#114 Nov/Dec 2000 — Leadership

Stakeholder Community Development

Community development has much to celebrate from its thirty or so years of existence. The field has achieved a solid level of national respect and support, and has grown from […]

Community development has much to celebrate from its thirty or so years of existence. The field has achieved a solid level of national respect and support, and has grown from its initial focus on the work of community development corporations (CDCs) to include a range of activities performed by faith-based institutions, universities, hospitals and settlement houses. These organizations build houses, train community residents and provide support to fragile families in low-asset communities.

Despite these accomplishments, however, there are still a significant number of community-based development organizations that operate outside the norms of good organizational practice. Accounting is haphazard. Boards are weak and lack the diverse skills needed to guide an organization. Many are frustrating places to work because their leaders are unable to nurture talent. Many do not have systems in place to connect with and listen to their constituents. Just this past year, a number of major CDCs either closed their doors or fell under scrutiny for suspect management practices.

At center of this problem is the failure of many CDCs to practice “stakeholder community development.” Stakeholders include any institution or individual that has a latent or expressed interest in the organization accomplishing its mission and goals. In stakeholder community development, CDCs both recognize the value of stakeholders in their work and develop the capacity of those stakeholders to act as stewards of their institution. Stewards work for the long-term health of an institution, and do not see it as something to be mined for personal gain and discarded when convenient; they add value to the institution instead of taking it away.

There are many kinds of stakeholders in a CDC, including staff, board members, community residents, and resource providers. Each kind faces unique challenges in acting on their stake in the CDC.

Executive Director as Stakeholder

Perhaps no stakeholder is more influential than the executive director. While executive directors are guided by a number of personal interests, including career advancement and a sense of doing good, their dominant thrust as steward must be the sustainability and durability of the organization. Balanced against that is the mission (presumably community revitalization), but front and center has to be the goal of building a durable institution. While it may seem counter-intuitive not to emphasize mission above all else, community development is a process of working against persistent forces of poverty and neglect that sometimes seem intractable. To mount any sort of battle against these forces requires thinking and acting with long-term vision and durable, sustainable organizations that will be around for the long haul.

One of the executive director’s key tasks is strengthening an organization’s relationship with all of its other stakeholders. The executive director needs to be secure enough to build a strong board and to continually deepen links with the community served by the CDC. Effective executive directors are not afraid to tell truth to power and also to community residents. Too often, executive directors are afraid of a strong board and strong community links because this implies a loss of control and status. This is true in a narrow sense. But leaders who think of themselves as stewards are not afraid to build strong boards that may choose to replace them some day; strong boards are characteristic of strong organizations in both the private and nonprofit sector.

William Barrow, who runs the well-regarded and productive H Street Community Development Corporation in Washington, DC, believes strongly in this principle. “I serve at the pleasure of my board,” he says, “They feel that they can make independent judgements because there is a transparent, strategic process of choosing new board members.”

A good example of a stakeholder who became a steward leader is Mtamanika Youngblood. She runs the Historic District Development Corporation in Atlanta, in the community in which Martin Luther King grew up. Once the center of African-American cultural and commercial life in Atlanta, the community has lost some of its luster over time. Youngblood, who has lived in the community for more than a decade, joined the CDC first as a board member and then as its executive director. “I got involved in the CDC, quite frankly because I wanted neighbors. The community was losing population and I was determined to stay and raise my family in a positive setting,” she says.

This story is not unusual. What makes it different is the careful thought that Youngblood and her colleagues put into enacting processes that encouraged stewardship. For example, they created protocols to maintain a balance between board direction and Youngblood’s gifts as a leader. They have a process for board and staff acceptance of any given strategic direction, and Youngblood does not cut corners with it. As a result, both staff and board feel they have a clear and important role in decision-making, and the board is an active policy making body. The board and Youngblood agree on policy, but at times, differ on strategy. These differences are managed in a clear and transparent way. “I do not suppress conflict and disagreement. I address it head on in a constructive fashion,” says Youngblood. “Of course managing disagreement is time intensive. I have to keep in touch with my board members, explaining my position and getting their buy-in, but that keeps the organization strong and focused. Transparency and a certain amount of creative tension keep the board engaged and quite frankly challenges me to anticipate and stay on top of things.”

For an executive director, stewardship also means recognizing the value of other staff as stakeholders who are critical to building an enduring organization. Talk to Youngblood about her staff, and what quickly comes through is her pride in building their confidence as professionals who can take initiative and make appropriate decisions for the organization. “I remember attending a meeting out of town. A small crisis came up and they called me asking my thoughts. I gave my opinion, but I had no hesitation in saying to my senior team: you make the final call. I could do this because all along I had placed them in positions to make critical judgements. I accepted mistakes so long as they learned from those mistakes. I also encourage a culture of trust so that they feel confident in consulting with their colleagues. So when a crisis arises, yes I want to know about it immediately, but I know that my staff, together, will take the right steps to address the problem.”

Many fear that all this emphasis on process and building a strong organizational culture might get in the way of actual community development activity. That can happen, but it doesn’t have to. By most standards, the Historic District Development Corporation is one of the most effective CDCs in Atlanta. In fact, it has been so successful that neighborhood real estate values are increasing, and the major issue for the organization has become how to spread the benefits of a re-ignited market to long-term residents.

Board of Directors as Stakeholders 

Members of an organization’s board of directors, usually volunteers who serve as policy setters and the legal equivalent of owners, clearly have a huge stake in an organization. But building a strong board is difficult in a community-based setting. Board membership is often thought to be an avenue to personal gain, prerogative and privilege by residents. Cronyism is sometimes a key factor in selection to the board. This view of board membership often goes unchallenged by all concerned, including resource providers. It is often considered acceptable for residents and others to take value from the organization as a part of the price of doing good.

Take the following hypothetical example. A CDC with a community-led board receives public and philanthropic support. One board member, a developer who lives in the neighborhood, wants to develop a supermarket. There is no supermarket in the community, so its construction would add tremendously to its residents quality of life. The developer wants a loan from the CDC’s revolving loan fund and some grant support for the project. Since this is clearly self-dealing, the developer/board member recuses herself. Problem solved, right? The answer is in fact more complicated. The community may get a supermarket, but that CDC has started a pattern of stakeholders taking value for themselves. Even if the short-term result is good, it will become harder and harder to maintain a culture of stewardship at that CDC.

For the field to evolve, critical questions must be asked about the role of CDC board members. Possessing an agenda is human, but like executive directors, board members as stewards can only have one overriding agenda: the mission and durability of the organization.

Some firm, even inflexible, standards are necessary for increasing board member accountability, including:

  • Board members cannot financially benefit directly or indirectly from board membership (apart from some pre-established remuneration)
  • The organization must regularly produce financial statements that pass the “non-accountant’s” test (statements that the average layperson, after a reasonable period of study, can understand enough to grasp the organization’s financial position)
  • There are clear ladders of authority and succession protocols in place
  • Executive directors are held to clear standards for their organizations’ performance and effectiveness

The composition and selection process for the board also makes a big difference. It should be a firm expectation that board members are recruited from diverse sectors of the community including those that bring professional skills and resources but who might not live in the community.

The question is, who should put all these standards into place? Ideally, community vigilance would prevail, but the reality is that resource providers must take the larger share of this burden. For the community development field, national intermediaries such as LISC, Enterprise Foundation, Neighborhood Housing Services and Seedco are another important means of promoting standards. Government (federal, state and local) and the growing use of performance-based contracting is another element. In addition, over the past fifteen years or so, local funder partnerships (usually composed of the public sector, philanthropy and some private sector actors, such as banks) have grown in significance and reach and should play an important role.

Community Residents as Stakeholders

Community residents – the people CDCs purport to serve – are the most important stakeholders of all. In fact, the hallmark value of community development has been, and remains, resident participation and leadership in the development process. Unfortunately, many CDCs are detached from their communities and as a result, they implement programs without sufficient input from these crucial stakeholders.

This detachment is counterproductive. In the private sector, organizations that are detached or provide poor services are sent clear signals from shareholders or consumers. If consumers feel that a brand of soap has deteriorated over the years, they can switch to another brand. If a CDC that doesn’t develop a relationship with community stakeholders is ineffective or pursues strategies that do not have community support, community residents have limited means to express their dissatisfaction. And yet, if CDCs do not pick up signals they will eventually die.

Some years ago, I asked a CDC director whose community was shifting from a predominately African-American population to a Latino one why, when half the community was Latino, there were none on his board. The response was disconcerting. The executive director felt no need to reach out to the Latino community because the CDC had been created from the struggles of the African-American community. He refused even to participate in cultural celebrations sponsored by the Latino community. As a result of his intransigence, the Latino population started its own organization, and his CDC struggled to find a continued mission and support. It effectively disappeared as a significant institution. If the executive director had included the new residents as stakeholders in the organization, it might have survived the population shift.

At the root of much of this kind of detachment from the community is a fear of openness. Nurturing community contact and involvement is messy and full of conflict. It is often easier to plough ahead independently than to attempt to gain community support or approval for a project or program. This is understandable. All communities include individuals with agendas who pose a threat to the CDC’s plans. The response should not be a closed fortress, however, but a slow process of educating and shaping resident expectations. There is no better way to manage opposition than to have the clear backing of the majority of residents. As Barrow says “I walk through the community everyday. I have to explain my goals and programs to everyone from the guys playing basketball in the park to the shopkeeper down the street. That’s the way it should be. The more I explain what I am trying to do, the less of a chance that I will be surprised. That is what you do not want, surprises!”

Development of community stakeholders is a critical way to ensure accountability and legitimacy. It is also a way to recognize voices that possess important information on how the community revitalization process should proceed. How many rental-housing units have been built in asset-poor communities while residents really wanted homeownership opportunities or economic development programs that provided jobs? If a CDC develops its base through community outreach and values its community as stakeholder, it has a much greater chance of making successful mid-course corrections.

A CDC needs to develop both residents’ capacity to act as stakeholders and its own capacity to incorporate residents in that role. To incorporate residents as true stakeholders in the organization, a CDC must incorporate their visions and needs into actual practice and governance on a continuing basis. This means having multiple avenues for incorporating community input, such as meaningful participation on the board and program advisory committees. It is only then that community members become true stakeholders and accountability is present.

The second part of this equation is developing the capacity of these community stakeholders. This is another way of saying that CDCs, along with physical and economic development, should help develop citizens with the critical awareness to ask tough questions of their elected representatives, government and, yes, even their community-based development organizations. Developing their capacity will make their contributions as stakeholders more valuable.

Through the services and programs that CDCs provide there is ample opportunity to engage and teach residents about the complexity of the revitalization process. I recall talking to a volunteer in a CDC located in the South. She had worked in the maintenance section of the local electrical utility. When she retired, she volunteered in her neighborhood CDC where she learned real estate analysis, including calculating ratios using a sophisticated calculator. She used her knowledge to stand her ground when talking to bank officials, city government and other authorities that would otherwise have dismissed her based on gender and race. She was empowered to do that because the CDC had made an investment of time to demystify the process of real estate development. Of course, this feeling of power spills over into other areas of that individual’s life.

CDCs should also develop the capacity of the community as a group, by providing a framework for citizens in asset-poor places to act collectively on problems in their communities. This is where community organizing/planning can play an important role. CDCs should be proactive in informing residents about the complexities of policies that affect their communities.

CDCs have often cited the prohibitive cost of hiring community organizers, printing newsletters, etc. as a barrier to community outreach. It is a real problem that resource providers will generally not pay for such crucial activities, but CDC leadership should not wait for the changes in funding patterns. The emerging revolution in information technology, especially Geographic Information Systems (see Shelterforce #113) and the internet, is lowering the cost of outreach and informing communities.

Resource Providers as Stakeholders

Resource providers are central actors in building a stakeholder/stewardship culture in community development. As illustrated above, resource providers can act in concert to financially support the field and put standards in place. Unfortunately, in some instances resource providers ignore obvious problems with organizations, often because of past accomplishment. They may feel a sense of commitment to a long-standing relationship that they either helped to start or supported in the early years, or just not be willing to acknowledge an initial mistake.

It is the hallmark of responsible philanthropy to support institutions in difficult times. Yet, organizations are not helped if fiscal and operational practices that are wrong at best, or malfeasant at worst, are ignored. Resource providers should act as stakeholders not by being enablers, but by establishing guidelines for good organizational practice and by pointing out or discouraging bad practices. A tough love stance by resource providers may mean the death of some organizations, but organizations that cannot build strong boards and competency in their programs and services have no right to life. Except in the most extreme cases, bad organizations are never the only alternative.

Funders do not have to make harsh decisions on a unilateral basis. The growth of funder collaborations like the National Community Development Initiative (see Shelterforce #104) and the 25 or so local and regional collaborations that have sprung up over the last 20 years are a welcomed way to impose reasonable standards for organizational and development practices. Originally started to aggregate and stabilize the flow of resources to CDCs, and to add structure to the local community development industry, these funder partnerships have increased the effectiveness of CDCs by establishing a local industry standard and imposing tough discipline in return for access to a collective pool of resources. CDCs who receive partnership support and assistance are less likely to fall prey to bad management practices. As they grow in popularity, the hope is that these funder collaboratives can provide a more directed environment for young CDCs to incorporate and maintain principles of stakeholder community development.

Some CDCs argue that funder partnerships are top down and stifle individual initiative and creativity. That is an open question. It is not a question, however, that all organizations in the private and nonprofit sector need to be measured against an industry standard. Remarkably, the community development industry has, until recently, faced no such standards, and community-based developers are themselves lobbying for some. Groups like the Development Leadership Network (DLN) argue that standards would help limit CDCs that are managed poorly and not representative of their communities. The DLN has embarked on an important campaign, the Success Measures Project, to have practitioners define standards themselves in order to prevent them from being imposed externally. Everyone recognizes the need for standards and accountability, but the conversations about them take place in individual organizations and networks. The field needs a more inclusive conversation to reach a higher level of agreement.

The Time is Now

This is an important moment for community development. The field has had over 35 years to work out its problems. It is an appropriate time to put in place firm standards, expectations and practices so that asset-poor communities are can be assured of the strong, durable institutions they need.




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