HHS 497 Health & Human Services Wk5-A

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CHAPTER 3

Forces Shaping the Human Services Sector in the Early 21st Century

Elizabeth Carey, John Hollingsworth, and Alex Reed

T his chapter follows a historical perspective of the sector and begins to lay the foundation for where the broader health and human services sec- tor is going, including why the Strategy Counts initiative is so timely for the industry. The chapter begins with Embracing the Industry of Courage, which is an adaptation of a position paper first prepared for the board of directors at Michigan-base Starr Commonwealth. This chapter also shares Eckerd’s story: although Eckerd is not a pilot site, the agency has served as an inspiration to the Strategy Counts sites, providing insight into what it really takes to transform an aging health and human services organization.

EMBRACING THE INDUSTRY OF COURAGE

The only constant is change—everything flows. This is the doctrine of the Greek philosopher Heraclitus, and today, in the human services sector, we know that standing still is not an option.

However, the factors and trends to which children and families agen- cies are now responding are far from unique to our sector. And with change comes opportunity—the opportunity to use new, innovative means to help many more children and families fulfill their potentials.

We operate in a sector that has been placed under enormous pressure. And yet the “quiet revolution” of the nonprofit sector (Salamon, 2003) contin- ues, despite the chaos of our public finance crisis. While numerous organi- zations in the human services field have succumbed to the contraction of government funding, some green shoots of hope can be found in the non- profit sector as a whole.

Making Strategy Count in the Health and Human Services Sector : Lessons Learned from 20 Organizations and Chief Strategy Officers, edited by Tine, MGA, JD, FCPP, FAAN Hansen-Turton, and Michael Mortell, Springer Publishing Company, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=1572950. Created from ashford-ebooks on 2018-11-17 08:45:02.

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40 Making strategy Count in the health and huMan serviCes seCtor

The key to withstanding the pressures of our economy, increased com- petition, public sector reform, and societal shifts is to be bold—to have the courage to break from tradition and be enterprising, innovative, collabora- tive, and quick.

Service providers in all sectors are required to be ever more dynamic in how they interact with their clients. It is increasingly naive to assume that children and families will travel to a treatment center for our services when they already prefer to experience banking, retail, education, and entertain- ment online, at home, and through mobile devices.

Funding streams are also changing. Government funding overall is declin- ing and continues to be threatened by an unprecedented debt burden at the federal and state levels. Foundations are still recovering from a difficult period for their investments and are being asked to meet a broader range of needs.

As demand for its services rises, the nonprofit sector continues to grow. The expectations of nonprofits are also on the rise, with increased focus on performance-based contracting, a need to demonstrate outcomes, and more emphasis on collaborations aimed at efficiency.

The levels of funding available from government sources do not match the costs of traditional, institutional treatment approaches. There are fewer funds available in the juvenile justice and child welfare systems, while men- tal health is holding strong, particularly with increased coverage from pri- vate health insurance and Medicaid.

Society and the populations our organizations serve are changing too. Overall, we are aging. We are more diverse—the populations currently regarded as minorities will account for 90% of the total population increase in the next 45 years. Growth in the U.S. population is increasingly concen- trated in the south and west.

Meanwhile, the needs of children and families are greater and more complex. Families are less likely to include a married couple. More children live without their biological parents than ever before. Poverty is a daily real- ity for over 46 million Americans. Obtaining a good education is a challeng- ing and unfair process, with just over 70% of all school pupils graduating from high school; the figure drops significantly for urban children and for children who are Black, Hispanic, or Native American.

Children are increasingly living with multiple needs that established systems are not prepared to meet. Children in the juvenile justice system, for example, are often in need of mental health services they cannot access. The proportion of children diagnosed with neurological differences is rising—the U.S. rate of autism diagnosis is 1 in 88 children—while children and adults face significant challenges in accessing services for diagnosis and support.

At Starr, we believe such disadvantages are unacceptable: We know there is a better way. This is why we are continually examining how we meet the needs of the most vulnerable people in our society and are constantly striving to improve how our services are delivered. This is the industry of courage, and we plan to lead it.

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 41

Your communities have benefited from your bravery. It takes courage to move out of the comfort zone, to take chances, to change, and yes, to innovate. In this field, there is little reward for taking risks, but driven by your mission, and compelled to provide high-quality programs and services, you take those risks in order to better serve your communities.

—Peter Goldberg, president and CEO, Alliance for Children and Families (Alliance for

Children and Families, 2011)

Beyond the Knowledge Economy

Revolutions in technology, communication, and consumerism are often seen as revolutions in retail and other private-sector industries. However, the experiences, efficiencies, and conveniences that customers find in other sectors are highly relevant to human services, particularly as collaboration between for-profits, nonprofits, and government become more common.

With such rapid changes, it can be argued that we now operate in a “learning economy,” which focuses on the rate of change and the consequen- tial requirements of constantly renewing firms’ capabilities and workers’ competencies (Morel, Palier, & Palme, 2009). It is not a case just of buying into new technologies but also of being flexible in how you operate and innovative in your response to changes. In this sense, people are still the key to success.

New capabilities emerge just by virtue of having smart people with access to state-of-the-art technology.

—Robert E. Kahn, Internet pioneer

No longer can human services organizations focus only on the delivery of existing programs and contracts: Dynamism and constant connectivity with the external environment are also required. The way individuals and organizations interact with services is fundamental to how human services need to be designed and managed.

Although the basic developmental needs of the children and families in Starr’s care today are, in many ways, the same as they were for Starr’s very first children in 1913, the manner in which these needs are met is far from the same. The system in which vulnerable children and adults find themselves is changing, in part as a result of the continuous search for efficiency, greater effectiveness, and improved customer experiences. Where technology and for-profit solutions can replace government intervention and expense, they increasingly will.

We can look at a host of industries for examples of services respond- ing to consumer trends. When traveling, for example, we book trips and

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42 Making strategy Count in the health and huMan serviCes seCtor

travel experiences anywhere in the world using the Internet and through mobile devices. Ticketing is electronic, and even security in airports involves fewer people. In health care, reliance on the institution has decreased—we stay overnight less often thanks to improvements in surgical technology, robots, and local outpatient services. In education, colleges and universities are switching to virtual courses, involving less travel, less need for physical facilities, and less overhead.

One of the top consumer trends in 2012 was identified as do-it-yourself health, facilitated by advances in mobile applications (apps; “12 Crucial Consumer Trends for 2012,” 2012). At the end of 2011, Apple’s App Store offered 9,000 mobile health apps (including nearly 1,500 cardio fitness apps, more than 1,300 diet apps, more than 1,000 stress and relaxation apps, and more than 650 women’s health apps).

Other related trends include point-and-know (“12 Crucial Consumer Trends for 2012,” 2012), which is the need among consumers for instant infor- mation on real-world images and people; this is driven by the growth in augmented reality apps, which allow people to point a device at a real-world scene and make it come to life using images and text.

The way we innovate is also changing. Idle-sourcing is the next fron- tier for crowd-sourcing (“12 Crucial Consumer Trends for 2012,” 2012): It is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially from an online com- munity, rather than from traditional employees or suppliers. Idle-sourcing comes from people seeking to contribute their services, ideas, and content with minimal effort and minimal reliance on technology, enabled only by their mobile devices. It is also making brands more instantly accountable for their actions, with consumers expecting honesty about flaws in a company’s service rather than the appearance of flawlessness.

“More!” is as effective a revolutionary slogan as was ever invented by doctrinaires of discontent. The American, who cannot learn to want what he has, is a perma- nent revolutionary.

—Eric Hoffer, American moral and social philosopher

Continuous learning, development, and improvement are required, and yet these cannot always come from within an existing organization. Just as businesses, particularly technology companies, have embraced “open inno- vation” (Chesbrough, 2005) for decades, human services nonprofits can look for external innovation and exploit it through collaboration, partnerships, mergers, and acquisitions.

Changes in technology, with the increased potential to reach large audi- ences with interactive and tailored communications, are opening up new possibilities in business development and fundraising. Realizing this poten- tial is proving to be a challenge, however: Although nearly all nonprofits

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 43

are experimenting with social media, approximately 80% are unsure how to build real value by doing so (Weber Shandwick, 2009).

To embrace social media, human services organizations must be more open with their information while ensuring that they maintain client confidentiality. Used responsibly, proactive social media strategies can significantly increase an organization’s community of interest—and, potentially, its donor base.

Know Your People

Demographics played a significant role in the outcome of the U.S. presiden- tial election campaign of 2012. As Republicans have since acknowledged, their party’s campaign did not make full use of data that would have told them how significant the Latino population has become, both nationally and in specific regions of the country.

As shown in Figure 3.1, there are 52 million Hispanic persons living in the United States, comprising 17% of the total population—making Hispanics the largest minority group. This number is projected to reach 132.8 million (30% of the U.S. population) by 2050 (Pew Research Hispanic Center, 2008). In 1980, Hispanic children accounted for 9% of all children in the United States; in 2011, the proportion was 22%. The growth of non-Caucasian populations is undoubtedly changing the politics of the United States and is also chang- ing the dynamic of the communities served by the human services sector.

Although non-Caucasians make up an increasing proportion of the total population, inequality continues to present major challenges. In education, for example, Hispanics, African Americans, and Native Americans graduate from high school at rates consistently below 60%, whereas the national average is 71%. Similar patterns are evident in college and university graduation rates.

Ethnicity, however, is just part of the demographic picture. Approximately 37 million Americans are over 65, and this number will double in the next 40 years. The millennial generation (born 1982–2002) is 81 million strong and, over the next 20 years, will come to comprise the bulk of the popula- tion. Family structures are changing: Fewer than 1 in 4 households consists of a heterosexual married couple with children. Meanwhile, 1 in 4 children under 21 in the United States lives in a single-parent family, more than three- quarters of such children supported by single mothers.

For the human services sector, such shifts in families and communities can affect the social needs that organizations are challenged to meet, as well as how culturally appropriate services are and how their delivery should be managed.

FIGURE 3.1 U.S. Hispanic population.

TODAY 2050

17% 30% 52 MILLION 132.8 MILLION

OF U.S. POPULATION OF U.S. POPULATION

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44 Making strategy Count in the health and huMan serviCes seCtor

Where’s the Money?

The distribution of government funding arguably reflects what we as a soci- ety are accepting as our social priorities, and as funding becomes tighter, scrutinizing the nature of expenditures becomes more important.

Currently, national spending on adult corrections is $81.5 billion, approaching three times as much as that for child welfare ($29.3 billion) and 12 times what we spend on juvenile justice ($6.4 billion). Meanwhile, spending on mental health is much higher, at $113 billion. Typically, less than 10% of the federal budget is spent on children (The Urban Institute & The Brookings Institution, 2010), and although no comprehensive figures are available detailing the mental health dollars spent on children, it is esti- mated that in 2007, approximately $6 billion was spent on preventive services for children (O’Connell, Boat, & Warner, 2009).

The growth in older populations will continue to draw funds away from other areas of social services. Federal funding spent on children has been decreasing, and this trend is expected to continue. Already the budget allo- cated to this area has shrunk from 20% of the total budget in 1960 to 16% in 2007, and this is expected to fall to 13.8% by 2018.

Other pressures on public funding include the increased number of Americans living in poverty and on relatively low incomes. With 19% of U.S. children living below the poverty line (a family unit of three living on less than $19,530 per year, for example), and many more adults struggling to sup- port them, the demand for basic services is enormous.

Charitable Giving Under Pressure to Fill the Void

Total charitable donations in the United States are still approximately 11% below their level in 2007 and are recovering slowly—growing only 0.9% in 2011. It is expected that it will take a decade for charitable giving to return to pre–economic crisis levels. Donations to foundations have dropped, result- ing in lower levels of grant-making. Despite this, the United States is still the most charitable country in the world, donating approximately $300 billion to charities each year.

Overall charitable giving from corporations is still relatively low, owing in large part to the stress and uncertainty in the banking sector that has long been the largest source of corporate philanthropy. Meanwhile, online giving by the public is growing as a proportion of charitable philanthropy, and fundraising through social media represents an area of opportunity for nonprofits.

The human services sector attracts approximately 12% of the total dona- tions in the United States, compared with 32% for religion and 13% for education. In 2011, 90% of Michigan residents donated to charity, a greater percentage than in 2007 (Michigan Nonprofit Association, 2012). However,

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 45

competition for donations is also high, and fundraising techniques must be sophisticated for a human services organization to present itself as an attrac- tive investment.

Rethinking Social Finance

Record levels of debt in national, state, and local governments are driving aus- terity initiatives, leaving fewer and fewer public resources available for human services. At the same time, the funds behind social investment are coming not only from a wider range of sources, but also with greater expectations.

In the wider nonprofit arena, budget cuts and private-sector social inno- vation are driving the creation of new financing models. The competition among nonprofits for ever-scarcer public funding is encouraging collabora- tion, partnerships, and mergers.

Socially minded individuals and corporations with integrated approaches to sustainability are seeing social change as an investment opportunity. Social impact financing is beginning to replace traditional corporate philanthropy and has made evidence-based impact a point of entry as opposed to a source of advantage. Government is seeking private sector–nonprofit collaboration to maximize the impact of the dollars it invests.

You cannot have development in today's world without partnering with the private sector.

—Hillary Clinton, U.S. Secretary of State, Clinton Global Initiative, 2012

One example of social impact financing is the social impact bond, a mechanism of funding for social programs in which government agencies pay only for real, measurable social outcomes, and only after results have been achieved, with the private sector providing the upfront financing (Center for American Progress, 2012). Such a model is built entirely on the need to demonstrate impact and creates a new starting point for a nonprofit bidding to obtain funds.

Health Care and Health Reform—New Frontiers for Human Services

The links between physical, mental, and social wellness are better under- stood than ever, and our health care providers are rapidly realizing the real value of addressing needs more traditionally met by the publicly funded human services sector. Mental health, substance abuse, and behavioral

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46 Making strategy Count in the health and huMan serviCes seCtor

health, for example, are being treated on a more equitable level by private insurers, and this trend is likely to be accelerated by the implementation of the Affordable Care Act.

As the country continues to look for new ways to control health care costs, states have increasingly become laboratories for adopting new financ- ing strategies and moving away from traditional fee-for-service reimburse- ment models. This means that integrated care delivery models, such as health homes, have begun to take hold in many states.

Health homes provide integrated, coordinated primary and behavio- ral health and substance abuse services. They represent a person-centered, holistic approach that normally focuses on serving individuals who have been diagnosed with one or more chronic and/or behavioral health con- ditions. As defined by the Centers for Medicare and Medicaid Services (Center for Health Care Strategies, 2011), a health home provides six spe- cific services beyond the clinical services offered by a typical primary care provider:

• Comprehensive care management • Care coordination and health promotion • Comprehensive transitional care and follow-up • Patient and family support • Referral to community and social support services • Use of information technology to link services, if applicable

This trend means that behavioral health organizations and com- munity mental health centers will need to learn how to master different markets. This change and the overall increase in links to the health care sector provide opportunities and challenges. While service areas threat- ened by public cuts may find new sources of funding, organizations will be required to meet a different set of expectations and measurement stand- ards. Diversification into new areas of service and new client groups can also reduce reliance on public funding and increase support from private health care providers.

Neurological Differences—Emerging and Unmet Needs

The number of people diagnosed with neurological differences, including the most commonly known autism spectrum disorders (ASD), is increasing at an alarming rate.

The nonprofit autism science and advocacy organization Autism Speaks reports that autism affects 1 in 88 children overall, including 1 in 54 boys, and that autism is the fastest-growing serious developmental disability in the United States (What Is Autism? 2013). Research conducted among U.S. parents suggests that the rate of autism is much higher—possibly 1 in 50

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 47

children of school age (Centers for Disease Control and Prevention, 2011– 2012); the variance in reported rates is thought to be affected by a low but improving level of diagnosis.

White children are more likely than are Black or Hispanic children to be diagnosed—among white children the prevalence is 1.6%; among Hispanic and African American children, the rates are 1.0 and 0.6%, respectively. These figures, in part, reflect disparities in society when it comes to aware- ness of neurological differences and accessing appropriate services for diag- nosis and treatment.

ASDs begin in childhood and continue through adulthood, and although each case is unique, children who have been diagnosed with ASDs have in common problems with social and communication skills. Other features typical of children with ASDs are unusual patterns of learning, paying atten- tion, and reacting to sensory stimuli. These issues, if untreated, make it less likely that an adult who has been diagnosed with an ASD will thrive.

Among those diagnosed with an ASD, socioeconomic status appears to play an important role in mitigating the symptoms. Non-Hispanic white chil- dren of highly educated mothers are much more likely to experience rapid improvement in functioning than are other children (Fountain, Winter, & Bearman, 2012).

The lifetime societal costs associated with autism have been estimated at $3.2 million per person who has been diagnosed with autism. These costs are driven largely by behavioral therapies in childhood and extensive adult care, along with large indirect societal costs owing to lost productivity (Ganz, 2007).

In addition to autism, a range of other conditions require special atten- tion from organizations such as Starr. Attention deficit hyperactivity dis- order (ADHD), for example, is frequently encountered by Starr and has a significant impact on young people in the United States. The Centers for Disease Control and Prevention (CDC) reports (OPEN MINDS, 2013) that ADHD is one of the most prevalent neurobehavioral conditions in the United States, and that between 4% and 12% of school-aged children have been diagnosed with the disorder. The CDC estimates the societal cost of this illness to be between $36 and $52 billion—that is, between $12,005 and $17,458 annually per individual. National survey data suggest that approximately two-thirds of children who have special care needs such as ADHD are covered by commercial employer-based health insur- ance (Mathematica, 2004).

Even as the needs of people with neurological differences grow, service provision is lagging behind the demand. In Michigan, for example, signifi- cant waiting lists exist for access to services required by people with neu- rological differences, including assessment and diagnostics as well as day treatment and respite. Many organizations, particularly schools, could also benefit from expert advice on working with children affected by neurologi- cal differences.

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48 Making strategy Count in the health and huMan serviCes seCtor

Fresh Thinking Closer to Home

Just as we’ve seen deinstitutionalization in mental health in recent decades, a major shift is also under way in the areas of juvenile justice and child wel- fare. The number of children and adolescents in residential placements is falling, and community-based, in-home care models are more highly prized by public authorities and clients.

This shift is driven by a range of factors, including both cost and the belief that it is better to keep children in their normal environments and find solutions to their behavioral challenges that fit those environments.

There is also a move toward more coordinated and integrated treat- ments; new systems are being designed to reduce the inefficiencies of mov- ing young people between different care and funding models.

EXHIBIT 3.1

Case Study: Massachusetts Unified Child Welfare Service Model for Congregate Care and Community-Based Treatment (Open Minds, 2013)

A new model of child welfare launched by the Massachusetts Department of Children and Families and the Department of Mental Health reflects some of the emerging trends in child welfare.

The Massachusetts approach is a unified service model called “Caring Together” that integrates congregate care and community-based treatment for youth in the child welfare system. The Massachusetts model has six key elements:

1. Collaborating between human services and mental health with monitoring of outcomes and performance

2. Creating standardized level-of-service criteria for various levels of placement and common criteria for utilization management and network management

3. Contracting for human services through RFPs that can be renewed for as long as 10 years and that have federal grant funding attached (e.g., IV-E demonstration projects)

4. Reimbursing through pay for performance 5. Using congregate (residential) care only for short, intensive

stays 6. Focusing on aftercare community programming such as indepen-

dent living and vocational services

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 49

Foster Care

Nationally, the number of children in foster care has been declining for over a decade. From the peak of 567,000 children in 1999, there were 401,000 children in foster care in 2011 (Foster Care, 2012). The challenges faced by children in foster care remain far greater than those faced by most other children. Children who live in foster care are more likely to exhibit physical, learning, and mental conditions: One study suggests that 60% of young children (aged 2 months to 2 years) in foster care are at high risk of slow development and neurological impairment (Child Trends, 2003).

Furthermore, the young people who age out of foster care (i.e., leave because they have turned 18 or have graduated from high school) often find it difficult to progress to a healthy adult life. The largest study of this popula- tion in the United States showed that 38% had emotional problems, 50% had used illegal drugs, and 25% were involved with the legal system.

Currently, the funding for foster care does not cover the full cost of deliv- ering services to the high standards most agencies strive for—approximately 14 states cover less than half the cost of foster care.

Education

As change sweeps across all governmental and business sectors, educa- tion in the United States is also undergoing some of the most substan- tial reform in American history. Funding is being cut, teachers and administrators are under immense pressure, and student achievement is struggling.

In recent years, strong emphasis has been placed on standardized test- ing to measure the academic progress of young people. The role of stand- ardized testing in schools has increased dramatically in response to federal legislation, such as the No Child Left Behind Act, which requires states to administer standardized tests to measure students’ yearly progress. Schools not making adequate gains according to the legislation are sanctioned. Opponents of standardized testing suggest that the tests do not accurately measure progress, and they cite the significant cost of administering and grading the tests as wasteful spending.

Education is also becoming increasingly integrated with the business world. In an effort to raise student performance and close the achieve- ment gap, the United States has seen a large rise in private investment in education in the form of for-profit charter schools. Nonprofits are also having a greater influence in the educational arena, with many helping to open public charters alongside local public schools to meet the needs of communities.

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50 Making strategy Count in the health and huMan serviCes seCtor

As in all areas of everyday life, technology has had a huge influence on education. From online learning opportunities to entirely virtual schools, the way students receive educational services is constantly evolving. Traditionally reserved for post-secondary learning, online schools are on the upswing in K–12 education, and are now becoming serious alternatives to traditional public schools.

Courage in Our Communities

The growth in demand for community-based services is one of the most important shifts in our field and is evident not only in traditional service lines such as juvenile justice. More flexible, tailored, often in-home models of service are proving to be effective and efficient in the support of people who have developmental disabilities, neurological differences, and mental health conditions. To respond to these opportunities and serve a wider range of needs, we must be innovative and customer-focused at an organizational level as well as in our sector as a whole.

Having led bold, inventive initiatives in its first century of service, Starr will continue to meet children, families, and communities where they are and, with a focus on resilience and courage, be a part of where they are going. We know that on that journey, our business model, our programs, our people, our culture, and our customers will change and keep changing—the challenge is to ensure that we are leading the changes, not following them.

To achieve this, we must continuously scan not only Starr’s landscape, but that of other innovators, service leaders, partners, and customer champions, linking macro trends to how we achieve local impact. Only then can we iden- tify the leaps we must make to stay ahead of the curve, master our own hori- zon, turn courage into success, and ensure that children and families flourish.

ECKERD: A DRAMATIC TRANSFORMATION

Founded by Jack and Ruth Eckerd in 1968, Eckerd is a nonprofit youth ser- vices organization dedicated to ensuring that every child has the opportu- nity to succeed. Through a continuum of life-changing behavioral health and child welfare services nationwide, Eckerd has given much-needed sec- ond chances to nearly 150,000 children and families.

In 2007, Eckerd operated 47 programs serving 9,500 youth annually on revenues of $80 million, with 86% of this revenue derived from residential programs for which state and local agencies were rapidly reducing fund- ing because of the costs. As a result of this industry shift toward more cost- effective community-based services for treating at-risk and troubled youth, since 2007, Eckerd has had to exit 46 of those original 47 programs along with $78 million of the $80 million in revenue. To put this into perspective, Eckerd today would be a $2 million nonprofit with only one program serving

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 51

100 youth annually had it not embarked on a significant transformational effort over the past 6 years.

Rather than facing closure, since 2007, Eckerd has opened or is in the process of opening 32 new programs serving 14,000 youth on $158 million in revenue, with 96% of this new revenue being community-based. Additionally during this period, Eckerd has reduced its overhead rate from 17% to 5%, significantly improved its program quality, and eliminated the use of nearly $3 million annually from its endowment for sustaining base operations. Table 3.1 provides a snapshot of this dramatic transformation.

How did Eckerd make this transformation a reality? The answer starts with a reflection on how a nearly 40-year-old nonprofit found itself in the position of possibly having to close its doors.

Jack Eckerd: The Genius Leader

Management consultant Peter Drucker wrote in The Effective Executive (2006), “Organization is, to a large extent, a means of overcoming the limitations mortality sets to what any one man can contribute. An organization that is not capable of perpetuating itself has failed” (p. 56). Unfortunately, history is littered with organizations large and small, for-profit and nonprofit, that were so dependent on the “genius” of a single leader that when the leader ultimately left—whether by choice or the wear of time—the organization floundered and even eventually collapsed.

Jack Eckerd was a business titan with a gift for innovation and deal making. After acquiring three failing drugstores in Clearwater, Florida, Jack reengineered the drugstore experience and built Eckerd Drugs into a national chain that was on the road to becoming the preeminent drugstore company. However, as Jim Collins wrote in Good to Great (2001) when com- paring Eckerd Drugs with Walgreens, “But then Jack Eckerd left to pursue his passion for politics, running for senator and joining the Ford administra- tion in Washington. Without his guiding genius, Eckerd’s company began a long decline, eventually being acquired by J. C. Penney” (p. 46).

TABLE 3.1 The Eckerd Transformation

Eckerd in 2007

Programs Exited Since

Today If No Transformation

New Programs

Eckerd in 2014

Youth Served 9,500 9,400 100 14,000 14,100

Total Programs

47 46 1 32 33

Revenue $80M $78M $2M $158M $160M

Residential % 86% 85% 100% 4% 5%

Community % 14% 15% 0% 96% 95%

Overhead Rate 17% N/A 17% N/A 5%

Source: Reed (2013).

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Collins describes Eckerd Drugs’ organizational model in Good to Great as being one of a “genius with a thousand helpers” (p. 47), with the primary guidance mechanism for Eckerd Drugs’ strategy being “inside Jack Eckerd’s head” (p. 46). How does an organization not just survive, but thrive after its iconic leader leaves? That was the daunting task faced by Eckerd the nonprofit— not the drugstore chain—after its founder, Jack Eckerd, died in 2004.

1968—“It’s the Kids”

It was Jack’s desire to give back to the country that had given him so much that fueled his calling to create a nonprofit providing and sharing solutions for children in need of a second chance. When asked what was most impor- tant to him over the years, Jack, despite his extensive professional accom- plishments, always said: “It’s the kids.”

In the late 1960s, Florida’s juvenile justice system often approached work- ing with “incorrigible youth” by confining them in punitive institutions for years at a time. Believing there had to be better treatment alternatives, Jack researched the programmatic landscape and discovered therapeutic wilder- ness programming, a strengths-based, 12-month residential model operated in a wilderness setting that was an innovation for its time. Utilizing this model, he opened the first outdoor therapeutic program for boys in Florida in 1968, followed by the first outdoor therapeutic program for girls in the southeastern United States a year later.

Over the next 4 decades, at the request of state leadership in Florida as well as in Georgia, New Hampshire, North Carolina, Rhode Island, Tennessee, and Vermont, Eckerd opened 16 more therapeutic wilderness camps, accompanied by additional types of residential programming. Additionally, Jack’s innovations in youth services programming extended beyond wilderness camps and residential services. Understanding the need to prevent younger at-risk youth from needing residential treatment in their teens, he personally funded school-based character education pilots in Florida elementary schools, leading to the creation of Eckerd’s early intervention and prevention “Hi-Five” model of services. Jack also led the charge—again with his own funding—for launching aftercare and reentry services throughout Florida to help youth leaving juvenile justice residential treatment facilities successfully transition back to their home communities.

2007—“It’s the Camps”

In the late 1990s, Jack suffered a stroke that reduced the time he could dedi- cate to Eckerd; with his subsequent death, in 2004, the nonprofit organization found itself in a precarious position, much as Eckerd Drugs did in the 1970s after Jack began focusing on politics and philanthropy. By 2007, just 3 years after his death, the nonprofit Eckerd stood paralyzed on a dangerous precipice.

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Over the previous 10 years, Eckerd had been led by five different CEOs. Outcomes had deteriorated and were not driven by data. Annually, $2.8 million was siphoned from a dwindling endowment to support an overhead rate that had ballooned to 17%. And 86% of the organization’s $80 million in annual rev- enue was generated largely by wilderness camps with declining census levels.

After Jack died, Eckerd’s primary driving force of “It’s the kids” morphed into “It’s the camps.” Instead of perpetually trying to develop better and more cost-effective treatment alternatives for youth based on research and best prac- tices, the organization had come to identify itself inextricably as “the wilderness camping organization.” Faced with this dilemma, and sensing the organiza- tion teetering, Eckerd’s board of directors knew change had to happen. In 2006, they launched a national search for a transformational leader who could not only “put out the fires and right the ship,” but also embed systems within the organization that would ensure that the ship was adaptable enough to sail suc- cessfully into perpetuity, regardless of the mortality of any future leader.

With these objectives in mind, in April 2007, David Dennis was hired as chief executive officer. A licensed marriage and family therapist, David had a 30-year history in the child welfare and juvenile justice sectors, with a particular emphasis on leading turnarounds and startups. In addition to his professional experience, David brought personal passion to his work, born out of a childhood journey that included being removed from his alcoholic mother’s care by child protective services after his father’s death and later being adopted and given the second chance every child deserves.

Transforming the Organization

After engaging numerous stakeholders and assessing Eckerd’s existing ser- vices and systems, David put in motion a plan to begin transforming the organization and ensuring its future adaptability:

• Reaffirm the mission and vision and operationalize the values • Face reality with courage and plant a flag on the moon • Codify strategic building blocks, execution paths, and measurable

milestones • Install systems to drive execution and perpetually improve

Step 1: Reaffirm the Mission and Vision and Operationalize the Values

As Peter Drucker wrote in The Effective Executive, “Any organization also needs a commitment to values and their constant reaffirmation, as a human body needs vitamins and minerals. There has to be something ‘this organi- zation stands for’ or else it degenerates into disorganization, confusion and paralysis . . .” (p. 56). Because Eckerd was disorganized, confused, and paralyzed when the new leadership took over in 2007, company leadership

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54 Making strategy Count in the health and huMan serviCes seCtor

decided to begin the journey of transformation by focusing staff on the answer Jack gave when asked what was most important to him: “It’s the kids.” He never said, “It’s the camps.” It was always: “It’s the kids.”

Eckerd engaged a wide variety of stakeholders, including staff, the board, and customer agencies, to weigh in on its mission (“Provide and share solutions that promote the well-being of children and families in need of a second chance”) and vision (“Ensure that each child has the opportunity to succeed”). It quickly became clear there was universal agreement by all and, aside from minor editing, the mission and vision remained intact as Eckerd’s overarching compass points. The values, however, were a different story. At the time, Eckerd had 10 organizational values and seven guiding philosophies, all of which were being followed haphazardly at best. As a result, Eckerd leadership culled the list to the following values:

• We base our concepts upon a belief in God and respect for all. • Youth always come first. • Services should focus on the family. • Local communities must be engaged and empowered. • We hold ourselves accountable for achieving superior outcomes. • We engage people from a strengths-based perspective. • We are good financial stewards. • We build strong and lasting partnerships. • We have the courage to innovate and change.

With agreement on the values, leadership reflected on how well Eckerd had recently been “living” its values with sobering results. Was Eckerd really holding itself accountable for achieving superior outcomes when it had programs on conditional status for poor quality? Was it being a good financial steward with a 17% overhead rate and an annual withdrawal of $2.8 million from the endowment? And how was Eckerd demonstrating the courage to innovate and change when it actively refused customer requests to transition away from wilderness camps toward community-based ser- vices? After Eckerd pondered these questions, it became clear that a system was needed to ensure that the values were embedded and operationalized throughout the organization so that Eckerd could never again stray from them.

As a result, an organizational operating construct was created called “The Eckerd Wheel.” It consisted of both performance and person sides. As shown in Figure 3.2, the performance side of the Eckerd Wheel has as its hub Eckerd’s second through fourth values regarding youth, families, and com- munities, to ensure that each operational decision or action is made with its effects on these values in mind.

Surrounding the hub are Eckerd’s five “spokes” of quality, staff, finance, external relations, and growth and transformation, with each spoke mapped to one of values five through nine. In turn, each spoke (and hence each value) is championed by one of five spoke departments located at Eckerd’s support

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center, with each department chief a member of the executive leadership team that reports directly to the CEO. For example, the quality spoke/value of “We hold ourselves accountable for achieving superior outcomes” is championed by Eckerd’s quality team, which is led by the chief quality officer.

On a bike, if one spoke is bent, the wheel wobbles. Analogously, the Eckerd Wheel dictates that each spoke contributes equally to decision mak- ing to ensure that all points of view are heard and equally considered. The systemization of this dynamic tension ensures that each spoke (and thus each value) operates as a peer and fosters balanced decision making while keeping the hub values always at the center of the decision. Ultimately, by continuously championing Eckerd’s values, the Eckerd Wheel reinforces a strong sense of organizational identity and ideology while simultaneously acting as a thread binding the organization together as it forges a stronger ability to drive and adapt to future change.

Whereas the performance side of the wheel ensures Eckerd’s perpetual performance, the person side of the wheel (Figure 3.3) ensures that all staff members are focused on attending to each other’s, and their own, needs as human beings. The person side balances the performance side, making sure that Eckerd never loses sight of superior performance’s total reliance on an engaged and fulfilled workforce.

At the hub of the person side is “Respect for All,” which reflects Eckerd’s first value: “We base our concepts upon a belief in God and respect for all.” This value recognizes that each person is uniquely special and has inherent worth. Surrounding the hub are the five person-side spokes:

• Integrity: Totally ethical behavior at all times and in all situations • Responsibility: Knowing and doing what is expected of you • Empathy: Seeing the world through another person’s eyes • Caring: Meeting another person’s needs • Happiness: Having a smile on your face

STAFF

SPOKE

Quality

Staff

Finance

Hold ourselves accountable for achieving superior outcomes.

Engage people from a strengths-based perspective.

Good financial stewards.

Build strong and lasting partnerships.

Have the courage to innovate and change.

VALUE

QUALITY

GROWTH & TRANSFOR-

MATION

Growth & Transformation

EXTERNAL RELATIONS

External Relations

FINANCE YOUTH,

FAMILIES & COMMUNITIES

WE SERVE

FIGURE 3.2 The performance side of the Eckerd Wheel. Source: Reed (2012).

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56 Making strategy Count in the health and huMan serviCes seCtor

Eckerd’s five-dimensional leadership development system is designed to develop and evaluate all staff with respect to both the person and the performance sides of the Eckerd Wheel. Methods of developing staff include on-the-job experiences, mentoring, interactive training, employee apprecia- tion events, team-building exercises, cohort groups, and more. This is one way that the organization attempts to weave the Eckerd Wheel and its cor- responding values into the everyday fabric of the staff.

Step 2: Face Reality With Courage and Plant a Flag on the Moon

By 2007, a vast majority of youth services agencies were far into the process of moving away from residential services. Eckerd, however, had refused to face this reality, believing that wilderness camps were the end-all solution and hoping that eventually the tide would turn. Knowing this tide would never turn, Eckerd’s new leadership held frank discussions with staff, the board, and stakeholders about the hard realities Eckerd faced and the cour- age needed to overcome these challenges. Although these were not always comfortable conversations, they were necessary ones, at times waking people up to Eckerd’s situational realities, which included the prospect of program closures. So important were these reality-check conversations that Eckerd has integrated them into its annual planning process. An example from 2007 of “Facing Reality with Courage” is shown in Table 3.2.

It has been said that without a vision, the people perish, and as Eckerd faced the harsh realities of 2007, leadership did not want staff to lose sight of the possibilities ahead. To this end, leadership decided to “plant a flag on the moon,” establishing in measurable terms a “2020 Vision” for the organiza- tion that projected Eckerd to increase the number of youth served annually from 9,500 to 20,020 in the year 2020, and also to achieve national thought leadership recognition. Additionally, Eckerd established “Program 2020

RESPONSIBILITY

SPOKE

Integrity

Responsibility

Empathy

Honest, Fair, Courageous, Humble, and Reliable

Discerning, Diligent, Initiative, Proactive, and Accountable

Attentive, Accepting, Respectful, Objective, and Compassionate

Supportive, Encouraging, Patient, Candid, and Appreciative

Wellness, Balance, Learner, Positive, and Fun

SUPPORTING SPOKE

INTEGRITY

HAPPY

Happy CARING

Caring

EMPATHYRESPECT FOR ALL

FIGURE 3.3 The person side of the Eckerd Wheel. Source: Reed (2012).

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Chapter 3 ForCes shaPing the huMan serviCes seCtor in the early 21st Century 57

Visions”: Each program has painted a picture of where it intends to be by the year 2020. Over time, Eckerd’s 2020 Vision has become a rallying cry for staff, and because the organization has transformed and now serves 14,000 youth annually, the staff have taken great pride in their accomplishments to date.

Step 3: Codify Strategic Building Blocks, Execution Paths, and Measurable Milestones

Having a 2020 Vision, leadership next defined for each performance-side spoke its own strategic building block and execution paths marked by clear and measurable near-term, midterm, and long-term horizon milestones. Each spoke’s strategic building block is meant to represent the spoke’s foun- dational competency, while the execution paths represent the directional expectations over the next 18 to 24 months for each spoke (and hence build- ing block) in pursuit of achieving the upcoming horizon milestones. For example, Table 3.3 shows the quality spoke and its strategic building block, milestones, and midterm execution paths, and Table 3.4 shows those for the growth and transformation spoke.

Eckerd’s recent transformation of its North Carolina wilderness camps is a good illustration of how the strategic building blocks work. The build- ing block for Eckerd’s growth and transformation spoke emphasizes “actively engaging and partnering with customers to develop solutions to better meet their needs.” At the height of Eckerd’s wilderness camp programming, the organization operated seven such programs in North Carolina, even though the Department of Juvenile Justice wanted to trans- form to more community-based services. The department was effectively hampered in doing so because the camps were included in their budget as a non-compete line-item that Eckerd had successfully fought to protect. With the establishment of the growth and transformation strategic build- ing block, Eckerd’s new leadership engaged the department, asking them (much to their surprise) what their needs and desires were and offering to partner on the corresponding changes. Over the years that followed, Eckerd then supported the elimination of the Eckerd budget line-item and

TABLE 3.2 Eckerd 2007: Facing Reality With Courage

Eckerd’s 2007 Reality The Courage Needed

• Shrinking residential funding • Increasing community-based funding • Under-engaged families • Reluctance to use data • Bloated overhead • Investments being drained • Customers not partners

• Exit or transform camps • Grow community base • Focus on families • Become data-driven • Reduce overhead • Leverage investments • Build customer partnerships

Source: Reed (2013).

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58 Making strategy Count in the health and huMan serviCes seCtor

the refocusing of state funds on competitively bid, short-term residential and community-based services. While this did result in the closure of all seven North Carolina Eckerd camps, the department’s needs were met and Eckerd competitively won two short-term residential programs and five community-based programs, which enabled Eckerd to serve more youth annually with lower costs and better outcomes.

One particularly exciting area of future focus for Eckerd is the qual- ity spoke’s execution path strategy to develop and deploy a “Youth Success Wheel” to drive substantive longitudinal youth impact. This path represents Eckerd’s determination to shift programmatic outcomes from transactional

TABLE 3.3 The Quality Spoke’s Strategic Building Block, Milestones, and Midterm Execution Paths

Building Block Milestones Midterm Execution Paths

Thought leadership with respect to operating family- focused, data-driven services that deliver cost-effective out- comes and impact

Near-Term (by June 2013) Make the use of data

central to each program’s operations by deploying a Perpetual Performance Improvement (PPI) system (milestone achieved).

Midterm (by June 2016) Achieve the best contractual

outcomes in each operat- ing state for each program operated.

• Develop and deploy throughout all programs a “Youth Success Wheel” using evidence-based principles with the objec- tive of generating positive long-term impact.

• Focus each program’s PPI efforts on exceeding the performance of the other providers in their state.

• Engage other organiza- tions on ways to improve services and performance.

Long-Term (by June 2021) Demonstrate the long-term

impact for the youth served of each service operated.

Source: Reed (2013).

TABLE 3.4 Growth and Transformation Spoke’s Strategic Building Block, Milestones, and Midterm Execution Paths

Building Block Milestones Midterm Execution Paths

Thought leadership with re- spect to system reform and to actively engaging and partner- ing with customers to develop solutions to better meet their needs

Near-Term (by June 2013) Serve 12,000 youth annually

(milestone achieved).

Midterm (by June 2016) Serve 16,000 youth annually.

Long-Term (by June 2021) Serve 20,020 youth annually.

• Support each program’s 2020 Vision in engaging customers and communi- ties as to their needs.

• Pursue mergers and acquisitions as a means to strengthen both organiza- tions and scale.

• Secure investments to pursue strategic resource needs.

Source: Reed (2013).

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outcomes, such as completion rates and 12-month post-success rates, to impact outcomes, such as whether an Eckerd program is truly a driving force in giving children a second chance to ultimately grow up into success- ful adults.

Step 4: Install Systems to Drive Execution and Perpetually Improve

With strategic building blocks and measurable milestones in place, leader- ship next set out to develop and install a system of execution that maximized the impact of the Eckerd Wheel and ensured perpetual improvement. What emerged was Eckerd’s Perpetual Performance Improvement (PPI) process, which identifies, for both the overall organization and individual programs, support center spokes, as well as the individual staff, performance data, reports, and improvement processes that will be utilized. Three examples of performance tools and systems defined by the PPI process follow:

• Program Performance Scorecards Each Eckerd program has its own performance scorecard populated

with key performance indicators (KPIs) spanning the five performance spokes of the Eckerd Wheel. This ensures that each program maintains alignment with the Eckerd Wheel and hence Eckerd’s values. Program scorecards are reviewed monthly by program operations and spoke staff during program PPI meetings; areas of high performance are high- lighted and areas of low performance are targeted for improvement.

• Spoke 5×5 Performance Scorecards Each performance side spoke has its own performance scorecard with

five “subspokes,” and each subspoke has its own top five KPIs. For exam- ple, the staff spoke has as its five subspokes stability, engagement, devel- opment, exit satisfaction, and recruiting, with each of these having its own five KPIs that are reviewed on a monthly basis for performance improvement opportunities. By having both the 5×5 spoke performance scorecards and program performance scorecards, Eckerd is able to view performance from two important perspectives.

• Eckerd Execution Status Report Each month, Eckerd produces an overall organization execution report

that includes strategic and tactical (annual operating plan) scorecards, both containing KPIs for each of the spokes of the Eckerd Wheel. For example, the strategic scorecard tracks Eckerd’s execution relative to the spoke exe- cution paths and upcoming horizon milestones. This report is available to all staff every month and is provided to the board on a quarterly basis.

In short, the PPI process was engineered with the Eckerd Wheel at its core to ensure that Eckerd’s values were being lived and measured through- out the organization.

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60 Making strategy Count in the health and huMan serviCes seCtor

Six Years Into the Journey: A Dramatic Transformation and an Exciting Future

First and foremost, the Eckerd Wheel and its supporting planning and exe- cution systems provided Eckerd with the capacity to adapt, to be able to react swiftly and nimbly when “the cheese has been moved” or to be a “cheese mover”—and thus, in turn, to be able to overcome the limitations mortality places on what any one person can contribute. As Peter Drucker wrote in The Effective Executive, “An organization which just perpetuates today’s level of vision, excellence, and accomplishment has lost the capacity to adapt. And since the one and only thing certain in human affairs is change, it will not be capable of survival in a changed tomorrow” (p. 57).

In 2007, Eckerd was an $80 million nonprofit with 86% of its revenue derived from residential programs that agencies no longer wanted. Six years later, and having closed $78 million of that original $80 million in program- ming, Eckerd approaches its 2014 fiscal year as an organization of $160 mil- lion, of which 95% is community-based. And while the organization does have strong leaders, there are no genius ones. Instead, the organization’s values are lived in a systematized manner every day; reality is faced with courage; people strive to plant a flag on the moon; building blocks, execution paths, and milestones are clear; execution is not optional; and, most impor- tant of all: “It’s the kids.”

However, although progress has been made, the journey is far from over. There is much room for improvement, and there are 20,020 youth annually yet to be reached.

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