Reducing Generational Poverty – Some Thoughts

During the last decade of my career we learned a lot about generational poverty and the various social problems that are associated with it. As a result of our hands-on experiences and what we have learned from others – including a lot of people in low income households, here are some of my conclusions:

  • We must greatly increase access to affordable, high quality early childhood development opportunities for children in low income households. Because of the way the brain develops, the years 0-3 are even more important than ages 3-5. Society will get an enormous return on its investments in such services.
  • We must remember that no child chooses the circumstances he/she was born into. And nearly every mom – regardless of income level – wants what is best for her children. Where there’s a lack of knowledge among young parents about ways to prevent problems and help young children develop, we need to try to help close the gap.
  • Where there’s enough good data, we should increase the use of pay-for-success financing mechanisms to scale high impact services and make more effective use of public resources. While few programs or services have enough solid data of long term impact and a high return on investment, Nurse-Family Partnership and a few other high quality early childhood development programs do.
  • We must continue working to improve education attainment levels, but we must do a lot more to ensure that at every step of the way we are doing a good job preparing students for the next step. In other words, every child who completes 3rd grade should be ready for 4th, etc. And there is simply no excuse for students who receive a high school diploma to require remedial work when they enroll in a community college.
  • We must do as much as possible to ensure that everyone earns some credential beyond a high school diploma that will enable them to be employable. It could be an industry-recognized certificate, an associate’s degree, or a four-year college degree. A high school diploma is not enough.
  • Young people in high poverty situations need to be exposed at an early age to career opportunities they might not even know exist. We need to broaden their horizons and help them raise their aspirations.
  • The non-cognitive is just as important as the cognitive. The more we do to help children develop good character, habits of persistence, social and emotional strengths, etc., the greater their likelihood of being successful in school, work, and life. The earlier we start, the better.
  • Every child needs a positive, long term relationship with at least one responsible adult.
  • There is sometimes a big disconnect between the ideas of many “thought leaders,” including some policy makers, and the realities of individuals living in high poverty situations. Too many well-meaning people do not have enough direct hands-on exposure to really understand the problems they are trying to solve. This is one reason a lot of their solutions don’t work as intended.
  • Fragmented and “silo” approaches will never solve our most serious social problems. Poverty, low education levels, crime rates, births to young unwed mothers in low income households, and a host of health issues are all inter-related. They reinforce and compound each other. But we don’t tend to treat them as if they were. The public sector operates through large bureaucratic silos, and the not-for-profit sector is incredibly fragmented. There are a lot of organizations doing a good job addressing some of the pieces, but we are not connecting the pieces well enough to solve the big problems. We must do much more to bring some of the good services and resources together – within and across the various sectors – in complementary, holistic, two-generation approaches that can be sustained over multiple years. This will work.

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.

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.

On Talent and Culture

I frequently talk about the tremendous array of dedicated, talented people who are part of Goodwill’s team. They can be found at multiple levels in all parts of our organization, and they are the people who make things happen day in and day out. Goodwill’s accomplishments are really the sum of their accomplishments.

From time to time I am reminded of how fortunate – even blessed – we are to have so many terrific people. For example, this year we are opening four new Excel Centers – diploma-granting high schools for older youth and adults. Our talent sourcing staff posted 68 positions we needed to fill, and the response was amazing. We received approximately 3600 applications that our staff reviewed. They asked 728 of those applicants for additional information, then conducted nearly 400 telephone interviews. From those, approximately 100 were interviewed in person by a panel of staff, and 68 persons were hired. It is particularly reassuring to me that so many fine people want to be part of the work we are doing.

Another recent reminder came from visitors from a Goodwill organization in another state. They spent two days touring our operations and talking with our staff about their work. During those two days they repeatedly told me how impressed they were with the caliber of our people – at every level and in every place they visited. The fact that visitors who have seen many Goodwills and who themselves operate a very fine organization would make so many glowing comments about our staff meant a great deal to me.
What’s the key? We don’t really have any “secret sauce.” Perhaps it’s a different key for different people, and perhaps it’s the sum of several elements that might include:

  • A mission and a variety of services that are easy to become passionate about. There’s generally a pretty strong feeling that what we are doing is important and is helping others improve their lives.
  • A culture that insists on treating everyone in a respectful manner. This means in every direction – up, down, sideways, with those who are inside the organization and with those who aren’t.
  • A genuine desire to provide people with the resources they need so they can do their jobs well and to provide learning and growth opportunities for our people.
  • A strong effort to provide safe working conditions that are bright, clean, and pleasant places to be. Of course, a pleasant place to work is in large part a function of having people who are pleasant to be around – most of the time, at least.
  • A genuine desire to improve – to become more effective at accomplishing our mission, to achieve better results, and to be better stewards of all our resources.

We don’t always succeed at all of this. We’re human and we make mistakes. But the positives far outweigh the negatives, and the culture in our organization today is many times better than it was early in my career when we were much smaller. I’m very aware that with over 3,000 employees spread across approximately 80 locations, the potential for that culture to deteriorate is always present. But when I see the kind of work that goes into selecting new staff – for example, the kind of work demonstrated in filling those 68 new positions in the Excel Centers – and I see the caliber and ability of those who have recently joined our organization as well as those who have been with us for much longer – I know we’re in good hands and I’m confident the future is bright.

What goes around comes around – a brief historical perspective

In the late 1930s, in the midst of the Great Depression, the small Goodwill organization in Indianapolis was offering the following services:

  • A kindergarten
  • A pre-natal clinic
  • A dental clinic for school children
  • In conjunction with the Marion County Medical Society and Methodist Hospital, a home-based health care program
  • Classes for female heads of households. Topics included childcare, food preparation and purchasing, and how to run a household when a spouse is in prison
  • A library with books that mothers could read to their children

And yes, the organization also provided jobs in Goodwill stores. While the available resources and number of people served were small, the approach Goodwill took in those days was – using current terminology – holistic and dealt with the whole family.

When the U.S. became involved in World War II, Goodwill’s primary emphasis shifted to employing people – particularly people with disabilities – who previously had few, if any employment opportunities. Following the war, an emphasis on vocational rehabilitation was added. For the next forty years, Goodwill’s primary mission could be paraphrased as helping people – primarily, but not exclusively people with disabilities – prepare for, find, and keep jobs.

By the early 1990s, major societal changes – some of which began gaining momentum in the 1960s – prompted Goodwill to become involved in several initiatives designed to address growing social problems. Eventually, we launched efforts to try to improve education outcomes for young people who had struggled or failed in other settings. Those experiences, in turn, made us increasingly aware of the need to work with students and their families in a much more holistic manner.

Simultaneously, we began seeing a great deal of dismaying data that vividly illustrated the long term negative trends of a number of significant social indicators, despite massive increases in public spending and a huge proliferation of not-for-profit organizations. We also began searching for programs that have demonstrated long term positive impact reducing social problems.

As a result of all of this, we have begun implementing Nurse-Family Partnership in Marion County. In addition to the basic, nurse-led services offered under this highly regarded, evidence-based national program, each mom or mom-to-be will be linked with a Goodwill Guide who can assist her in accessing education services (e.g. through Goodwill’s Excel Centers) and/or employment opportunities (e.g. in Goodwill’s retail system). The Guide will also advise the mom on financial matters, housing and transportation, child care, and health care. It is a holistic, whole family approach that we believe can help reduce generational poverty.

With and for parents who so desire, we intend to take a similar holistic approach with the children of Indianapolis Metropolitan High School students and graduates, Excel Center students and graduates, Goodwill employees with barriers, and families of all of these individuals. To the extent possible and desired by the parents, we intend to maintain these relationships for a long period of time – ideally, until the children are grown.

As this approach develops, it may increasingly resemble Goodwill’s approach in the late 1930s – only with much greater scale, current information and technology, and, hopefully, long lasting impact – in the lives of people and in the larger community.