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The Nonprofit's Motive
 

A look at how Charles Lief, president of the nonprofit Greyston Foundation, is devising for-profit ventures to generate income, create jobs, and expand his organization's mission.
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On the Road

In the run-down city of Yonkers, the Greyston Foundation is building an unlikely business empire -- and leading the way for a daring new kind of social entrepreneur

It's slightly disorienting when you drive north out of Manhattan and into Yonkers, a down-at-the-heels city that seems out of place in rich suburban Westchester County. After crossing the narrow Harlem River on the Henry Hudson Bridge, the Saw Mill River Parkway threads north through wealthy Riverdale, then cuts into Yonkers. Exit the highway, and just over the hill you can see the tenement-like apartment buildings, small grocery stores, and tire-repair shops that line the streets. It's a predominantly African American and Hispanic neighborhood where the median household income is $22,000.

It may seem like an especially unlikely place to build an empire, but Charles G. Lief has big plans to add onto the roughly $8-million operation he runs there, one that includes a baked-goods business and a housing enterprise. He plans to build a new wholesale bakery plant as well as open up a retail bakery and an ice-cream shop. He's also aiming to expand the number of area housing units he runs from 150 to 190 by year-end 2000 and to offer affordable home-ownership opportunities to the poor. Then there's the venture fund he has been exploring; it will provide seed money and expertise to budding inner-city entrepreneurs. All told, Lief expects revenues from all his ventures to almost double by 2003, reaching nearly $15 million.

To get there, he's carrying out a set of initiatives that would be challenging for any entrepreneur. But what complicates the picture for Lief is that he's president of a nonprofit organization, the Greyston Foundation. On top of figuring out the strategy, planning, and logistics for growth -- an entrepreneur's everyday worries -- he has to do so within the context of the foundation's long-standing mission. And since its founding Greyston's goal has been to provide services and resources to its client base, which includes people who are homeless, jobless, or recovering from drug addiction, as well as those who were formerly incarcerated, have a limited education, classify as low income, or are living with HIV or AIDS.

But Lief's ambitious for-profit plans are in keeping with the heritage of Greyston, which actually had a business before beginning its nonprofit work. Originally, it was a meditation group, founded by a Zen Buddhist community, that started a bakery in 1982 to support itself. With a $300,000 loan, the group's members were soon churning out muffins, scones, and cakes to 100 accounts. They realized, however, that the bakery had the potential to improve the surrounding community, so in 1985 the group began hiring and training the chronically unemployed. In 1991 it opened housing for homeless families, and in 1993 it formed the Greyston Foundation to oversee the rapidly expanding activities. Founder Bernard Glassman, a Zen teacher, "plunged into unknown territory and overcame all kinds of obstacles," says real estate developer Jonathan F. P. Rose, who serves as the foundation's chairman. "He had a vision and was relentless about creating it."

These days it's a vision more and more nonprofits are eager to see clearly. Their interest is partly driven by the toughening reality of fund-raising. Private donations are projected to grow at a rate of about 3% annually through 2002, but that rate would have to triple to offset recent cuts in government spending, according to a report by the Independent Sector, a national coalition of nonprofits. In addition, the number of nonprofits has grown by 55% since 1987, although giving has increased only 15%. "You have more nonprofits competing for the same resources," says Vanessa Kirsch, president of New Profit Inc., a venture-capital fund for the nonprofit sector. Furthermore, heavyweights such as the Ford Foundation and the Rockefeller Foundation have started siphoning funds off for social enterprises that have prospects of eventually becoming self-sustaining. "You can't go to a conference about nonprofit issues and community development today where there's not a panel on nonprofit entrepreneurship," observes Lief. "Five years ago hardly anyone was talking about it."

A lawyer who took over Greyston in 1993, Lief now finds himself among the leaders of a small army of "social entrepreneurs" who look to for-profit businesses to help them generate income and expand their missions. It demands a delicate balancing act. "Organizations that fret about selling their soul, losing their values, being distracted from their mission -- obviously, this isn't for them," says Bill Shore, founder and executive director of Share Our Strength, a nonprofit group devoted to fighting hunger and poverty. Share Our Strength's first for-profit subsidiary consists of a consulting firm that helps nonprofits set up income-generating ventures. "Most nonprofits have assets that they recognize from a mission point of view but not from a marketing point of view," Shore says.

Those who are eager to try to capitalize on those assets often seek Lief out. Among them, he has noticed two common misconceptions. Some nonprofits are panicked over the prospect of losing a funding stream and perceive a business as a quick fix. "They think, 'Well, if I get a Ben & Jerry's franchise, that's going to solve my problem,' " Lief explains. "They don't understand there's a growth curve, that you're building a business just like any other small-business person does, and that it takes years." Other nonprofits grow enamored with the idea of being able to offer jobs that provide health-care, day-care, and additional benefits. "That's a tough one," Lief says, "because you go out with these big promises -- that this is going to be a more humane and enlightened way to operate -- but then you have to make sure your product has the margins to support that kind of thing."

What Greyston has tried to do is take a middle road, building businesses designed to throw off money to the foundation and also to create jobs for its clients. That nontraditional approach calls for novel thinking. "With all due respect to academics, I don't need another think tank or another consultant," Lief says. What he does need -- and has an uncanny ability to find -- are business partners who can endow Greyston with the kinds of knowledge and long-term support that are far more valuable than any onetime corporate donation. "In our case partners helped us get bigger faster," Lief says. Lief "is a builder and a stabilizer," says Rose. "He has expanded Greyston's collaborative relationships and grown Greyston in an organized and methodical way."

Both the bakery and the affordable-housing units have progressed as far as they have only by dint of Lief's ability to find and manage the right business partners. The bakery attributes 70% of its $3.5 million in revenues to the brownies it makes for Ben & Jerry's Homemade Inc., the $209-million ice-cream maker in South Burlington, Vt. "In the beginning, we were just a vendor, and their involvement was limited to cheerleading for our social mission," Lief says. Now, however, the relationship is more complex.

Lief and his team have worked closely with Ben & Jerry's -- improving efficiency, cutting costs, and modifying production methods to boost quality -- for more than a decade. In the early days, if botched batches of brownies arrived, the ice-cream maker gave Greyston the chance to correct the problem without threatening to drop it as a supplier -- just for the sake of supporting Greyston. But that's something Ben & Jerry's can no longer afford to do. Nor does Greyston want it to. "You can't expect the market to subsidize you or overpay you for the benefit of your mission," Lief says. It's "patronizing," he says, for Greyston to sell baked goods by, in effect, holding up its workers as poster children desperately in need of support. Instead, what Greyston seeks to produce is "a high-quality, competitively priced" product that happens also to further a "social mission," Lief notes.

The relationship with Ben & Jerry's has evolved beyond production methods and efficiency targets. In the fall of 1998 a group of Ben & Jerry's managers attended a Greyston strategy session to discuss its expansion; they offered to help with marketing and business plans. When Lief began scouting out new locations for the bakery this year, Ben & Jerry's sent down a plant engineer to evaluate sites.

If all goes according to plan, Greyston Bakery will have a bigger wholesale plant in 2000. It will be able to double its capacity, grow its line of cakes and tarts, and cut its over-reliance on the partner that helped make it all possible. As for its social mission, Greyston will have more entry-level slots and offer its staff a chance to advance to jobs that require more skills. The number of employees will increase to 80 from 55. A new retail bakery and a Ben & Jerry's outlet, both slated for downtown Yonkers, will add another 10 to 15 jobs.

Lief's other major thrust involves growing Greyston's real estate rental income from $895,000 in 1998 to $1.4 million by 2003. His chosen partner is board chairman Rose, whose development company is based in Katonah, N.Y. (To avoid conflicts of interest, an independent board committee evaluates any contracts with Rose.) Though Greyston has traditionally provided housing for the homeless, it now aims to develop housing for families who have means of support. By Lief's reckoning, much of Greyston's growth in real estate revenues will result from higher rent rolls. From 1996 to 1998, Greyston raised $4 million to build affordable housing in Irvington, a wealthy village about 10 miles north of Yonkers. Greyston owns the top two floors, with 22 apartments, and serves as property manager. The village of Irvington, a partner in the deal, put up another $2 million for a state-of-the-art library on the ground floor. The building opened last Labor Day. Rose, says Lief, "has provided things that we would have had to go out to the market to get, and we'd probably have ended up paying a greater rate."

If the 49-year-old Lief sounds more like a conventional business builder than like a leader in the nonprofit sector, that's simply because the other nonprofit executives haven't yet caught up with him. But it's only a matter of time. Last year the first-ever conference on community-wealth generation, as the field is known, attracted 200 participants to a four-day meeting in Colorado Springs. But Lief worries that nonprofits may jump in without having the resources, expert advice, and partnerships they need. And what better rationale for a venture fund? The one he's helping design with half a dozen other nonprofits -- under a planning grant from the Rockefeller and J.P. Morgan foundations -- would be a source of seed capital and wisdom to nonprofits wanting to build enterprises. "We're asked a lot about how to do it, but we don't really want to start an in-house consulting arm," Lief says.

Not that he examines all Greyston's forthcoming projects with such a strategic eye. He's talking, for instance, about opening a bookstore and café in one of Greyston's apartment buildings. "This is more of a cultural offering to Yonkers rather than a moneymaking venture for us," Lief explains. "There is no bookstore in downtown Yonkers, which I just find unacceptable." For him, that alone is reason enough to do it.

Samuel Fromartz is a freelance writer based in Washington, D.C.

Last updated: Dec 1, 1999




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