Social Enterprise

As CEO of Goodwill in central Indiana, I frequently described our overall objective in general terms as “maximizing mission-related impact while maintaining a financial position that’s good for the organization’s long term viability.”

Taking this approach has required us to define “impact” as well as possible. This has always been a work-in-progress, with improvements in definition and performance over time. Placing substantial importance on mission-related as well as financial metrics is a key feature of a social enterprise. And while “social enterprise” is a relatively recent term, Goodwill has always been one.

From its inception, Goodwill has used a commercial means (selling used goods in a competitive marketplace) to accomplish a social mission. The scope of that mission, originally to provide work for people with limited options, has broadened and now often encompasses other ways of enabling individuals and families to increase their economic self-sufficiency. Still, since its founding, Goodwill has earned and continues to earn the vast majority of its revenue from the sale of products and services. This is unusual for a community-based not-for-profit, and I have always viewed the way and the extent to which the organization blends business and mission as one of Goodwill’s most unique characteristics.

Until recently, it was often difficult for for-profit corporations to include social goals as primary objectives – especially if there was a desire to emphasize the social goals much as the financial goals. Now, however, new corporate options such as the benefit corporation make it possible to do so. Benefit corporations must balance financial and non-financial objectives when making decisions – much as Goodwill always has. Companies that want to go a step further can apply to become Certified B Corps, thus adding more rigor to measuring their social and environmental performance, as well as to monitoring their adherence to high standards in several other areas as well.

Along with the rise in benefit corporations is the notion of “impact investing.” Impact investors make investments in companies that are designed not only to make a profit, but also to achieve a well-defined, measurable social good. Some, though not all, impact investors are willing to take less than a market rate of return in order to help accomplish what they view as important social goals.

These and other innovations are attractive to a lot of millennials who, while interested in having successful careers, are also interested in helping make the world a better place. I’ve met quite a number of them on college campuses where, increasingly, students can take courses – often taught in business schools – on social entrepreneurship. I’ve also served as a judge in a major social venture competition and seen some of the ideas of some very bright young social entrepreneurs. They give me hope!

Benefit corporations, Certified B Corps, impact investing – all of these are new tools for addressing social problems. None represents the solution anymore than does the not-for-profit sector as presently constituted. But in the U.S., the inability of the not-for-profit and public sectors to substantially reduce a lot of major social problems in recent decades makes the addition of some new tools particularly welcome. Perhaps we can all learn from each other and, who knows, even leverage our respective assets and capabilities and come up with some new approaches that will be more effective in improving lives and strengthening communities.

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Our Corporate Social Responsibility as an Employer

The organization I lead now has over 3,200 employees, two-thirds of whom have limited options because of a disability, criminal history, low education level, or other significant barrier. And while there are a lot of part time employees among those 3,200, nearly half of them are the primary source of income in their households. That places an enormous responsibility on those of us in leadership positions to run the organization really well so we can continue to provide a livelihood for all those people who are counting on us. And we don’t take that responsibility lightly.

What we do matters. If we’re not paying attention to what’s going on around us and we allow ourselves to be blindsided, it matters. If we become myopic, complacent, or arrogant; if we fail to take care of our customers; if we fail to recognize what our competition is doing or fail to see new competitors or new forms of competition that are emerging, it matters. If we don’t successfully adapt to changes in our environment – changes in technology, demographics, the legal or regulatory landscape, or the larger economy, it matters. Even worse, if we cut corners, act unethically or illegally, take actions that might benefit us in the short run, but that will eventually result in long term damage, it matters tremendously. How we go about our work matters just as much as the work itself. And all of these things matter to a lot of people who are likely to lose their jobs if those of us running the organization aren’t doing our jobs as well as we possibly can. And if we let that happen, we should and probably will lose our jobs, too.

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On the other hand, if we are paying attention to what’s going on around us; if we’re recognizing opportunities, trying new ways to grow our businesses and accomplish our mission; if we are operating according to high ethical standards; if we’re continuing to learn and adapt; if we’re being good stewards of our resources; and if we’re treating everyone with respect and providing the kind of workplace and culture that enables our people to grow, we’re likely to see our organization grow, evolve, and employ more people. Fortunately, that’s been our recent experience, as we’ve added over 1,000 jobs in central Indiana and increased our revenue by 55% in the last five years.

Of course, our experiences haven’t always been that positive, and no employer can guarantee that any job will last forever. Changes in our external environment are occurring at an incredible rate and require near constant adaptation. Along the way, some jobs disappear while others are created. Some people learn and adapt to changing circumstances and requirements, others don’t.

Our approach is to do the best job we can to grow the organization in a financially responsible manner while simultaneously increasing our mission-related impact. In addition, while recognizing that each of us is primarily responsible for continuing to learn all our lives, as an employer, we are often in a position to help our people learn and grow, improve their education, and earn credentials that enhance their future employment prospects. Then, if circumstances beyond the control of an individual result in the loss of a job, at least the person affected is likely to be better prepared for his/her next step than might have been the case otherwise.

In my opinion, when a company is operating in a manner that enhances the prospects it will be able to continue providing a livelihood for its employees, and when that company is doing all it can to help its employees learn and grow, it is exercising what might be considered its most important corporate social responsibility.

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.

Two Stories

We have a lot of stories at Goodwill. Here are two recent examples – very different from each other, but each a great illustration of some of what gives our work at Goodwill so much meaning.

The Sanders Triplets

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Amber, Ashley, and Angel Sanders are identical triplets. They were raised by their grandmother because their mom had severe addiction problems, and their father wasn’t around. On two separate occasions, they were placed in foster care. During those early years, they struggled, but they didn’t give up.

They enrolled in and thrived at Indianapolis Metropolitan High School, the first charter school Goodwill opened. Graduating with honors in 2009, they received scholarships that covered all of their expenses at Indiana University, where they maintained GPAs above 3.0 and in 2013 graduated with bachelor’s degrees.

At IU, Amber and Ashley majored in East Asian Languages and Cultures. Ashley’s language focus was Korean, Amber’s was Japanese. Angel, who did part of her undergraduate work in Korea, had a double major in International Studies and Slavic Languages and Literature with a focus on Russian.

In their own words, they have “surpassed the stereotype of African-American women who have graduated from neither high school nor college.”

The Sanders sisters have been accepted by Yonsei University’s Graduate School of International Studies in Seoul. Their goal is to earn masters degrees, immerse themselves in an Asian culture, and become fluent in one or more Asian languages. They then hope to work in the United States or abroad for government or a multinational corporation, become connectors, and help bridge borders around the world.

I have no doubt Amber, Angel, and Ashley will achieve their goals.

Verdell

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In 2012, Verdell came to Goodwill through a work release program after serving 17 years in prison. Initially employed as a janitor in one of our outlet stores, she let it be known that while in prison she had learned to clean floors and loved cleaning floors. She was then moved to Goodwill’s contract site at the VA Hospital, where she had the opportunity to clean floors every day. She did so well she was promoted to a team leader position.

In November 2013, while attending a Goodwill safety meeting at the VA Hospital, Goodwill COO Kent Kramer, who was aware Verdell had been homeless, asked about her housing situation. She told Kent she had an apartment, and then Kent asked her if she had ever thought about owning a home. Verdell thought she could never afford that, whereupon Kent connected her with Habitat for Humanity.

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Goodwill and Habitat for Humanity have developed a very good relationship over the last several years, and Verdell was given the opportunity to start the process to become owner of a new HFH home. She got support from staff at both Habitat and Goodwill, put in a lot of “sweat equity,” and on June 14, 2014 was given the keys to her new home. As she said at the dedication ceremony, she had gone “from homeless to homeowner.”

These two stories illustrate a variety of ways Goodwill provides opportunities for people. Some of those we work with (e.g. the Sanders sisters) need assistance because of circumstances over which they have had no control. Others (e.g. Verdell) need help because of bad choices they have made. Regardless, when we provide the opportunities, it’s still up to the individuals to make the most of those opportunities. Most – including Amber, Angel, Ashley, and Verdell – do.