The following is a conversation between Carla Javits, President and CEO of REDF, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer in New York City.
Denver: Although the unemployment rate hovers around 4%– which is good news– the number of Americans in the workforce has dropped nearly 5% in the past decade– which is not. Now, some of it is demographics, but there is more to it than that. For instance, over 21% of working-age black men did not participate in the workforce at all in 2016. The disproportionate number who have been incarcerated, and as a result have not been given the opportunity to work, is just one example. This is a big problem in our nation, and it takes an innovative and creative approach to solving it.. which is exactly what the Roberts Enterprise Development Fund, commonly known as REDF, has done! And here with us to explain it all is Carla Javits, the president and CEO of REDF.
Good evening, Carla, and welcome to The Business of Giving!
Carla: Thank you so much!
Denver: Carla, give us some of the history of the organization, and of its mission and purpose.
Carla: REDF was founded about 20 years ago by George Roberts, who’s a partner at the private equity firm KKR. He and his wife saw the burgeoning problems of homelessness in the Bay Area and wanted to do something about it that was oriented around jobs. What REDF has done… really from the beginning… is to provide money and know-how to a special kind of business that we call social enterprise– so that they can grow and create jobs. Then, the social enterprises hire people who would otherwise have a really tough time getting into the workforce — as you mentioned… people have been incarcerated or homeless, might have been in foster care — and they help them with a supportive work environment, the services that they need, so that they can move on and advance.
Denver: Well, as you say, there are two major pieces here. There are the social enterprises that you invest in and how you go about doing that, and then the programs themselves, and the impact that they’ve had on the participants.
So, let us start with the first. Give us a couple of examples of social enterprises you have invested in and the type of jobs they’re providing.
Carla: I’ll give you a few examples, maybe in groupings. There’s a group of businesses, for example, that are certainly in the food arena. We have a wonderful restaurant called Cala in San Francisco that has deliberately employed people who are coming out of prison. It’s a very high-end restaurant. They provide a lot of support to the people that they employ there. There are catering businesses. There are some that create food products like the Women’s Bean Project in Denver. There’s a neat one called The Monkey and the Elephant Café in Philly that employs former foster youth. So, many in the food area.
There are some in screen printing – printing T-shirts and bags and things like that. Great organization called New Door Ventures in San Francisco that employs young people coming out of the foster care system, or who have had other challenges. They also have a really neat bike sales and repair shop; one of the best in the city. And there’s a similar organization called New Avenues for Youth that’s up in Portland, Oregon that does the same thing. But the young people now have gotten into doing design work for some of the really big companies like Nike, et cetera.
Some of them do recycling or are sort of in the green area. There’s a new field called “deconstruction,” where you take down a building and you used to just throw the stuff in the dump. But now, you can take the materials, and you can resell them. So that’s also a great business. We have some in even manufacturing. We have an airplane parts manufacturing company called Orion up in Seattle. There’s just a very wide variety of business. And the basic idea is to provide real work to people who have different aptitudes and interests in a supportive work environment, where the management is really about helping them skill up, and connecting them to the services that they may need so that they can be successful.
…we want to be sure that the mission actually is about the employment of people who face barriers, helping them to skill up and move on.
Denver: Well, that is a very interesting array indeed.
As a venture philanthropist, you probably examine many of the same things that a venture capitalist would look at before making an investment, but perhaps a few others as well because of the nature of this work. What is the process that you go through to make a determination whether to invest in a social enterprise or not?
Carla: When I came to REDF about 11 years ago, this is the thing that impressed me the most: it was their ability to do this very thing. I think this is at the heart, sort of the special sauce of REDF. Because we’ve been involved in just this one type of investment for so long, we’ve really learned a lot about what works and what doesn’t. And we’ve learned the hard way, but that has taught us many, many lessons.
Some of the factors we look at are more traditional, as you would in any investment, like leadership of the organization. Then we want to be sure that the mission actually is about the employment of people who face barriers, helping them to skill up and move on. And we want to make sure that’s not only the bright idea of the CEO or somebody on the team, but that the board has actually bought into it, and backs it up, and is willing to do that hard work.
We want to make sure that there’s a real business; and this is very important, that there’s a real market for the goods and services that the company is selling because they do have a social mission. So often they may emphasize the social mission and not be as savvy about business. So that’s been a big area for REDF, is to be sure it’s not just a bright idea or somebody on the board has a nice space that they can make available cheaply so we’ll retrofit a business in there. Sometimes it seems like a sexy idea, but there’s not really a market, or you can’t really break into it. Or the business itself is a good business, but it’s not going to create a lot of jobs for the very people that you want to employ. So there’s a lot of art and science that goes into looking at that.
We’re also looking for that balance between the ability to run a business and making those hard business decisions every day, as well as fulfilling the social mission of employing people who really need some support in order to be highly effective workers. That may sound simple, but that, I think, is the chemistry of what makes these social enterprises work.
Denver: There may not be an answer to this, but do you find that there are more business people who add on a social mission to what they’re already doing… also finding a nice source of talent along the way? Or more where the social mission is first, and the business enterprise is a thing that will make it sustainable?
Carla: It’s a wonderful question. I think right now–because I think this is beginning to shift… I would say historically, it was social mission organizations, often nonprofits, who frankly were just frustrated. They couldn’t get jobs for the people they were trying to help, and they said, “Well, let’s just start a business and try do it,” or “We can’t get the resources to pay for it, so we’ll do something that generates revenue.” So, largely, that’s what we’ve seen.
But now, increasingly, we are starting to see for-profits that are interested in this, I think because there’s pressure on them to demonstrate that they’re delivering something – in a positive way – to the community. I also think, from a very practical business perspective, as the market tightens up, they need workers, and they’re challenged sometimes in finding good quality workers. And so they’re trying to rethink the way that they source talent and support the talent that they have.
One is the business. How do you run a successful company, make money, deliver quality products and services to the market, price properly so you can generate revenue, et cetera? And then on the other side: How do you provide a quality work environment and support to people who have faced a lot of trauma and problems in their lives so that they advance and do well?
Denver: That’s very interesting!
Explain to us the flow of capital that allows you to support these social enterprises.
Carla: Historically, for REDF, this has been a combination of donations from individuals — that’s the majority of the funding that we receive — and then traditional foundations, and then a little bit from government. So the biggest– individuals, a little bit less, philanthropy, foundations, and then the government. I would say that going forward, we’ve just started a new lending practice, so we’re trying to do a little more lending. Historically, we’ve just provided essentially equity into the companies, but we don’t necessarily get the capital back. And so with lending, I think we’re going to have some opportunities with the banking community and certainly with foundations that are making PRIs (Program Related Investments) and potentially with the federal government, their CDFI (Community Development Financial Institution) program, and things like that.
Denver: That will help you scale a lot if you can do that.
In addition to the capital you provide, you also provide advisory services. Describe what they are. And how active a role do you play in the operations of these social enterprises?
Carla: I think this is again one of the distinguishing features of the work that we do. We are deeply engaged with each of these enterprises. The way it works is: we sit down with them once we make the investment, and we mutually decide on a set of outcomes that we want to achieve each year, and then the projects that we’re going to do.
They commit to do certain things; we commit to do certain things with the objective in mind. And then we sit down for what we call a VC meeting, just like a typical investor would do every month, and we go over: How are things going? What do the financials look like? What do the results look like? What are the problems? What are the challenges? Are we on track? Do we need to change up some of the work that we’re doing together?
And we may, in some cases we’re talking every few days, every week, but certainly we’re checking in in a deep way every month. The services, the know-how that we try to offer, honestly, have been soaked up from the enterprises themselves that were in the fortunate position of touching a lot of these groups. So we learn a lot from them, and we’re essentially repurposing a lot of what we learn to them.
And it’s really on two tracks: One is the business. How do you run a successful company, make money, deliver quality products and services to the market, price properly so you can generate revenue, et cetera? And then on the other side: How do you provide a quality work environment and support to people who have faced a lot of trauma and problems in their lives so that they advance and do well? And how do you combine the two?
So those are the kinds of services we offer.
Denver: Hands-on, that’s for sure!
Carla: Very hands-on.
Denver: Let’s turn our attention to the beneficiaries now for a moment, and perhaps you can expand a little bit on what I touched upon in the opening, and that would be the circumstances and challenges these individuals face in trying to find employment. What is that like?
Carla: I can probably illustrate best with a couple of examples. But I would say to headline that, the reality is that some employers are just going to be concerned about the risk of hiring somebody with a prison record or something like that, so that makes it very difficult to get a job. And they’re going to be more likely to hire you if you’ve had a job, and it’s your manager that’s calling to say, “Joe showed up every day and did a great job,” rather than a case worker perhaps who’s just saying “I met the person and…” et cetera. So there are those sorts of issues.
And then for other people, sometimes they may have grown up in a set of circumstances where they didn’t have a lot of exposure to work. And just the basic skills that you need – showing up on time, dealing with conflict, really demonstrating energy around the work that you have to do, and commitment to the task at hand… So in that case, people need that chance to practice those skills, and then also get some hard skills that can help them when they get into the workforce. So that’s at a high level…
A good example, I think, is a young woman… she had grown up in foster care, she got married, she had a kid, then she got addicted. She ended up tragically losing her child, losing her job, losing her house, losing the marriage, and ending up incarcerated. When she got out, she really wanted to turn her life back around, but once you’ve gone down that road, it’s very hard to come back. She got a job in a social enterprise. She actually became a counsellor to others. Now, she’s remarried, and she has a child, and she actually volunteers in the sector. I think that paints a picture of one kind of person.
I would give as an alternate example a young man who had been incarcerated at 17 years-old for a gang-related offense. He was in prison for 17 years. So, really tough. You get out from that, you haven’t worked, you have no experience, and you got a big prison record. He got a job with a social enterprise, and he moved up in the ranks there. Then he became a case worker with juveniles – kids who had been in prison – and he’s now working as a policy associate with a group that’s trying to cut the prison population in half, called Cut50, and he’s completing his bachelor’s degree.
Denver: What a great story!
Carla: So it really can be quite transformational to have that chance to work.
Denver: And not just for the individual. The ripple effects, I would imagine, are extensive. Just give us a sense of what those are, what it means to their family, their community, and society.
Carla: This has deep impact on certainly the family. If you think about it, you’ve had a member of your family who’s been incarcerated or homeless. It’s very tough on the family. Everybody else may be aspiring and trying to work, trying to get educated. The kids are trying to go to school. But it’s very disruptive and difficult. What is the future going to look like?
And so, I think that it makes a huge difference to these individuals when the person coming home has a job, and they feel that sense of pride and contribution to their family. And then for the community at large, to see people… more people in the community who are getting up and going to work every day is very inspiring and breeds hope in other people.
We had a great example of a guy out in San Francisco who ran a company doing recycling services. And at the beginning, the other young people in the neighborhood were making fun of him. They were showing up in their suits every day, in these blue uniforms, doing the recycling. And then slowly over time, people started coming up to him and saying, “Could I get a job? Do you have an extra job for me?”
So it really can change both the quality of life within a family, and also in a community.
Denver: For people to get these jobs at these social enterprises, are they meant for an extended period of time? Or is it more to get them started into the workforce, and back into the workforce, with the idea that they’ll move on to other job opportunities?
Carla: The social enterprises that we work with primarily provide transitional employment. So the idea is get people up to the level of skill and experience they need and then help them move on and move up. All of the enterprises, of course, have some permanent jobs. You can’t run a business without some permanent positions. So, often people do move up and become leaders of these companies over time.
Denver: I would imagine the real challenging piece is in that transition, when they’re moving from the social enterprise and trying to get employment in the mainstream workforce. Have you found that to be the case?
Carla: Yes. That is a really stressful time because you’re moving from a very supportive work environment into one — let’s face it, if you’re at the frontlines — that’s likely not quite as supportive.
One of the exciting things we’ve been involved with is a big public- private partnership we call LA: RISE, the LA Regional Initiative for Social Enterprise in Los Angeles, where we’ve put together a cohort that includes a bunch of social enterprises, and then several employers and the cities workforce system. We help people get a job in a social enterprise, and then the employers have told us what kinds of preparation they’re looking for, and all the social enterprises are meeting that standard of preparation. And then the cities kicked in to help with some support and retention services so that when people are making that transition into mainstream employment, they continue to get a little bit of support back from the social enterprise.
The other neat feature with social enterprise is: for many of us, we get that first job; maybe it doesn’t work out so well. So the social enterprise itself can serve as a safety net where people can come back and take another run at it.
Denver: Cool! Sounds like you’re creating an ecosystem to me!
Carla: So true.
Denver: You are a very, very data-driven organization. And a little while ago, you did an extensive analysis of your impact, which was conducted by Mathematica, which also included the social return on investment. What was some of the data that came out of that research study?
Carla: That was a very powerful study. One of the top line, as you said, findings was that we as a society benefit from every dollar spent, with $2.23 positive on the ledger. So it’s a very good investment. Because these enterprises are earning revenue for services that otherwise are usually paid for exclusively by a philanthropy or government. And then of course, the people who are employed are paying taxes.
We also found, for example, that three-quarters of the income of the individuals employed was coming from government programs when they first started. And that flipped down to less than one- quarter of their income coming from public support and, of course, and three-quarters of it coming from their own income.
So that was very powerful. Incomes themselves went up 268%. There was greater housing stability. There were many positive findings. And we’re actually launching off now on a new study, even more rigorous and with many other companies, not only in California. So, hopefully we’ll be able to bring you even more good news a few years from now.
Denver: In addition to supporting these social enterprises, as I said a moment ago, you’re creating a movement. And part of that is through your website redfworkshop.org, which is really an online learning center for those in the field. Tell us a little bit about that and the kind of information that’s there.
Carla: It’s been a really active and growing community with hundreds of social enterprises around the country signing on. There’s very exciting material on there from a series we did called MADE. That’s real neat short videos about cool companies around the country that are doing this kind of work. There’s a terrific tool suite there that’s available for anybody who’s thinking about starting an enterprise like this to kind of work through a set of questions that we’ve provided with a lot of rigor based on the learning that we’ve done over all these years.
And also, even for companies that maybe already are in business or social enterprises… When they want to create a new business line, you really have to think through a series of both business and social mission questions. So there’s tremendous tools on there; there’s a way to network with others. So you just want to find another enterprise that’s maybe doing something similar to what you’re interested in doing, or has a similar problem and you’re trying to find out the solution. There’s information about public policy and government programs that may be relevant… just a whole host of useful and valuable information, and a way to connect with others.
Denver: Absolutely! REDF has worked exclusively in California for many, many years, but now you have scaled up, and you are in many states across the country. Tell us about your decision to do that, Carla, and not just the demand that existed and the proof of your model, but some of the things that you examined internally which led you to say, “Yep. We’re ready for this.”
Carla: I think we were very conscious that to become a national organization, but to try to stay lean, we were going to have to really think hard about our systems, our technology, our ability to track data and information, and our ability to communicate across a larger set of geography. So we did spend a lot of time and energy and resources building up those internal systems so that we knew we were going to be able to communicate with companies that were spread out all over the country, and reliably collect data on a much broader array of companies. So I would say we made a big investment in that.
We’ve made a big investment in talent, of course, getting the right people in place. We’re fortunate to have just an incredible staff– highly motivated, extremely talented. So we’ve put a lot of effort into that. And we set a big goal for ourselves of 50,000 people employed over a five-year period, whereas the previous five years, we had helped about 4,000 people become employed only through a few California-based companies. So it’s been an exciting journey, and thus far, it’s going quite well,
Denver: How many states are you in now?
Carla: We’ve had investments out into 20 states.
Denver: Fantastic! That’s scaling up, and that’s scaling up fast!
Tell us a little bit more about that corporate culture you described and your people. How would you describe that culture? What do you do to shape it? And maybe something that makes it a very special and distinctive workplace.
Carla: I think it’s a very mission-oriented place. I think if you spoke to every single person on staff, they would tell you they’re highly motivated by our mission. I think people really value the other people at REDF. It’s a collegial culture, and there’s a lot of mutual respect and excitement about working on a team that is so talented because we are blessed with a lot of just extraordinarily talented people, smart people with a lot of skills. We’re very much about problem solving, which is really exciting, I think, for a lot of people. And I think we’re very sensitive to trying to balance our role as really an intermediary.
On the one hand, we have know-how and we’re trying to push groups to do certain things and achieve in a certain way. And yet at the same time, we have to have some humility about understanding that they do the work every day; they’re on the front line, and sometimes they may know better. So I think we have a very good balance of those two things.
I think perhaps the thing that’s most distinctive and may be why we’re attracting such great talent is that we really do sit at that intersection of business and social mission in a unique way that not that many organizations around the country do, and we have this aspiration to scale the impact. So that packaged together, I think, makes it a very exciting and energizing place to work.
Denver: Sounds pretty interesting.
Let me close with this, Carla. I know you’re inspired every day by the people who avail themselves of these programs and consequently turn their lives around, and you’ve been good enough to share a couple of stories with us about those people, but also the people who lead and work at these social enterprises. Share with us a story of one of them, if you would, and in terms of how they have lifted and inspired you with the work that they have done.
Carla: I think I might cite a woman name Tamra Ryan who runs the Women’s Bean Project in Denver, Colorado. She had a career that was more in the business world – marketing and communications – took over Women’s Bean, which makes wonderful, delicious cornbread mixes and soup mixes, as well as jewelry. The women who are employed have had really tough lives.
She’s a very inspirational leader. She wrote a beautiful book about some of the challenges that the women face in trying to integrate back into the workforce. She invented, I think, a beautiful approach that’s really helped more of the women get jobs, which was to get mentors who had been senior talent or HR executives, to mentor each of the women. That moved the needle quickly from placement of only a portion of the women into permanent employment to placement of all the women into permanent employment. So I just thought that was a very creative idea.
And then, of course, as we know, it’s one thing to have an idea. It’s another thing to implement it well. I’ve been very impressed with her ability to do that, and also to speak in a very compelling way about the work. She’s chaired the Social Enterprise Alliance Board, which is a big trade association for social enterprise. She really does a great job explaining sort of the value and the role and the meaning and the purpose of social enterprise.
Denver: You work with a lot of people who are really making a difference in this world. Well, Carla Javits, the president and CEO of REDF, I want to thank you so much for being here this evening. Your website is redf.org. What kind of information will visitors find there?
Carla: They can find all of the investments that we make, all of the organizations that we work with and have worked with. They can find short videos with all of the CEOs of the companies that we invest in. They can find the data. They can find information about the field. It’s a very rich website, and I urge them to hop on.
Denver: Sounds pretty comprehensive. Well, thanks so much, Carla. It was a real pleasure to have you on the program.
Carla: Thank you so much. Thanks for having me.
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at http://www.facebook.com/BusinessOfGiving