Growth recipe – Investing in charities

By Todd Cohen

Two years ago, Boston-based Jumpstart — which matches college students with at-risk preschoolers — was venturing into one or two new cities a year.

This year, it has expanded into 10 new cities.

And Boston-based Citizen Schools — which pairs volunteers with low-income middle-school students – expects next year to serve nearly 2,000 Boston youngsters, up from less than 1,000 in 1999. It also will launch Citizen Schools University to train and support similar groups throughout the U.S.

Boosting both nonprofits has been New Profit, a three-year old nonprofit in Cambridge that invests time and know-how to help charities learn, grow and thrive.

“New Profit has fundamentally helped us clarify our goals, helped us to define success and helped us come up with a plan for how to create success,” says Eric Schwarz, Citizen Schools’ president and co-founder.

New Profit has raised $1 million from foundations for its operations, plus $6 million from investors to back Jumpstart, Citizen Schools and four other nonprofits in Boston and New York.

New Profit contributes $1 million over four years to each nonprofit in its “portfolio,” matching that investment with consulting contributed by Monitor Group in Cambridge and New York, and a performance-tracking tool donated by The Balanced Scorecard Collaborative in Lincoln, Mass.

The idea is to give nonprofits growth capital and “intellectual capital,” says Vanessa Kirsch, New Profit’s president and founder.

Linking cash and brainpower is critical, she said, because nonprofits with big plans typically either hire strategic consultants or invest in expansion – but often lack the resources, or don’t see the need, to do both.

What’s more, she says, growth should be tracked against goals – and nonprofits should track more than simply the financial bottom line.

New Profit looks for nonprofits that are social entrepreneurs with ambitious plans, regardless of the issues they target.

Working hand in hand, New Profit staff and Monitor consultants join the senior team of the nonprofits they support.

First, these “executive partners” help nonprofits assess their current strategy and goals, and make choices about their direction and how to get there.

That “strategic choice-making” gives nonprofits options about their work and possible impact, says Aaron Lieberman, Jumpstart’s executive director.

“They lay out the implications of each choice,” he says. “We’re making the decision. They show us how.”

Rather than develop its own early-childhood curriculum, for example, Jumpstart decided as a result of its self-assessment to team up with a curriculum developer and focus its own work on teaching.

Based on the assessment, Monitor consultants help nonprofits analyze their markets, decide what they’re best at and map a growth plan that ties their strengths to their targeted markets.

Jumpstart, for example, decided it could add 10 new programs a year – up from only one or two – by expanding its efforts to work with colleges and capture a share of their federal work-study funds to help pay college students who mentor children.

Finally, executive partners help nonprofits write an operating plan rooted in performance goals for the entire staff and board.

All those steps take about 18 months, with New Profit and Monitor consultants meeting with the nonprofit every week.

Then New Profit, which takes a board seat, assigns a senior Monitor consultant to serve as “CEO coach” for each nonprofit’s executive director.

Coaches focus on issues such as reorganizing the nonprofit’s management team, rebuilding its board, learning to delegate and getting more involved in fundraising.

New Profit also connects nonprofits with other advisers.

Citizen Schools, for example, worked with Diana Leslie, a New Profit executive partner who has served on the boards of Sarah Lawrence College and the Children’s Museum of Indianapolis.

The process “got our board more deeply invested in our growth plan,” says Schwarz, Citizen Schools’ president.

The board “needs to be concretely committed to achieving the goals of the organization,” he says. “It needs to be helping to identify new partners, helping to bring in money, helping to identify potential staff members. They helped us build a more action-oriented board.”

New Profit ties funding after the first year to the nonprofit’s ability to meet financial, customer and operating goals, and to learn from experience and adapt to change.

“We expect there to be bumps in the road and people not to hit their benchmarks,” says Kirsch. “When a benchmark isn’t hit, then it requires us to go back and learn what is going wrong and how can we fix it. It’s the way we learn.”

New Profit also helps nonprofits generate additional funding and works with other funders.

At Citizen Schools, New Profit is a “co-investor” with the Edna McConnell Clark Foundation in New York, which is contributing $2.75 million over four years.

New Profit and the foundation both link funding to the performance tool that New Profit uses.

And Jumpstart has parlayed its growth plan into commitments of $2.5 million from London-based publisher Pearson plc and $1 million from Starbucks, Lieberman says.

New Profit now will put itself through its own planning process. With Monitor’s help, it will study how to share what it’s learned and expand its reach, either by focusing on particular issues or moving beyond the East Coast.

Whatever strategy it chooses, Kirsch says, the sluggish economy makes it critical that nonprofits be smart and nimble.

“At a time when people are being more conservative about their money,” she says, “the pressure is for us to show clear results, and the impact is going to be much greater because we’re going to be competing for less money, and those that are more professional are going to win.”

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