Balancing Act

Old definitions may be obsolete as CDCs weigh whether to grow and how to build their impact in today's social and economic environment.

  1. Revolution in information systems and technology. The development of diverse information systems, database technology, and communication tools has enabled CDCs to function with greater efficiency and reduced expense. Today, these systems are infrastructure essentials for any CDC seeking to expand its impact and effectiveness. The key is to have the necessary technology support, as well as to have staff who understand how to use the technology and make the best decisions based on analysis of the vast amount of data these systems can access and aggregate.
  2. Shifting demographics. Since the 1970s, the influx of individuals and families from around the world pursuing work opportunities in the United States has affected the demographic composition of low-income communities, which are often the entry point for new residents. Around the country, there are CDCs serving communities that have changed from majority African-American to majority Latino and/or with a sizeable Asian population. This can be challenging to established CDCs, which now need to develop new cultural competencies, services, and staff and board composition to better reflect the new community. (See Have Community, Will Travel.)
  3. Aging of CDC founders and long-time directors. Many long-term CDCs have benefited from the guidance of a stable, talented, and entrepreneurial group of founders and/or long-time executive directors. As these leaders retire in the coming years, their organizations must cultivate new leaders from among current staff and board members or recruit outside talent. Different skill sets and competencies are needed for the next generation of CDC leaders. (see Out Front And In Sync).
Why and how should a CDC expand its size, impact, and effectiveness?

The complexity of the environment in which contemporary CDCs operate increases with the organization’s size and number of initiatives. Thus, CDCs seeking to grow have to spend time both on growing the organization and sustaining its effectiveness. The more diverse the funding base, the stronger the administration and operational systems; the greater the number of partners, the greater the likelihood that an expanding CDC can remain sustainable and viable.

Operating at a larger scale requires careful planning, effective decision making, and steady, often aggressive growth that takes a keen business sense and the ability to balance income-generating activities with those dependent on subsidies. The organization’s stakeholders (board, funders, and partners) need to understand this balancing act and to recognize when projects jeopardize the viability of the organization.

One big advantage of expanding the geographic base is that organizations can spread their risk and tap new resources. For example, if the market is soft in one area, resulting in properties losing money, the losses can be offset by projects in other markets that are making money. Increasing numbers of CDCs are undertaking mixed-income housing and economic-development initiatives to generate revenue for their subsidized costs and operational expenses. An expanded geographic base also provides more opportunity for projects, resources, political support, and partners.

Another advantage of increased scale is that larger organizations can sometimes provide a more powerful voice in the public-policy arena when they advocate for their constituents and for additional resources for affordable housing. For some legislators, a large number of housing units and job creation make the difference in their level of support for community development initiatives. This is especially true at the local and state levels.

There is no silver bullet for deciding how to increase the impact and effectiveness of a CDC. But the experience and practice of large CDCs around the country point to some pivotal factors, including making effective strategic decisions; building organizational capacity; expanding the geographical target area; and developing financing strategies and tools that lead to long-term growth and sustainability.

The Importance of Strategic Decisions in Building an Organization

Strategic decision-making clarifies the needs of a CDC’s constituency and what activities it undertakes. According to George Knight, former director of NeighborWorks America, “Lots of organizations die from making poor strategic decisions. Private companies fail from taking the wrong strategic path, too. Maybe even nations. That’s why strategic direction should be the top concern of a CDC board.”

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Dee Walsh is the executive vice president and chief officer of strategic development for Mercy Housing (MHI). Walsh oversees the work of the Mercy Loan Fund and MHI’s four regional offices. She previously held leadership positions with the Network for Oregon Affordable Housing, REACH Community Development, and Housing Partnership Network.
Robert Zdenek is a community development consultant and principal investigator at the Public Health Institute. He is the co-author of Navigating Community Development.

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