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.

CDCs should build upon their existing competencies and skills when making assessments of options for growth. In the late 1990s, the Local Initiative Support Corporation (LISC) analyzed six CDCs that had serious management and financial challenges. LISC found that these organizations did not have the internal discipline to accept the insights derived from objective analysis. The LISC report, “Building Durable CDCs,” concluded that there are dangers for CDCs in starting certain kinds of for-profit ventures, particularly construction-management subsidiaries, service-based businesses, or other initiatives that have had high failure rates nationwide. A number of mature CDCs have started similar businesses to those identified by LISC and a number of them have had problems because of the nature of the enterprise and the staff’s lack of business management experience.

Steven McCullough, president and CEO of Bethel New Life CDC in Chicago since 2005, has led his organization in crafting a new comprehensive strategy. McCullough replaced long-time director and founder Mary Nelson, who had developed an array of initiatives. He has focused on making the Garfield Park and Austin neighborhoods communities of choice for existing and new residents. Bethel New Life has narrowed its focus on affordable housing, education, and sustainable wealth creation. It currently runs 15 programs, each of which has been assessed for its contribution to the areas of concentration. McCullough said the group has recently begun to transfer some programs to community partners who can more effectively provide the relevant services, and some other programs may also be transferred. He stressed that even five years ago, many of the partner organizations did not exist, and that since its inception in 1979, Bethel had to fill the void. This is no longer the case, and by exiting programs that do not fit the new strategy, Bethel will be more focused and intentional in its approach.

When asked about the best strategic business decisions community development practitioners have made in growing their organizations, Joe Errigo, past president and CEO of CommonBond Communities in Minnesota, boiled it down to one handy phrase: “The right people, the right deals, and the right partners.” However simple Errigo’s formula sounds, the right choices are not always self-evident, especially when there are numerous options.

Choosing the right real-estate deals, for example, is the result of experience, skilled analysis, competent team members (architects, contractors, etc.), and some luck. It is helpful to have an interdepartmental review process, in advance, that lets you examine the project for the immediate gain as well as the long-term benefits For example, REACH Community Development in Portland, Ore., establishes an interdepartmental team at the outset of each new real-estate project. The team uses a detailed task list to take the project from inception to operation. The facilitator gives clear assignments and due dates for each task, and the team meets regularly to ensure accountability.

A CDC board of directors can also help review and approve projects at pivotal decision-making points. To do so, the board needs project-development knowledge, political savvy, funding connections, and community knowledge, and acquiring this variety of expertise takes time. Nonprofit board-development experts stress that too many boards focus on minutia rather than the strategic vision and direction of the organization. They commonly spend 80 percent of their time on the past and present and only 20 percent on the future, when their priorities should be reversed.

It is critical not to over-extend the organization. Janaka Casper, president and CEO of Community Housing Partners Corporation (CPHC), in Virginia, says one of the keys to CPHC’s success has been to “develop the discipline to say no.” Casper adds, “Don’t let emotion and mission let you make bad business decisions.” For CPHC, this discipline resulted in the termination of their HVAC and indoor plumbing business in 2003, resulting in a more mission-focused and financially successful organization. This example underscores the need for CDCs to stay focused on a few core strengths and build initiatives and product lines that flow from these competencies.

Most urban CDCs have expertise in neighborhood planning, real estate development, and some forms of commercial or business development. Building additional capacity in such areas as child care, workforce development, and transportation can compromise a CDC’s ability to be effective in its core areas. This is not to say that CDCs should never venture into new areas, but they have to be careful and build the professional capacity (staff, board, consultants) to do so successfully. Often, the sounder path is forging a partnership with existing organizations that have the requisite expertise and share a similar mission.

As CDCs begin to expand their scale and impact, the level of risk increases. The community-development business requires entrepreneurial behavior and fast action when appropriate. But it also requires thoughtfulness and deliberation when moving into new housing products, new lines of business, or new markets. The point is that risk needs to be thoroughly understood, and the CDC must have identified sufficient resources and capacity before plunging ahead. Understand the context and the politics. Know your core competencies and assess the potential pitfalls in advance.

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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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