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.
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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.

optimize

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.

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.

On Lifelong Learning

Jim-StudentInteraction
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.

Thoughts on Culture – Corporate and Societal

In an October 25, 2011 article titled, “The Global Innovation 1000: Why Culture is Key,” published by Booz & Company, the authors (Barry Jaruzelski, John Loehr, and Richard Holman) write, “Studies have shown again and again that there may be no more critical source of business success or failure than a company’s culture – it trumps strategy and leadership. That isn’t to say that strategy doesn’t matter, but rather that the particular strategy a company employs will succeed only if it is supported by the appropriate cultural attributes.”

From my observations and experience, a corporate culture is defined largely by five factors:

  • Who you hire and retain and the way and extent to which you develop people
  • What you measure
  • What you recognize and reward
  • How the leaders act
  • How you allocate resources

Not surprisingly, the bigger the organization, the harder it is and the more time it takes to change a culture. Of course, if the leader of a unit has too many limitations on his/her ability to hire and fire, change the reward system, or allocate resources, significant culture change within that unit can be nearly impossible.

I think about this from time to time in relation to the culture of our society. To what extent do similar factors apply? Certainly, the way we educate and train (i.e. develop) people is hugely important. The kind of performance and behaviors we reward or punish also heavily influence a society’s culture.

How a society chooses to allocate resources also has a bearing on culture. For example, using resources to help people develop and productively utilize their talents will tend to create and reinforce a very different kind of culture than if we use resources largely in ways that reinforce dependencies.

How leaders act can also be a major factor. Unfortunately, we live in an era when respect for institutions of all kinds is at perhaps an all time low. While at times there are good reasons for lack of respect for an organization, other organizations in the same field that have not acted improperly are often tarnished by association. Consequently, even those leaders of institutions who demonstrate admirable behavior and performance often have few followers outside the institutions they lead.

If we use a basic definition of a leader as one who has followers, it seems that a lot of celebrities have far more followers than do most leaders of business, governmental, religious, or not-for-profit organizations. Often, those celebrities and , seemingly, all of their actions – especially the less admirable ones – are widely publicized by various media. We can at least be grateful for those celebrities who consistently demonstrate attributes that are worth emulating.

For those of us in positions of influence in an organization, it’s obviously important that we do all we can to cultivate a culture that optimizes the potential for success of the organization and its people. Part of that involves reminding ourselves that, whether we like it or not, others are watching what we do and how we act in various situations. All of us need to do our best to conduct ourselves in ways that are worth emulating and that will enhance rather than detract from, not only the kind of organization we want, but also the kind of society we want for our children and grandchildren.