Art Berman is a former Ameriprise Financial executive who joined nonprofit Twin Cities Rise in 2008. The organization's mission? Finding $20,000-plus-a year jobs for its talent pool of mainly minority men, most of whom have criminal backgrounds. Not an easy task at a time when the nation's unemployment rate hovers above 9 percent.
The program, also called TCR, was founded nearly 20 years ago by former General Mills executive Steve Rothschild. It enrolls several hundred trainees annually and invests up to 14 months on education, training and "personal empowerment" development.
Last month, Twin Cities Rise was one of five global winners of a $50,000 award from the eBay Foundation and Ashoka Changemakers that seeks "the most innovative market-based solutions that create economic opportunity and generate employment for disadvantaged populations."
QWhat does this award mean to TCR?
AIt's a huge validation of the work we do, our "pay-for-performance" model, and the cash award is very helpful. We want to leverage this award into more work, more funding and expanding the impact of our program.
QWhat's the business model?
ASteve Rothschild, years ago and working with state officials, was able to determine that "success" in terms of a successful placement of a graduate at Rise is worth $31,000 of financial value to Minnesota taxpayers in terms of subsidy the state no longer has to pay, the increased taxes our employed graduates pay and a lower prison recidivism rate. We serve a high percentage of ex-offenders. The recidivism rate in Minnesota is about 60 percent. Recidivism for our grads is about 12 percent.
The Legislature agreed to help fund us. We don't get outright grant funding as do other nonprofits. We get funded if we place somebody in a job that pays at least $20,000. We get $9,000. We get another $9,000 a year later if that person is still employed. So there's an opportunity of up to $18,000. The state wins and the people we serve win.
We've recalibrated the model lately, and we think that our success [rate] of graduates is now closer to [taxpayer] savings of $50,000. This is a high return on investment for taxpayers with no risk. If we don't succeed, we get nothing from the state.
QI read an interesting statistic in your 2010 annual report about total return to Minnesotans.
AOver the last 13 years, TCR returned $33.4 million in state taxpayer value for the $4.6 million of state investment, or a 624 percent return on investment.
QYou got about 20 percent of your $3.4 million budget last year from government grants that support those job placements of 60 or so people annually. The rest comes from earned income and corporate and individual donations. You serve several hundred people with training and placement services annually for which the government doesn't pay you, correct?
AThe 60 or so we place in full-time, good-paying jobs are home runs. We work with several hundred others annually ... and thanks to the economy, we may only place them in an $18,000 job, or a 32-hour-a-week job. In terms of success, we think about where people start. About 85 percent are unemployed, 70 percent have criminal records and more than 50 percent have addiction histories. The average earnings for those who come to us who are working is $5,500 per year. There are various levels of success. We have well over 200 successful outcomes a year.
QDo employers also pay you a placement fee?
ANot since 2008. The world has changed. It's a buyers' market for hiring. Employers don't need to pay a placement fee. We still have strong partnerships with many employers. We have a strong philanthropic base to our funding.
Q TCR also had a hand in getting passed the pilot, $10 million "human capital performance bonding" bill that was signed by the governor, correct?
A That's an important step forward. It potentially reaches a whole new set of investors. It creates an incremental source of funding for high-performing nonprofits. Private investors will buy the bonds.
The bill was authorized in July. It was [advocated] by Steve Rothschild, but Rise was not involved. There will be a governing entity established that sets the criteria for getting funds. There are no guarantees. ... But we're watching it. There has to be a high level of transparency and a way to measure and monitor nonprofit performance. If you can do it, that will unlock a huge opportunity to serve people in need.
Government funding of nonprofits is in decline. That's not going to change anytime soon. The pay-for-performance model holds potential. The core Twin Cities Rise model has an opportunity for huge replication. Pay-for-performance is easily replicable at any level of government. It rests on a nonprofit's ability to measure and demonstrate social value and put a process in place to capture it. We do it by contract in Minnesota. Others could. It creates a level of accountability to ensure state funds are well spent. It could also be done at the federal level. There are a lot of possibilities.
Neal St. Anthony • 612-673-7144