Successful Youth Employment through Social Enterprise: A Case Example Shawna Smith Executive Director/CEO Taller San Jose Samra Haider Portfolio Director.

Successful Youth Employment through Social Enterprise: A Case Example

Shawna SmithExecutive Director/CEOTaller San Jose

Samra HaiderPortfolio DirectorREDF

January 16, 2013

© REDF 2013 – PLEASE DO NOT DISTRIBUTE WITHOUT PRIOR PERMISSION FROM REDF

Agenda

a) Overview of Taller San Jose and REDF

b) Social Enterprise within Workforce Development

c) The Social Enterprise: Hope Builders

d) Key Considerations for Employment Social Enterprises

e) Q&A

© REDF 2013 - PLEASE DO NOT DISTRIBUTE WITHOUT PRIOR PERMISSION FROM REDF

What is Taller San Jose?

3PAGE 3

Overview

• Taller San Jose (TSJ) assists marginalized youth (ages 18-28) in Orange County through job training and support services that help them find and keep employment

• TSJ offers paid, hands-on training programs for: 1) Office Careers, 2) Medical Careers, and 3) Construction

• Recognized with one of three Changemakers Awards in 2008, an international honor sponsored by Ashoka

Results To Date

• Served more than 4,500 youth since 1995

• 220 youth enrolled annually in industry related programs

• 175 job placements in 2011

• 72% of students remain employed one year after graduation

• 92% with a criminal record do not reoffend

http://www.tallersanjose.org/


What is REDF?

Overview

• REDF is a California-based nonprofit grantmaker that helps nonprofits build social enterprises employing people facing barriers to employment

• Approach is similar to a venture capital firm, but seeking social rather than financial returns

• Pioneer in measuring social impact that is committed to sharing its lessons learned

Results To Date

• Direct financial support of $19 million as well as $17 million in business and capacity-building assistance since 1997

• Supported 49 social enterprises that have employed over 6800 people and earned over $127 million in revenues

• 77% of those interviewed still employed two years later

• After employment in social enterprise, participants report 31% average wage increase


Partnership between TSJ and REDF

Overview

• To significantly grow Hope Builders, a general contracting social enterprise that employs its graduates, Taller San Jose joined REDF’s portfolio in 2011

• REDF offers grant funding as well as technical assistance aimed at increasing enterprise revenue, exploring transitional employment, and expanding access to support services

• Hands-on partnership also allows TSJ to participate in REDF’s social outcome measurement efforts and networking /field-building activities Specific Initiatives

• Restructuring Hope Builders’ staffing model to integrate transitional employment and serve greater number of youth

• Funded and recruited Farber Intern to assess Hope Builders’ market opportunities and forecast financial results

• Assisting with the identification and pursuit of funding opportunities to help finance Hope Builders’ growth and mission-related activities


Agenda





e) Q&A

© REDF 2013 – PLEASE DO NOT DISTRIBUTE WITHOUT PRIOR PERMISSION FROM REDF

Social Enterprise: The Sweet Spot

7PAGE 7

Nonprofit- For Benefit

For Profit- Business

Mission driven

• Invests surpluses to meet a social objective rather than to serve shareholders

• Services offered and/or production process of the enterprise can also serve social objective in themselves

SocialEnterpris

e

Market driven


Social Enterprise vs. Earned-Income Activities

8PAGE 8

Earned-Income Activities

Social Enterprise

• Revenue generated through some commercial endeavor

• Has a long-term vision and is managed for the indefinite future

• Growth and revenue targets are set in a business or operational plan

• Separate and distinct staff manage and oversee the activity

What distinguishes a social enterprise from other earned-income activities?


What is an Employment Social Enterprise?

9PAGE 9

Supportive employment

• Experiential learning/on-the-job training

• Wages, stability• Developmental

opportunity• Builds identity as a

“worker”• Often coupled with

support servicesRevenue generation• Product or service• Customers• Suppliers• A vital part of the local

economy

• Usually founded by nonprofit organizations

• Created for the explicit purpose of employing people who face significant barriers

- Histories of homelessness and/or incarceration

- Mental illness- Young people “at-risk”

Employment Social

Enterprise(ESE)

Social Mission

Business


ESE as a Vehicle for the Hard To Employ

Employment

Help people move into employment and out of poverty

Social Enterprise

• TSJ invests in launch of a social enterprise to further its mission impact

• REDF offers capital, experience, and networks to support social enterprise

• Social enterprise jobs are a first step and pathway into the regular work-force for the target population

• The enterprises and their employees earn income, offsetting taxpayer costs

• A social enterprise job leads to a rise in hours worked, health status and income; and reduces homelessness and incarceration

• Social enterprise is an innovation that would benefit every community

Individuals facing one of the following barriers to employment:

• Mental illness

• History of Incarceration • Youth at-risk

• History of homelessness



Social Enterprise is a Sub-strategy of Workforce Development

11PAGE 11

Career advanceme

nt

Skill developmen

t

Career counselin

g/ coaching

Job search/ developme

nt

Workforce development strategies

External employer

siteEmploymen

t social enterprise

Strategies by which jobseekers and workers are equipped to secure or advance in employment

Employment strategy to transition people with labor market barriers into work using wage-paid, short-term employment that combines real work and supportive services

Job slots external to the

agency providing

supportive services

Job slots in-house at the

agency providing

supportive services

Placement of individuals with greatest barriers into job slots within a social enterprise

• Supportive services provided by enterprise itself, affiliated nonprofit, and/or through partnerships with service providers

Work experienc

e

Transitional job

In-house

Note: Other types of ‘work experience’ beyond transitional jobs are not detailed here (e.g., on-the-job training, internships, etc.).


Focus on Individuals with Greatest Barriers to Employment

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Workforce funding and services have

traditionally focused on jobseekers who are the most work-ready and skilled

• As currently structured, public workforce funding rewards rapid placement into employment and into high-paying jobs

• Resulting tendency to “cream” and focus on people with fewer barriers

Employment social enterprise can be leveraged to focus on those individuals who are the

hardest to employ

• Individuals with greatest barriers to employment who are likely to take longer and require more support in achieving competitive employment (e.g. young adults disconnected from work and school, formerly homeless, ex-offenders)

• Nature, structure and duration of employment and the mix of support services offered must vary to meet different target population needs (e.g. the focus for many young adults on securing a high school diploma)


How are Employee Supports Different from Client Services?

13PAGE 13

The social enterprise context (already having a job) is very different from the workforce development context (trying to get a job) and creates unique opportunities and challenges for support services

• Context of a paycheck “makes real” previously theoretical discussions (e.g., financial literacy, taxes, work/life balance)

• Experiential/contextualized learning

• Earned income increases likelihood of eligibility for tax credits

• Reinforcement of employee support personnel‘s messages by supervisors

Opportunities

• Sustainability is dependent upon product/service getting produced

• Subject to employment laws (e.g., compensating for mandatory activities, risk of lawsuits, information sharing policies)

• More demands on employees’ time (need to balance empowering employees with streamlining access)

Challenges


Agenda





e) Q&A


The Social Enterprise: Hope Builders

• Hope Builders is a licensed full-service general contracting company providing new construction, renovation, and rehabilitation services. Additionally, the social enterprise employs graduates of Taller San Jose’s construction training program.

• In 2011, Taller San Jose made a significant strategic investment in Hope Builders with two goals in mind:

1)Expand employment for some of its most at-risk youth; and,

2)Increase its mission impact through business-generated revenue.

• Hope Builders joined the REDF portfolio in 2011, and REDF is assisting TSJ to significantly grow Hope Builders’ revenue and capacity, optimize its mix of transitional and permanent employment opportunities, and connect youth participants to more support services

15PAGE 15


Hope Builders’ Success To Date

• Launched new business model in March 2011, securing over $1,000,000 in sales through December 2012

• Completed 53 rehab or single trade projects

• Generated $374,000 in business, plus $82,500 for “parent” TSJ through partnership with private equity firm (Citivest)

• 18 youth employed in last two years

• $75,000 in board pledges

• Social Innovation Fund grant recipient through REDF portfolio, securing $450,000 in grants as well as extensive technical assistance over a two year period

16PAGE 16


Hope Builders Services

17PAGE 17

• Hope Builders offers services in three areas of expertise:

New Construction

• Drywall• Electrical• Energy efficiency/”green” building

• Flooring • Framing• Hardware• Home safety• HVAC• Insulation• Interior/exterior work• Landscaping• Lighting fixtures• Painting• Plumbing• Room additions• Stucco

1 Rehabilitation

• Appliances• Cabinets• Countertops• Door/window replacement• Drywall• Electrical• Flooring • HVAC• Insulation• Interior/exterior work• Landscaping• Lead and asbestos abatement and manifest of disposal

• Lighting fixtures• Painting• Plumbing• Roof repair• Stucco• Water-damage repair

2 Remodeling

• Appliances• Cabinets• Countertops• Door/window replacement • Drywall• Plumbing• Electrical• Flooring• Full bath and kitchen renovations

• Hardware• Interior/exterior work• Lighting fixtures• Painting• Room additions• Stucco

3


Current Customer Base

• Includes a mix of private investors, community based organizations, and individual business/homeowners

• Over $65,000 in average monthly sales in 1st quarter of FY2013; all are repeat customers

18PAGE 18

"By partnering with Taller San Jose and Hope Builders on our Logan Homes project, Santa Ana accomplished three important goals: First, we built high quality homes which were sold at affordable prices to first time buyers. Secondly, we offered the construction as an economic development opportunity for Hope Builders and the youth served by their program. Finally, we supported the existing residents of the Logan Neighborhood. This resulted in commercial property being converted to residential uses, which further serves to reweave the fabric of our community.”

Mayor Miguel PulidoCity of Santa Ana


Hope Builders’ Competitive Edge

19PAGE 19

Bank Program

• Bank sells REO properties to non-profit at discount (10-37%)

• JP Morgan Chase to sell another 500 REOs in next two years

• Same opportunity with Wells Fargo

Taller San Jose(Non-profit)

• Provides its non-profit status;

• Receives 1% of purchase price and 2/3 of proceeds after the sale

• Under agreement TSJ controls general contractor choice

Private Equity(Investor)

• Provides the capital, analytics, marketing and sales services

• Leverage affordable housing and first-time homebuyer credits meeting bank program requirements

Hope Builders(General Contractor)

• General contractor of choice for rehab work

• Average contract $22,000

• Averaging 4 homes per month

• 40+ acquisitions by TSJ since October 2011

• Highly experienced management/field leadership with reputation in local market for quality workmanship

• Tested operational systems which support field efficiency

• Bank programs give preference to non-profits for acquisition of foreclosed properties; committed investor


Youth Employment Pathway

20PAGE 20

TSJ TechGrad

Apprentice

Other Constructio

n

Apprentice

Personal Exit

Other Trade Career

Other Constructio

n

Personal Exit

Other Trade Career

1. Pursue SE Employment?

Yes

No No

Yes

2. Stay with SE?

EmployeeDecision

Preferred exits are positions within the construction/ building industry

MANAGERIAL DECISION

3. RETAIN?

YES

NO

• Youth Apprentices at Hope Builders are graduates of Taller San Jose’s construction training program


Workforce Skill Development

21

PAGE 21

Tech Grad Apprentice Foreman

Hard Skills:Measuring TapeHammers and ToolsSquaresLadders and ScaffoldsExtension cords and pigtailsSawsDrill/Impact/Skill GunNail GunsTool RecognitionPowder actuated ToolsAbrasive Cutting SawForklift & Work Area Platforms

Soft Skills:Critical Listening Skills

Hard Skills:PaintingPlumbingDrywall installationWindow InstallationTile installationLaminate FlooringElectrical Fixture InstallationFinished Carpentry Lathe & PlasterAppliance InstallationRough Carpentry Repair

Soft Skills:Completes projects satisfactorily under timelineDemonstrate Excellent Work EthicArrives on-time and prepared

Foreman have demonstrated mastery of all skills in each category. Hard Skills:Granite installationCarpet installation

Soft Skills:Read Project ScopesAdhere to budgetsCommitment to on-time delivery schedulesAble to critique employee performance and handle disciplinary issues AccountableResponsible

• Hope Builders employs 3-5 Youth Apprentices and 4-5 Foremen, experienced professionals who are responsible for production as well as training Apprentices


Hope Builders 5-Year Plan

22PAGE 22

FY12 FY13 FY14 FY15 FY16

12 15 20 22 253 3.5

44

4.5 26

3237

42 49

# Field Employees # Management Employees # Projects

• Hope Builders plans to triple its sales revenue over 5 years

• This would result in field employment equivalent to 40 jobs for its target population

Hope Builders Forecasted Growth


Agenda





e) Q&A


Key Considerations

While there are many nuances to employing youth through social enterprise, we wish to highlight the following:

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1 Transitional vs. Permanent Employment

2 Youth-Oriented Systems and Policies

3 Consistency in “On-the-Job” Training

4 Separating Business and Social Costs


1) Transitional vs. Permanent Employment

25PAGE 25

Transitional Employment• Offers shorter employment

opportunities (typically 3 – 12 months) for more people

• More individuals are able to be served through the social enterprise as people transition to outside employment

• There are challenges with structuring the “transitional” element of employment in the enterprise. Are people “timed out” or can they leave when ready? How can the SE ensure individuals will be ready?

Number of

people

employed

Duration of

employment

Permanent Employment• Offers longer employment

opportunities (typically over 1 year) for fewer people

• Employment social enterprise could potentially provide long-term employment- ESEs that work with individuals

with developmental or physical disabilities often provide permanent employment

• However, unless the enterprise is continually expanding, permanent employment significantly limits the number of people who can be employed


2) Youth-Oriented Systems and Policies

26PAGE 26

Hire experience

d talent that can support youth

• Hope Builders is careful to hire foremen who have years of industry experience, but who can also coach youth apprentices effectively

Emphasize soft skills

with training

and expectation

s

• Youth apprentices are evaluated on attitude, appearance, and accountability among other items

• Staff strive to instill a sense of pride in work among youth apprentices

Frequent evaluations

and feedback

• Hope Builders provides formal evaluations to youth apprentices every 2 weeks during their first 6 weeks on the job

• Evaluations also help staff determine where to deploy youth

Integrate formal

training into

workplace

• In addition to dedicated training on specific construction skills, staff devote much time to on-the-job coaching

• Training is important given the complexity of jobs and short tenure of youth apprentices

From talent recruitment to staff feedback, many practices and policies in the workplace are oriented towards supporting the development of youth participants


3) Consistency in “On-the-Job” Training

27PAGE 27

SkillFrequency

Completed OTJ

Degree of Difficulty

(skill)

Implementation

Cost

Window Installation

Often Moderate Easy Low

Plumbing Always Difficult Moderate/Difficult Low/Moderate

Tile Flooring Often Moderate Moderate Low

Laminate Flooring

Sometimes Difficult Moderate Moderate

Drywall Installation

Always Moderate/Difficult Moderate Low

Painting Sometimes Moderate Moderate Moderate

Electrical Fixture Installation Always Moderate Easy Low

Finished Carpentry (doors, base & trim)

Always Moderate Moderate Moderate

Lathe & Plaster Sometimes Moderate Easy Low

Rough Carpentry Repair Sometimes Moderate/Difficult Moderate Low/Moderate

With project-based businesses, it is difficult to standardize “on-the-job” training because some services will be demanded more than others. Social enterprises must balance the need for workforce skill development with business demand


4) Separate Business and Social Costs

28PAGE 28

Revenue or Sales

Cost of goods sold (COGS)

Business expenses

Net profit

For-profit businesses generally run like this…

Gross profit

…but social enterprises are a bit more complex

Business-related revenue or cost

Mission-related revenue or cost

- = - =

Business revenue

Business COGS

Business expenses

Net profit without social $Gross

profit=

SubsidiesMission-related COGS

Mission-related expenses

Net profit with social $

e.g., less efficient direct

labor

e.g., grants

e.g., case-workers

Social benefit

+- = -

Because of its social mission, social enterprises will incur greater costs than regular businesses. To obtain a true representation of their performance, social enterprises should separate costs associated with the social mission from regular business costs


Agenda





e) Q&A


Questions?

30PAGE 30

www.redf.org

Samra [email protected]

www.tallersanjose.org

Shawna Smithssmith@tallersanjose.

org


Successful Youth Employment through Social Enterprise: A Case Example Shawna Smith Executive Director/CEO Taller San Jose Samra Haider Portfolio Director.

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