Built to Last: Managing CDCs

For most community development corporations, internal management understandably takes a back seat to activities that stimulate community revitalization. But across the CDC field, there’s growing concern that a legacy of weak management is threatening the industry’s effectiveness. Poor management has already claimed some prominent groups, including the Indianapolis-based Eastside Community Investments, which collapsed financially two years ago and finally closed for good last December.

Managing a CDC has never been easy, and today it’s tougher than ever. Competition for funding has accelerated, putting more pressure on groups to perform. Keeping talented staff is harder, too—private corporations and government, offering better salaries and benefits, snap up people with frontline community development experience. Many effective CDCs face growing pressure to move beyond real estate development into less familiar territories—job placement, child and elder care, transportation to work—challenging their organizations still further.

Fortunately, the fundamentals of CDC management are a discipline—more science than art. In extensive interviews about management issues, experienced CDC directors confirmed that almost all of the management challenges a CDC is likely to confront fall into three broad areas: strategic decisions, people and resources, and operating systems. By working to achieve good performance in each area, CDCs can become stronger advocates for their community.

Strategic decisions get to the very essence of who a CDC serves and what activities it undertakes. In most CDCs, strategic decision-making is the responsibility of the executive director, with input from the board. For CDCs seeking to become better-managed and more effective, that equation needs to be reversed. Boards should do the strategic planning, with input from staff.

Managing people and resources effectively can, at times, confound even the best organizations. But the full range of people and resource issues can be summed up in one question: Is the CDC aligned—does it have enough of the right tools to do the job it has set for itself? The CDC is not aligned if the staff continually struggles to meet its goals, if the resource base does not cover all planned activities, and if the executive director makes all the big decisions but expects the CDC to become an enduring organization. Some misalignment is common, especially as groups go through transitions. But CDCs that continually stay out of alignment have structural problems that hinder performance.

The third component of management—good operating systems—is increasingly affordable. A well-run CDC needs management information systems to track projects and financial data systems to provide monthly operating reports, financial statements, and payroll data. Good communications are important, too, to share timely information with staff and supporters.

Strategic Decisions

A strategic decision sets a CDC on a path that will probably be followed for years and influences staffing and resources and partners. When a choice is strategic, it nearly always means other options are precluded. Strategic implies something else, too: that a decision reflects a careful and objective assessment of options.

In interviews, experienced community development leaders offered six recommendations for strengthening the board’s capacity to make strategic decisions:

Common vision. Boards that share a common vision can become very good at making strategic decisions. CDC leaders suggest organizing board training and retreats—outside of regular board meetings—focused on letting members develop and refine that vision together. Some said smaller boards tend to be more cohesive and thus better at making strategic decisions.

Diversity. Boards with a diverse mix of skills, experience, age, and board tenure tend to make better strategic choices than less diverse boards. In addition to neighborhood residents, CDC leaders say they want boards with professional expertise and representatives from other community institutions. “We use a skills grid to decide who to put on our board,” says Dee Walsh, executive director of REACH in Portland, Oregon. REACH’s board includes slots for members with experience in accounting, law, housing development, property management, construction, public relations, fundraising, social services, community organizing, and program planning. Tenants from REACH properties also sit on the board. Board members have mentors and can take training courses each quarter in financial management, development, and other organizational essentials.

Turnover. That’s right—turnover. While stability is a virtue, many CDC boards ossify over time, and their capacity to make good strategic decisions weakens. “Board members can get into comfort zones and stop asking challenging questions,” says Jim King, who heads Avondale Redevelopment Corporation and Walnut Hills Redevelopment Fund in Cincinnati.

Good information, provided in a timely fashion. Even the most diverse and committed boards cannot make good strategic decisions without the right tools. Boards need training and regular summaries of activities, project status, financials, and other key information. It’s not sufficient to pass these out a few hours before the board meeting. Members should have a week or more to digest materials, weigh potential decisions, and even communicate beforehand with each other.

High expectations. CDCs should expect board members to offer a high level of service to the organization, in part because this improves strategic decision-making. Jim Dickerson, founder of Manna Community Development Corporation in Washington, DC, is not shy about confronting board members who aren’t pulling their weight. “Hello, my brother or sister, we’ve been missing you,” he tells a recalcitrant board member. “I know you’re busy, and we don’t want you to leave, but maybe you need to step aside and let someone else fill in, because we need someone working here.”

Financial contribution. Is strategic decision-making improved when board members are expected to make a financial contribution to the organization or participate in fundraising? Many experienced CDC leaders say yes. Board members who make regular gifts have a bigger stake. Make sure potential members are aware of what’s expected in this area before they are asked to join the board.

The best CDCs are opportunistic. The key is knowing how to manage and mitigate risk so that the organization isn’t threatened. In addition to assessing economic risk—how much money is needed, sources of funding, anticipating delays or a drop in revenues—CDCs should examine the drain on staff and board time, how other activities would be affected, and the impact on the organization and its community if the project were to fail. Identifying partners for a project can be one way to spread the risk, but a CDC must select carefully and, among things, examine what it is willing to give up in return for a partner who can potentially reduce its own risk and exposure on a project.

Increasingly, one of the biggest decisions many CDCs face is deciding whether or not to engage in a broader range of community-building activities. The pressure to branch out is hard to resist—particularly in light of neighborhood needs. But experienced CDC leaders say the instinct to do more should be resisted unless the key components of organizational structure—ability to make sound strategic decisions, ample staff and financial resources, and operating systems that can handle a wide range of activities—are in place. Pursuing a more comprehensive agenda requires a CDC to access more funding from multiple sources. Real estate development and business lending may no longer be sufficient, but community building is long-term, and a CDC which embarks on these broader activities is making a commitment for the long haul.

“A CDC should stay focused where you know what you’re doing,” recommends Dan Horvath, president of Community Equity Investments, Inc. (CEI), which has provided millions of dollars in business loans to small businesses across the Florida Panhandle. “We have a lot of finance expertise and we do lending,” Horvath explains. “We don’t do anything in social services or education. A lot of CDCs own and operate businesses. We don’t.” Horvath worries especially about CDCs that take a shotgun approach: “If there’s funding available, they’ll go after it. They become monster organizations—with 100 employees or more—doing Head Start, Meals on Wheels, energy weatherization, and two dozen other activities.” When Horvath’s CDC did face the need to expand, it moved geographically—not into other services. The CDC’s board made the strategic decision to expand beyond Escambia County (Pensacola, Florida) into the 15-county Panhandle region and southern Alabama.

Many CDCs forge partnerships with social service and other organizations to widen their community-building menu. “We look for partners to supplement what we don’t do,” says Ron Phillips, executive director of Coastal Enterprises, Inc. in Wiccasset, Maine. Coastal Enterprises works with banks to supplement financing of deals and with training organizations to help companies the CDC has invested in. “We recognize these partners and integrate them on our board, and through our program advisory committees.”

People and Resources

Finding and retaining a good staff is a challenge for even the most experienced organizations. “Six years seems to be our magic number for keeping staff,” says Lynne Cunningham, executive director of the Southeast Chicago Development Commission. “We lose our best staff to intermediaries,” adds REACH’s Dee Walsh. For Marva Battle-Bey of Vermont Slauson Economic Development Corporation in Los Angeles, the tenure of skilled project staff is three to four years.

Like most CDCs, Asian Neighborhood Design pays less than private- and public-sector employers. The CDC tries to compensate by emphasizing the social value of the staff’s work and by attracting people who want the gratification of doing work that is socially beneficial, says former executive director Maurice Lim Miller. Coastal Enterprises, Inc. takes a different approach. “We’ve tried to ensure that support and middle-management positions are as competitive as possible, upper-level maybe less so,” says Ron Phillips, executive director. The CDC works to develop management and staff depth, supporting staffers who want to pursue college or graduate degrees or specialized training.

“In rural areas, staff recruitment is always a tremendous problem,” says Bill Bay, who has worked for 30 years with Impact Seven in rural Wisconsin. The CDC offers competitive salaries, sometimes even more than comparable urban organizations. The challenge, says Bay, is convincing people to work in Almena, Wisconsin, a community of 265 people. To address the challenges, Bay allows staff to work flexible hours or telecommute. Impact Seven also invests in cutting-edge technology and equipment to attract younger workers.

Dee Walsh, REACH’s executive director, suggests the following ideas for attracting and retaining staff:

Invest in staff development: “Most of the people we hired didn’t have the full skill-set at the time they were hired. There’s a lot of on-the job training.”

Maintain a good work environment: “Many of the most draining staff problems flow from communication styles. Some people are very task-oriented, no-nonsense. Some people are very touchy-feely. These two types of people have trouble even when they agree. We’ve all got to get along. We’ve done all-staff Myers Briggs (personality assessment) training. To bring in someone for fewer than 50 people, for a half day, runs from $250 to $400. Most people find it interesting and helpful.”

Communicate what’s going on throughout the organization: “I try to have quarterly all-staff meetings. We have every department give a presentation about what they’re doing, and I try to address a specific topic that people want to know about. I also let people tell me what they want and check in with staff frequently.”

Cross-train across departments: “We always try to train people to help each other across department lines. We’re better for it, and people like the variety.”

Operating Systems

Three years ago, the Southeast Chicago Development Commission implemented a computerized bookkeeping system and automatic payroll system to help track and manage its annual budget of about $750,000. The time savings were felt immediately. “The systems cut an entire day out of someone’s time every two weeks,” says director Lynne Cunningham. “That’s how much time good technology frees up.”

What type of operating system does a CDC need? At a minimum, experienced CDC leaders recommend a networked computer system with basic communications capabilities (common file access, e-mail, a website), accounting/financial management software, project tracking capability, and contact management programs. CDCs involved in comprehensive human services activities need more robust systems to track client outcomes; groups providing business loans may benefit from special software to manage those flows. The CDC’s board and executive leadership should help assess what level of operating systems the CDC needs. But after that, researching, testing, and buying systems can be delegated to other staff—or even outsourced.

Smaller organizations need to be careful about overdoing technology. “In the computer world, you have to be discerning,” says Manna’s Jim Dickerson. “We once invested in a financial system for fundraising that would have been good for the Red Cross. Now we’re more conservative.” But Dickerson also stresses the benefits of becoming techno-savvy. “It took a while to get the bugs out of our new financial system, but now we can get cost estimates out at the touch of a button,” he says.

CDC leaders urge groups to engage a professional consultant to plan and implement operating systems or to work closely with similar groups that have already been through the technology process. Service providers that the CDC already works with, such as accountants, bankers, and architects, can provide helpful input.

The first step in buying technology is to determine how much the CDC needs to accommodate its current activities and those planned in the near-term. Most experts advise against buying technology to meet far-off needs, since the technologies behind operating systems are still changing rapidly. And while donations of used equipment are possible, it’s better to solicit new equipment as a donation or approach manufacturers such as IBM, Compaq, Dell, Microsoft, and Gateway, which routinely make in-kind contributions to nonprofit organizations. A good source is Gifts In Kind International (www.giftsinkind.org), a comprehensive online resource for donated items, including new computer equipment.

A tougher challenge than securing equipment is getting someone to manage and service it. Quite a few CDCs put off hiring technical personnel. Instead, they delegate that job to a technically proficient staffer who helps others when computer issues arise. Relying on this approach isn’t necessarily bad, so long as the CDC understands the time it takes and invests in training the staffer. Online resources such as www.networkforgood.org and www.techsoup.org include guidelines for technology planning and assessment. Another good source is Genie (www.genie.org) a general nonprofit resource that has frequently-asked questions on technology planning and other nonprofit issues. Other national tech-related support organizations include Handsnet (www.handsnet.org) and Compu-Mentor (www.compumentor.org) which works primarily with schools.

Becoming better managed is rising on many CDC agendas. Some funders are helping too—new support collaboratives in many cities, financed by large foundations and government, are investing more in CDC leadership, staff development, and technical support. The early results from these initiatives suggest that spending for good management pays off—in better CDC performance and stronger neighborhood capacity.

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