Chairman’s Corner: January 2005

Looking Back, Looking Forward

by Mario Morino, Co-founder of VPP

The beginning of a new year is a time for looking back on accomplishments and forward to the work ahead. At the start of 2005, we at VPP pay homage to the old adage, “Be careful what you wish for.” We have great investment partners who face formidable challenges yet have the potential to tackle them. We built our team with seasoned executives having extensive regional knowledge to deliver on the promise of “strategic assistance” for our investment partners. We’ve developed a comprehensive suite of tools and systems to support the VPP investment approach, and we’ve learned how to apply and improve on these tools.

Each and every day we continue to learn just how difficult our chosen course is. The investment road we have undertaken is one of high risk for high reward, yet, we remain convinced that our efforts will yield significant results, despite the risks.

For our investment partners, 2004 was a year of important strides in expanding their coverage, serving more children and youth, improving their services and thus the outcomes achieved, and building their organizations. We entered into the first stage of investment relationships with three new investment partners: The Boys & Girls Clubs of Greater Washington, Mary’s Center for Maternal and Child Care, and, most recently, College Summit. And, we began multi-year investment partnerships with CentroNía (formerly Calvary Bilingual Multicultural Learning Center) and the Latin American Youth Center (LAYC) following the completion of their business planning initiatives. We also committed to the continuation of our co-investment with the Edna McConnell Clark Foundation to support Asian American LEAD’s (AALEAD) business planning initiative, after AALEAD completed the first stage of organization building that the Edna McConnell Clark Foundation and we supported.

Other portfolio organizations moved full steam ahead implementing expansion strategies. Heads Up began serving children at two new sites in 2004, expanding to a total of 10 locations. The See Forever Foundation opened its second campus—Maya Angelou Public Charter School-Evans—in partnership with the DC Public School system (DCPS) and supported by the Gates and Walton Foundations. The Child and Family Network Centers (CFNC) opened a new center in the West End of Alexandria to serve more children with new support from the Freddie Mac Foundation. The Center for Multicultural Human Services (CMHS) began serving children and families in two new locations—Arlandia and Herndon. LAYC entered into a partnership with the Archdiocese of Washington to become the anchor youth program in a new, multi-service facility in Langley Park, MD, guided by growth aspirations developed in their business planning initiative. And, CentroNía opened a new charter school that serves children from preschool through fifth grade.

More important than simply the numbers of children and youth served, there were across the board improvements in the quality and scalability of investment partner programs and services. The increased focus on understanding their respective “theories of change” resulted in improved programs and services to better achieve sought-after outcomes. Material improvements were realized in curriculum, faculty, staff, program delivery, and client care. And, for several organizations, including Heads Up, AALEAD, and CMHS, outcome assessment systems were implemented. For example, Heads Up was able to report that individual reading assessments for the 2003-2004 program year showed that 856 students averaged a 1.1 grade level jump in reading skills over the year.

Each of the investment partners took important steps to fortify and strengthen their organizations so that they may become even more effective in building their organizations and further scaling their efforts to improve the lives of children and youth. A number strengthened management teams and further developed their boards. Heads Up, See Forever, LAYC, and CentroNía hired senior executives for their management teams. Introducing this kind of change in an organization is vital but tough, requiring Executive Directors to let go of certain tasks to embrace a newfound freedom that allows them to focus on larger issues to deliver on their mission. CMHS, See Forever, Mary’s Center, AALEAD, and Heads Up also made important additions to their boards.

Working with McKinsey & Company, the Monitor Group, and the VPP team, eight investment partners have now conducted extensive business-planning efforts, with the last three underway in 2004, allowing us to refine our approach and improve the effectiveness of the planning. In addition, VPP placed greater emphasis on outcomes planning as a core element of business planning, enlisting Policy Studies Associates and Mathematica Policy Research to help investment partners design outcomes frameworks to better assess and manage their organizations. These processes offer a way to engage management and the board to better challenge basic premises and to understand the purpose and goals of the transformation we all seek to achieve. We and our investment partners have learned much from these experiences. We’ve adapted our efforts, to evolve from a process originally designed to challenge an organization on its goals, to that of an “intervention” intended to trigger the organizational transformation necessary to help investment partners meet the difficult challenges often inherent in fulfilling bold aspirations.

Fiscal sustainability remains the biggest need and challenge for our investment partners. Although all of our investment partners are faring well in financing their operations, VPP is committed to supporting our investment partners’ efforts to better identify and secure sustainable financing streams—whether public, philanthropic, or fee-based—for the long term. Some of the more notable financial achievements included:

• See Forever forged a partnership with DCPS to gain access to public school facilities, defraying a major capital cost.
• Mary’s Center was designated as only the second “Federally Qualified Health Center” in the District of Columbia, which entitles them to $650,000 in additional federal funding for each of the next three years, federal coverage of their liability insurance premiums, and substantial increases in Medicaid reimbursements.
• CharityWorks selected two VPP investment partners as beneficiaries, See Forever in 2004 and Heads Up in 2005, resulting in significant financial support and, in addition, a broader awareness to open new connections to donors and resources in the region.
• Public funding appropriations for CFNC, CMHS, LAYC, CentroNía, Mary’s Center, and See Forever were secured, and CMHS was also awarded a Virginia state grant of $300,000 for the delivery of gang-prevention services.
• CentroNía was the recipient of the DC Revenue Bond Program’s 100^th The bond, funded through the sale of tax-exempt municipal bonds, will finance $3.5 million in upgrades and additions.
• VPP and the Edna McConnell Clark Foundation joined together, not only providing dollars but also bringing complementary expertise to two investment partnerships, and, by doing so, demonstrated a model where funders can work closely, complementing each other’s strengths, as co-investors.

For VPP itself, the growth, development, and full integration of our own in-house investment team were priorities for 2004. Marc Sarkady, a team builder and expert in organizational development, helped us acknowledge and appreciate the diverse experiences, skill sets, and past leadership roles of individual team members and learn to function better as a team. The result is that we have a greater appreciation of our respective skills and strengths and are able to leverage them more effectively as an investment team to support and help those in which we invest. This work will continue well into 2005. And, in addition to their work with our investment partners, we continue to work closely with McKinsey & Company as they help us understand and build on our introspection on what we’ve learned, how that informs and improves our efforts, and guides our future planning.

We have refined our own investment process, developing special tools and guidelines to keep on track and maximize our effectiveness. We have partnered with the Nonprofit Finance Fund (NFF) to blend our respective methods to create a better way of assessing an organization’s financial health and now utilize the services of NFF as a standard part of the extensive analysis we do on potential investment partners.

Moving forward, our challenge is to build on our work and continue the momentum. We’ve learned that VPP is about transformation—within ourselves, among our investment partners, and within the philanthropic and nonprofit sectors. Our investment partners and the VPP team have been tested throughout the year, and we are stronger as a result. But looking back, I can honestly say that all of us have learned important lessons as our understanding of our work, goals, and each other evolves. Our investment partners and VPP as organizations are all well-positioned to continue.

In 2005, we have a full agenda. In addition to the work already underway,

• We expect to make three new investments.
• We are examining VPP’s own effectiveness and have engaged Fred Miller, President of The Chatham Group, to conduct a confidential assessment of the VPP portfolio of investment partnerships and expect the results to be presented to the board, team, and our investment partners by early spring.
• We will continue exploration of ways to increase the awareness of and find solutions for the acute shortage of leadership and management talent that continues to seriously constrain the nonprofit sector in the National Capital Region, particularly in social and human services organizations. We are focusing our initial work and attention to work with community leaders on ways to change the flow of talent to attract, retain, and develop African American leaders, benefiting not only our investment partners but broader nonprofit needs.
• We are working closely with the Nonprofit Finance Fund, one of the premier organizations in the nonprofit field, to research existing and new financing options and capital sources for nonprofits along the different stages of organizational growth.
• We are doing more to engage, serve, and learn about our founding investors to be able to advance their philanthropic interests and endeavors and leverage their collective work.
• And, finally, we are exploring VPP’s future which will build on VPP’s investment experience and evolve into a regional intermediary, capable of providing large financing and addressing structural change in organizations and the sector at large. We are assembling a core team for planning VPP’s future, have formed Planning Working Groups comprised of VPP board members and key advisors, and are working with McKinsey & Company to augment this effort.

On behalf of the VPP team, I am particularly grateful for the support of our investors, investment partners, board, advisors, and growing network of co-investors and providers. I opened this letter saying that we had gotten what we wished for. And it is because of these stakeholders that we have achieved the success we’ve had in supporting our investment partners, in building our own team, and in laying the groundwork for the coming years. But the real proof of performance will come from our delivery on the opportunities before us. We still have much to learn and much to accomplish. For 2005 and 2006, it’s all about execution. We look forward to an exciting and challenging year ahead, and most of all, continuing to work with those who have joined with VPP for this unique journey to grapple with the difficult challenges affecting the long-term health, effectiveness, and sustainability of nonprofits serving children and youth.

My best wishes for a productive and fruitful 2005