#133 Jan/Feb 2004

Real Solutions in Real Time

When a national or regional foundation initiative comes to a close, its grantees usually disperse and continue related work independently. Some may call on one another informally, but relatively few […]

When a national or regional foundation initiative comes to a close, its grantees usually disperse and continue related work independently. Some may call on one another informally, but relatively few get together on a regular basis to share notes on immediate challenges and opportunities. However, 10 community development corporations did just that. They were selected in 1998 for the Fannie Mae Foundation’s Sustained Excellence Award, an initiative that would provide them with an opportunity to receive valuable operating support and loans over three years. At the end of the initiative in 2001, the CDCs:
• Had a combined net worth of $35 million;
• Met scheduled repayments on $148 million from traditional banking institutions, community development lenders and private investors;
• Maintained their community roots while emphasizing focused business plans with implementation schedules and accountability standards;
• Completed 1,600 affordable housing units, including both homeownership and rental housing;
• Brought $183 million in new investments into the neighborhoods;
• Involved themselves in a broad range of physical development and community building activities, such as developing commercial space (for day care and community space activities) and business enterprises.

What accounted for this collective growth? Of course, Fannie Mae’s support helped. The ability to leverage an additional $183 million in new investments from other foundations surely boosted production as well. But the participants say there was much more to the initiative than financial support. The executive directors of these CDCs had the opportunity to meet semi-annually and build strong, practical and supportive relationships with their peers from across the country. More than networking, these events provided opportunities for peer-to-peer exchange about project financing, housing design and programming.

In 2001 the grantees decided to continue their collaboration by creating the Sustained Excellence Alliance Corp (SEA Corp). They developed their own set of semi-annual work sessions and site visits, designed and led by their staff members. SEA Corp members also built enough trust among one another to form their own 501(c)(3) and establish a loan pool that is co-owned and shared among all 10 participants. Each member makes an annual contribution of $2,500 for SEA Corp’s operating costs. The loan pool for member organization projects was launched with $250,000 equity from SEA Corp members. Calvert Social Investment Foundation, which is managing the fund for SEA Corp, is in final negotiations with a commercial bank investor and three individual investors. Made up of investor funds, the loan pool now totals $1.4 million and will provide members with flexible funding for difficult projects or to move quickly in “hot” real estate markets.

So far, the synergy of the group work sessions and loan pool has had results. In 2002 alone, the 10 SEA Corp members initiated nearly $100 million in real estate investments to create nearly 1,000 jobs and 500 housing units. A combined total of 2,092 housing units are in the pipeline for completion. Individual SEA Corp members continue to take on new housing and commercial real estate initiatives, develop more services to their constituencies, especially those that engage youth, and they have strengthened their community organizing efforts. “It’s as though the stars have aligned,” says Lorna Bourg, the SEA Corp president and executive director of Southern Mutual Help Association. SEA Corp members say their participation has helped them to improve organizational strategies, generate new lines of service and community building activities, address property management challenges and strengthen professional skills. In Bourg’s words, SEA Corp “has allowed for us to re-energize and re-focus our commitment to our communities, our field and ourselves.”

Joining large member associations or statewide networks is nothing new for CDCs. However, SEA Corp members say it is distinct from other networks because it is a community of practice. In the Harvard Business Review, Etienne Wenger and William Snyder write that, “Communities of practice are groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen their knowledge and expertise in this area by interacting on an ongoing basis… As they spend time together they typically share information, insight and advice.” The advantages of participating in a community of practice include the exchange of advice grounded in the experiences of practitioners, the ability to work on real-life problems and the development of solutions that have direct application, as opposed to problem solving in the abstract. Real-time application of direct solutions separates communities of practice from more traditional network memberships. Working in and sustaining this approach has its own challenges. According to Wenger and Snyder, “The organic, spontaneous and informal nature of communities of practice makes them resistant to supervision and interference.”

In the early stages of establishing SEA Corp, member organizations spent a significant period of time identifying what it valued as a group and appropriate collective projects. The CDCs also had to figure out how to provide ongoing technical assistance between meetings and set benchmarks for group progress. In other words, they had to “process” together – a challenge for busy, task-oriented professionals. Finally, because the individual members of SEA Corp have full agendas of their own, it can be difficult to find the space and time to reflect and collaborate. However, SEA Corp persevered because it allowed members to “honestly share, learn and benchmark to improve our own individual impact,” says Barbara McCormick, manager of SEA Corp and housing development director for Project for Pride in Living.

SEA Corp is completely run by the members. Although the group has an appreciation for outside expertise and brings consultants in when needed, members are more likely to rely on one another for technical assistance at first. Members emphasize relationship building whether they are together or not, and call one another with ongoing challenges and opportunities. It is the relationships among the members of SEA Corp that matter, and these relationships cannot be found within more traditional state or member networks.

Members brought their own experiences and philosophies into SEA Corp. As a result, two broad theoretical frameworks have helped to shape this community of practice: adult learning and community building. OMG Center for Collaborative Learning helped SEA Corp members articulate what they wanted to learn collectively and later documented the group’s learning process. SEA Corp’s design reflects everything that is known about how adults learn. Educators have noted that adult learners do best when they have both the opportunity for direct observation and the chance to use new knowledge or practice new skills in real life settings. Members are professionals deeply engaged in their field, able to assess new ideas in relation to the day-to-day challenges they face. Indeed, taking on very complicated real-estate projects requires learning from others who are just as deeply engaged in these complexities.

Research suggests that practitioners are more likely to be interested in the ideas of their peers than in the work of academic researchers, and that peer-to-peer technical assistance is a rich resource for new learning. “There is built-in technical assistance here,” says Jeannette Duncan, executive director of People’s Self Help Corporation in San Luis Obispo, CA. “I can talk to my peers who do not have any ‘agenda.’ I can get their honest feedback, and insight about their own experiences. It helps me be a better manager of my organization, and explain to my board the pros and cons of doing new activities.”

Adult learning principles are especially evident in SEA Corp’s three-day work sessions that consist of the following components:
Case studies as a method that provides an “immersion” experience and allows members to review both the challenges and opportunities of individual member projects.
Site visits to peer organizations allow SEA Corp members to learn more in-depth about individual projects or initiatives of the host organization. These site visits offer concrete experiences, and a safe environment to ask questions and learn about every member’s strengths.
Reflection with one another about particular real-estate and financial issues, topics or approaches. Experience offers a rich resource for learning and the opportunity for SEA Corp members to share thoughts about what projects and programs worked, which did not and potential solutions.

Integrated into the SEA Corp’s design and processes are community-building principles: building on community assets; involving those affected in joint problem-solving about community challenges; strengthening social networks; developing and nurturing leadership capacity; and encouraging approaches and solutions that address problems from a comprehensive perspective. These principles are mirrored in its loan fund. SEA Corp members had the option of joining a financial intermediary as a way to manage loans and make financial decisions. However, its loan committee, consisting of several members and independent advisors, determines what loans will be made to the member organizations.

While the diversity of the SEA Corp membership and their projects has resulted in a rich learning environment, diversity also created challenges when early decisions had to be made about underwriting criteria for the loan pool. Members’ work in different localities (rural and urban) and their projects vary in scale and type. McCormick says that members concluded that “the loans had to be generally underwritten on the financial strength of SEA Corp members, rather than the nature of individual projects.” SEA Corp was able to find a financial partner willing to work this way in the Calvert Social Investment Foundation. To deal with this issue, SEA Corp chose to set up a democratic practice and required members to agree to a particular set of criteria for loans. It also required each member to undergo due diligence, including a review of their development activities by Calvert’s investment analysts to determine if SEA Corp members are “investment grade.” This decision triggered some anxiety among members because there is a risk for all if one individual CDC is in financial trouble and unable to make loan payments. However, in the end the co-owned loan fund process strengthened the group by helping members plan for and implement standardized financial practices. Thus, the loan fund is used as a way to build the capacity of SEA Corp as a community of practice, but also to bring new resources directly to the geographic areas in which the CDC members work.

In addition to nearly $100 million in real estate projects in 2002, these CDCs saw other benefits as a result of their community of practice:
• The strengthening of individual management and leadership capacities;
• Greater individual financial capacities through the Calvert Social Investment Foundation review, which resulted in improved internal financial systems;
• Increased effectiveness in project planning, especially in the areas of commercial real-estate projects and condominium development;
• A growing awareness of different ways to work in new markets;
• Flexibility of the loan fund, which allows members to fill in development project gaps that typically go underfunded and to take on financially riskier and larger projects;
• Insight and increased attention to the long-term sustainability of projects and improved systems to manage properties.

The strength of communities of practice is self-perpetuating. As they generate knowledge, they reinforce and renew themselves. A case in point is SEA Corp’s next endeavor: to describe and assess the impact of their work in communities and calculate financial returns on investments. By defining and measuring the social return on investments, SEA Corp hopes to raise the value of communities of practice in the public policy arena.


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