The author and founder of Twin Cities Rise advocates solving social issues with a pay-for-performance model.
Steve Rothschild quit a top job at General Mills about 20 years ago to take on the vexing problem of how to engage more underemployed, low-skill, mostly minority men in skill- and career-building training.
The nonprofit he started with $100,000 of his own money in 1994, Twin Cities Rise, has attracted national attention for its long-term success with the hard-to-employ.
Rothschild's new book, "The Non Nonprofit: For-profit thinking for nonprofit success," calls for developing better-focused, higher-value-added nonprofits and a pay-for-performance model where government pays some of the training costs only after the trainee has completed the program and landed a living-wage job for a year or two. Also, he has ideas about new ways of funding training programs.
QYou say that when you started looking at anti-poverty nonprofits 20 years ago, you thought of yourself as a 23-year-old high school dropout with a kid or two, few skills and a bad attitude, and, maybe, flipping burgers for $7 an hour.
AThe government didn't provide support, particularly for these young men. The whole focus of ''welfare to work'' was for women. Most men don't qualify because they were not raising the children. You had short-term placement organizations that did very little training. They could get you into McDonald's, but then you were stuck. These guys didn't have the education, the soft skills, and they weren't empowered and they weren't accountable.
QYou identify seven principles that must be baked into the mission and execution by a successful nonprofit business. What are they?
AThe seven principles rest firmly on the social and economic bottom line: You must have a clear and appropriate purpose. Measure what counts. Be market-driven. Create mutual accountability. Support personal empowerment. Create economic value from social benefit. Be learning-driven.
QPlease explain personal empowerment.
AEmpowerment is a set of cognitive and emotional skills coupled with a positive belief system. At Rise, participants mostly grew up feeling victimized, powerless and entitled. We think the bedrock of personal growth is to be accountable as a human being. Many who came to us at Rise came from generational poverty. They had learned to survive. You don't delay gratification. You spend the buck in your pocket now because you need to or because somebody may take if from you. You live for the moment. Little education. Little hope.
But if you want to become successful, have a job, your own place and not go back to jail or the street ... you can't just be a survivalist. Empowerment evolves out of understanding, transforming yourself to being self-aware, so you are not a victim, you are taking control of your life and making decisions.
QThis is more than soft-skills training?
AWe started with soft-skills training .... don't fight, don't argue, dress for success, be on time. Personal empowerment is belief-centered. What you believe affects how you think, how you feel, and that affects behavior.
QAbout 1,500 people each year go through customized Rise training, including some prisoners. Job retention rates average 80 percent or so after two years. These guys cost the public less. Is this what you mean by social benefit?
AFor every $1 invested in the program by state taxpayers, Rise has returned more than $7 from increased state tax receipts from working graduates of Rise. We also can show reduced [public expenditures] and prison recidivism among our graduates.
QHow does the financial model work?
AIt starts with a premise that high-performing nonprofits and social providers create social benefit and economic value. It helps individuals and the state and county government. [It delivers] higher tax receipts and lower cost to government. Social service spending is declining ... largely because of the ever-growing cost of state government that's going to health care. Health spending in Minnesota is 30 percent [of the budget], and K-12 education is 40 percent.
Philanthropy can't make it up. There aren't enough philanthropists. The only area left is private investors. They'll do it, they'll invest, if they get a good return. In 1997, we went to a pay-for-performance model. We get paid by the state because the ROI is over 600 percent. We raise incomes and lower demand for public services.
QThis gets to the first-ever "high-performance" bond of $10 million that the state Legislature authorized for sale last year through the Finance Department. It's a pilot program and it's still being worked out, right?
ARight. Proceeds from the bond sale will be deposited into a "performance pool." High-performing providers of state services qualify for performance payments as they create economic value for the state. Providers must first be certified by independent economists ... and must provide outcome data from their history to b certified.
In this way, economic value to the state commences at the same time as the provider is paid. The state will pay interest and amortize the bond principal from cash flows created by incremental tax revenue and cost savings generated by provider outcomes.
Neal St. Anthony • 612-673-7144