we still tend to try to treat those problems in isolation one from another. Is it any wonder we’re not seeing better results? In our organization, though, we are now taking and further developing some truly holistic, often whole family approaches that we believe offer real potential for helping reduce generational poverty and some of the social problems that are associated with it.

So, for me, it’s encouraging to see universities offering opportunities for students to learn practical, multi-disciplinary approaches to solving societal problems. That, plus the contact I am privileged to have with a lot of young people who are similarly inclined, makes me optimistic about the future.

In my opinion, this generation of young people is going to have major positive impact in this country and many other places around the world. I look forward to seeing what they’re going to accomplish.

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On Character Development

In my September 2, 2014 post to this blog, I described how, over the past 20 or more years, my colleagues at Goodwill and I have been working to build a strong, dynamic, serving institution. Such institutions are vitally important to the development and ongoing improvement of a decent, stable society.

But, as emphasized by Richard Reeves in a wonderful essay, “The New Politics of Character,” in National Affairs, that’s not enough. Reeves states that “if we want a better, freer, fairer society, we will have to complement the 20th-century focus on strong institutions with a new (if also ancient) concern for strong individuals. The quality of our policies is a vital concern. But so is the quality of our people.”

According to Reeves, “The development of character is perhaps the central task of any civilized society and every individual within it…..Gaps in character development correlate to gaps in income, family functioning, education, and employment. The character gap fuels the opportunity gap, and vice versa.”

Lest we think there are simple solutions, though, Reeves provides a dose of reality. For example, he points out that, while rates of teen parenthood have declined, rates have proved stubbornly high among the least-educated, lowest-income groups. It may appear that poor teenagers who become parents are irrationally discounting the future and so failing to demonstrate the virtue of prudence. But there’s an important factor in the equation that we might not realize: “Teen pregnancy appears to have a limited impact on life chances for this group (poor teenagers) because their life chances were so truncated in the first place. Broadly speaking, they are not sacrificing opportunities for wealth and security in the long term for short-term pleasures; their opportunities for future pleasures are few, so as a matter of calculation it makes more sense to pursue the short-term pleasures than it would for a teen from a wealthier family.”

Reeves suggested approach? “The key insight for policymakers is that the task is not simply to teach prudence, but to improve the future prospects of these young adults so they have brighter possible futures to measure the present against…The opportunity agenda is a character agenda, and vice versa.”

Of course, without good role models, it is harder for a child to learn to defer gratification. There is also a growing body of evidence from neuroscientists showing “that growing up in a poor, stressful environment slows the development of the pre-frontal cortex, the part of the brain responsible for self-regulation.”

Reeves emphasizes, though, that “The most important influence on character development is not poverty – it is parenting. Good parenting – close, attentive, nurturing – can often compensate for material poverty.”

This is reassuring for those of us at Goodwill in central Indiana. We’ve now been implementing Nurse-Family Partnership for nearly three years, and well over 600 babies have been born to the moms who have enrolled. All of those moms want to do what’s best for their babies. But when our nurses first meet them, few know how to be good parents or to provide the kind of environment in the home that is conducive to the proper health and development of their children. That’s a lot of what our nurses emphasize during their 2-1/2 year relationship with these families. And that’s a big part of why NFP nationally has shown such remarkably strong results reducing the incidence of a lot of negative social indicators among children whose parents participated in NFP.

Of course, NFP is only part of a long term solution to a lot of major social problems. But thirty years of solid evidence illustrates why it should be scaled as much as possible. We intend to do our part.

Posted in Business and Mission, Early Childhood Development | Tagged , , | 1 Comment

Building Strong, Dynamic, Serving Institutions

Two pieces in the August 24, 2014 New York Times that were, on the surface, unrelated to each other offered insights on a topic I’ve been thinking about in recent weeks.

Tom Friedman’s column referred to the growing lack of order in the world – especially in societies that have overthrown autocrats, but not developed the values-based legal systems and institutions that enable people to grow and prosper. Tearing down the old order was much easier than building a new order with sustainable leadership and institutions.

The other piece, written by Stephanie Rosenbloom, was titled, “Dealing with Digital Cruelty.” It focused on how to deal with the nasty, often cruel barbs posted on social media by “trolls” who intentionally strive to distress or provoke and cause others pain. When I see comments of such people, I always think about how much easier it is to tear down an institution or the reputation of an individual than to build one. I take some comfort in the realization that most of those who delight in tearing down others have probably never built anything in their pathetically negative lives. But I’m also aware they can often do a lot of damage.

Three weeks ago I announced my intention to retire as President and CEO of Goodwill Industries of Central Indiana, Inc. in a little over 10 months. At that time I will have been in this position for 41 years. During those decades many talented colleagues and I have worked together to build an organization that is offering a wide array of opportunities to thousands of people who, in many cases, haven’t been dealt a very good hand in life. We haven’t succeeded at everything we’ve tried, but we’ve continued to learn, adapt as the world around us changes, and evolve to higher levels of impact in the lives of people and the communities where we operate. Today we have a tremendous pool of dedicated, talented people who bring their heads and their hearts to their work every day.

Over 20 years ago I began thinking of what we were trying to do as building a strong, dynamic, serving institution. And with a lot of help, we’ve done that. In addition to those who work in our organization, our helpers have included tens of thousands of people across central Indiana who donate goods, shop in our stores, hire our graduates, serve on our boards, or contribute money. They, too, are institution builders.

There are some indications that trust in institutions of all kinds is at an all-time low. It’s no mystery why. While no institution has ever been perfect, today the flaws are much more visible and tend to receive much more attention in the ever-present 24-hour news cycle than do the positive attributes. Couple that with the pervasiveness of social media and the tendency of negative stories – the more scandalous the better – to quickly go viral, and it’s no wonder that a lot of reputations – of individuals and institutions – have suffered.

I have no idea what the long term implications of these tendencies will be. But I’m quite certain that a decent, stable society will continue to need strong, dynamic, serving institutions that can function well over time despite the inevitable criticisms – justified or not – that come their way.

I’m also convinced that we will continue to need teams of passionate institution builders who devote their energy and talents over sustained periods of time to helping create a better society. At Goodwill we have been blessed with many such persons over the years, and I have no doubt that will continue to be the case as this organization continues to learn, adapt, and evolve to higher levels of service and impact.

Posted in Article Review, Business and Mission | Tagged , , | 1 Comment

On Lifelong Learning

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Jim McClelland shares a laugh with a graduate of the Indianapolis Metropolitan High School.

When I was 17, I thought I knew a lot. Throughout my adult life, though, the more I’ve learned, the more I’ve realized how little I know. I figure if that process continues long enough I will eventually reach the logical conclusion that I know absolutely nothing. (I realize that just confirms what some of you have always thought….)

Nevertheless, I don’t think we can overemphasize the importance of being a lifelong learner. This is particularly true for anyone who works or wants to work, as changes occur at such a rapid rate we have to keep learning just to stay current in whatever field we’re in or, in many cases, be employable at all.

I’ve had the same title at Goodwill for forty years, but the work I do today is vastly different from what it was even a few years ago. In part, the changes in what I do and how I go about my work are reflections of how we have adapted to enormous changes that have taken place over the years in demographics, technology, the economy, competition, laws and regulations, and American culture. Goodwill has also changed in response to what we’ve learned from our own experiences, from the experiences of others, and from research. And we’ve changed as a result of the different perspectives, insights, knowledge, and skills of people who have become part of our organization and caused us to question old assumptions, ask different questions, and consider new approaches.

From a personal standpoint, I have learned an enormous amount over the years from being in a position to work with people at nearly every level of society and in all parts of a community. I’ve also had the opportunity to work with a lot of people at national and international levels, try to understand their experiences and perspectives, and learn from them. The variety is tremendously appealing to me, and having those experiences has caused me to be skeptical of anyone who claims to have all the answers.

I also read a lot. I read to stay current with what’s going on in the world and in my community. I read in hopes of learning something that will help me do a better job or be a better person. I read for insights and to learn about topics I’m interested in. And sometimes I read simply for pleasure and no other purpose.

My regular reading includes publications with different perspectives, as I do not want to confine myself to being exposed only to the thoughts and opinions of those who have one particular point of view. Gary Hamel’s book, Leading the Revolution, (Harvard Business School Press, 2000) reinforced my desire to try to understand and learn from people with different experiences and perspectives. My notes on that book include:

  • Most people in an industry are blind in the same way. They’re all paying attention to the same things and not paying attention to the same things.
  • Insights come from new conversations. All too often, strategy conversations in large companies have the same ten people talking to the same ten people for the fifth year in a row. They can finish each other’s sentences. You’re not going to learn anything new in this setting.
  • There is so much individuals cannot imagine simply because they are prisoners of their own dogma.
  • The more you pay attention to information that supports your world view, the less you learn.
  • You can’t use an old map to find a new land.

While Hamel was writing primarily for leaders in business and industry, perhaps his admonitions could also be helpful in other aspects of a society that has become dismayingly polarized over many issues.

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AbilityOne – a federal program that works very well

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Goodwill Industries of Central Indiana has long participated in a program now known as AbilityOne, which uses federal procurement as a means of providing jobs for people with significant disabilities. The need is enormous. In fact, the Bureau of Labor Statistics reports that in May 2014 only 25.8% of working age people with disabilities were employed, compared with 71.7% of working age people without disabilities.

Nationally, over 44,000 individuals with significant disabilities are employed under AbilityOne at an average wage of $11.94/hr. Goodwill Industries in central Indiana operates 11 AbilityOne contracts that employ a total of 223 people. Over 80% of the direct labor hours on those contracts are performed by people with disabilities. They clean 2.5 million sq. ft. of space a day, provide grounds keeping, shelf stocking, and mail room services. The lowest starting wage is over $11/hr., plus a benefit package worth over $3.00/hr. The jobs are stable, and the working environment is clean and safe.

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One of our AbilityOne contracts is in the Birch Bayh Federal Building and U.S. Courthouse, a magnificent building in downtown Indianapolis. Our 18 employees there clean over 333,000 sq. ft. of office space and provide general landscaping and maintenance of the grounds. All of our employees at that site have a significant disability or other major barrier to employment. Three of them have been with us since we obtained the contract in 1996.

Our contract is with the General Services Administration (GSA), which manages the building. A third party not-for-profit organization now known as SourceAmerica helps link organizations such as ours with participating federal agencies.

We must meet all of the requirements that any other firm doing the same work would have to meet, and our people consistently do terrific work. In fact, GSA and SourceAmerica recently presented our team with a Partners in Service Excellence Award for outstanding work over a long period of time. In addition to consistently performing their work at a very high level, our team has not had a work-related accident in 15 years. Simply put, they are outstanding.

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In my view, this is an example of a program that could be used much more extensively to provide work at good wages and benefits for people who are frequently among the last to be hired and the first to be laid off by many companies. These contracts work well for the workers, the federal government, and for society.

Some critics of this program feel the federal government could get the work done at less cost. That is debatable. What is very clear to us, though, is that when all factors are included, using this program to employ people who might otherwise not be working is far less expensive than would be the combined cost of providing entitlements and other income supports to those individuals while also paying another contractor to provide the services that could have been performed under an AbilityOne contract.

Add the intangible value of this program to the employees and members of their families, and the total benefits to society are enormous.

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