A $3.2 million, 22-year-old organization with 30% revenue growth over the past three years, 150-plus clients, corporate ties by the dozen, and a strong relationship with government agencies could be any of several local firms.
Or it could be a recently revamped nonprofit for developmentally disabled adults in Orange County.
Project Independence is the latter.
“We’re not a profit-making business,” said Andrea Erickson, PI’s executive director for all but four months of its 22 years.
They just look like one. Now.
Three years ago, it wasn’t that way.
“We were stagnant,” said Erickson. “We’d had tremendous growth, but I’m looking down the future and it didn’t feel like energy.”
Erickson ticks off the list of maladies and they are typical of a languishing nonprofit: staff turnover, no growth, dwindling board membership, and a president,Erickson,with a hand in too many day-to-day operational details.
“I said, ‘I’m going to get someone in here to help,’ ” she recalled.
And what she found was what PI’s own clients find: a nonprofit with a mission to help people like her.
Erickson contacted the Center for Non-Profit Management in Los Angeles, who referred her to the Executive Service Corps.
ESC sent her to Paul Faranda.
“She needed outside expertise,” said Faranda. “Our assignment was to look at her organization.”
Faranda is a 41-year veteran of Northrop who also was vice-chairman of Delta Dental for five years and has worked with ESC since 1994.
ESC is a national non-profit group working with other nonprofits to improve their operations. It’s similar to the Service Corps of Retired Executives, an SBA-funded group that does the same in the entrepreneurial, for-profit community.
The two 501(c)3s, PI and ESC, did what a for-profit entity would: ask what business PI was in, decide what activities it required, build an organization around those and recruit staff to do them.
Faranda’s diagnosis was straight out of a B-school case study.
“She was a founder and too involved in the day-to-day details,” said Faranda. “It was important for her to step back and delegate so she could do long-range planning, coaching and training.”
The result was a total restructuring.
“We had put together a successful organization, but we needed to do something,” said Erickson. “We had to put some money into it and that’s sometimes scary. We started to look at things quite a bit differently.”
PI then turned to ESC’s Executive Advisor Program,a mentoring program,to help implement the new plan.
Among the changes, PI:
n restructured compensation, raising its pay scale 10%, with bonuses for degreed employees
n established a SIMPLE IRA for employees
n hired an HR manager and a field trainer, and began employment background checks
n networked its computer system
n hired an accountant
To pay for all the changes, Erickson did a thing she had never before considered.
“We hit our reserves,” she said. “In 20 years I’d never touched it. We did not get an increase in state funding.”
PI spent $300,000 to $350,000 over the three years of changes.
And in the grand tradition of American business, Project Independence even launched a friendly takeover.
“They acquired clients from another organization,” said Faranda.
The changes had an effect. Staff turnover was cut 50% (50 staff left in 1998, 25 in 1999), revenue grew 10% in each of the past three years, and the organization broke even in 1999.
The final stage was to address board issues and compensation.
“We looked at how the board was functioning,” said Faranda.
Typical of non-profits, PI’s board was made up of people who care about the cause,in this case parents of clients,but generally lacking in directly applicable business experience.
“We recruited five new board members in 1999,” said Faranda. “You need members on the board who can contribute and provide the help and direction needed.”
This board coaching was the last assignment for the partnership; the PI-ESC project ended in February.
But Erickson says her work has just begun.
The 10% revenue growth annually for the past three years was generated by an increase in clients; per-activity funding is unchanged.
“The rates are set,” she said. “We’re just doing more things.”
Doing them better, Erickson believes, is something non-profits must be capable of.
“We had to get more efficient,” she said. “If you’re real small and you don’t have good business practices you just won’t last.”
“She was aggressive enough, interested enough and smart enough to go out and find something to help her do a better job,” Faranda said.
“There are a lot of parallels here to the for-profit world,” he added. “They need to organize, motivate, delegate. It’s all the same. They … have revenue and want to increase their business.”
The result is something all businesses aim for.
“We’ll have a modest surplus this year,” said Erickson. “It’s the way we planned it.”
