Not For-Profit

This is one nonprofit facing a very businessslike question: can it get beyond the novelty stage and find a way to take its concept national?

Of all the enterprises that INC. has examined in the Anatomy of a Start-up series, City Year Inc. is singular. Not only is it a nonprofit venture, but it has customers who don't pay, investors who don't measure their returns in cash, and employees who are intended to be the principal beneficiaries of the enterprise. Nonetheless, City Year founders Alan Khazei (rhymes with daisy) and Michael Brown insist they are fundamentally entrepreneurs, only of a different sort. "We're interested," says Brown, "in ways of making society work better."

Toward that end Brown and Khazei, while still Harvard undergraduates, began working on a concept for a national youth service corps for kids from all walks of life. The objective was enhanced citizenship. They reasoned that if you could show young people early in their lives that they could work together on societal problems, the experience would give them a heightened sense of citizenship, which they would be inclined to exercise for the rest of their lives. This was the underlying concept for City Year, launched in 1988 in Boston as a model for a youth service corps that would eventually expand to other cities nationwide. Since City Year was conceived neither as a jobs program nor solely for the poor, it was ineligible for federal funds. Khazei and Brown realized early on that they were going to have to finance it with money they raised on their own. So they had to turn their concept into a program they could organize, operate, and sell.

The elements of the City Year program are simple. It recruits a limited number of young people, ages 17 to 22, from varied educational, economic, and ethnic backgrounds; organizes them into teams of 8 to 12; and sends them out to perform physical and human service work in conjunction with schools, agencies, and other nonprofits across the city. The financing for the program comes entirely from private sources -- the local business community, foundations, and philanthropic institutions. The benefits -- in theory -- accrue not only to the kids but also to the sponsors and the community. In 1987 Khazei and Brown worked with two colleagues -- Neil Silverston, then a recent Harvard Business School graduate, and Jennifer Eplett, who would later enter that institution -- to write a plan that explained their concept, strategy, and objectives and contained a projected budget. They proposed to operate a nine-week summer pilot program in 1988 to prove the project's feasibility. Then the plan called for full-time operation with 50 kids in 1989-90. If that worked, the plan said, they'd look toward national expansion.

The 1988 summer pilot, like the first full-year program Khazei and Brown envisioned, would consist of five teams of 10 kids, with each team supervised by a salaried young adult. The teams, like the City Year corps overall, would contain a deliberately diversified group: about half male, half female; half city residents, half suburban; half white, half minority; half poor and working class, some middle class, and some upper class. They'd wear uniforms -- T-shirts with the sponsors' names on them -- and all 50 would work out together as a corps every morning before splitting up and heading off to team projects. Those would include park-cleaning and shelter-painting chores, but they would also get the kids involved with people -- homeless people, people with AIDS, students, the elderly in public housing projects, and so on. All Brown and Khazei needed to start was $200,000, 50 kids, a staff, and some projects.

Although federal tax dollars weren't available to City Year, private-sector funding also made sense philosophically for a couple of reasons. One was that Brown and Khazei saw themselves providing to the public sector what other entrepreneurs contributed to the private: innovation. "Without political pressures," Khazei says, "we've been able to design a program the way we think it should be. I have the feeling that we'll have a major impact on public-service-program design. After all, you can't reform the computer industry from within IBM. That's why we needed Apple." If the City Year concept works in the long run, Khazei and Brown expect that government money will come in -- just as corporations eventually buy into successful small-business innovations.

Another reason that private-sector funding fit Brown and Khazei's plan was their assumption that corporations, like individuals, have civic responsibilities. "In the 1990s," says Brown, "there's a growing perception that doing good is going to be part of doing well." City Year, he and Khazei reasoned, would give companies an opportunity to do good in a new way.

City Year's major donors, without exception, say the concept was what first attracted them to the program. "This was definitely entrepreneurial, the first time it had ever been done," says Kay Kilpatrick, contributions secretary at General Cinema Corp., in Chestnut Hill, Mass., whose $100,000 contribution to City Year in 1989 made it a team sponsor. "We bought into the excitement generated by Michael and Alan about the idea that you could get kids of different backgrounds to function together."

Indeed, the diversity principle is a key premise of City Year. It differentiates it from other youth service programs and is a major selling point in Khazei and Brown's pitch to potential sponsors.

"We bought into Alan and Michael's vision of what City Year could be," says Susan Flaherty, former director of corporate contributions at New England Telephone, which also came in with $10,000 for the pilot program and $50,000 for the spring semester to be a team sponsor.

Khazei and Brown's vision got the sponsors' attention, but what swung the decision in most cases was the impression that City Year's management could actually pull it off. "They came to us with a very detailed proposal," says Kilpatrick, "that discussed how they would recruit, the hours that would be worked, the amount of the kids' stipends, and so on."

"They had a long-term vision of where things could go," says William W. Bain Jr., chairman and founder of management-consulting firm Bain & Co., "and practical ideas of how to get there. They understood that even lofty goals require planning and work." Also, Bain says, he quickly grew confident that Brown and Khazei would attract other major contributors -- that he wouldn't be alone.

There was nothing soft or mushy about their sell, says Jim Ansara, president of Shawmut Design & Construction Co., a Boston contractor and City Year contributor. "They looked at problems from a business perspective." From the beginning, Ansara says, City Year paid a lot of attention to budget and numbers. "With other nonprofit organizations, that's usually the last thing they worry about."