Case 11 Social Enterprise Within Nonprofit Organization Independence Matters Bruno Conti L Q36309629

CASE 1.1 SOCIAL ENTERPRISE WITHIN A NONPROFIT ORGANIZATION:INDEPENDENCE MATTERS Bruno Conti liked to joke that he establishedIndependence Matters in 1996 by accident. It was a joke becauseIndependence Matters was born out of a work accident that leftBruno paralyzed from the waist down with no clear path about how tolead life as a disabled person. He liked to say that once he got“back on his feet” he dedicated himself to helping others who foundthemselves newly disabled with a roadmap for transitioning into andfully living life. The mission of the organization was “to providesupport, identify solutions, and offer opportunities that enablepersons with physical disabilities to participate fully in life.”Independence Matters programs included an array of social, health,recreational, and educational services. Among them, counseling andcoaching of newly disabled individuals provided by a team ofspecially trained volunteer disabled mentors; transportationservices; physician-led health services that provided informationand referrals on a gamut of far-ranging health-related issues;professionally facilitated support groups for disabled individuals,their partners, and families; a fund for extraordinary medicalexpenses and other unanticipated expenses resulting from thedisability; a wheelchair basketball team and swim program; andadaptive job training that was accompanied by a successful jobreferral and placement component. The nearly $7 million agency waswell known throughout the community and highly respected for itswork. Bruno was proud of what he had built and of the hundreds oflives he had touched through the work of Independence Matters, buthe was tired of the constant fund-raising. Relative to the programsit offered, the agency operated on a lean budget that was cobbledtogether year after year with a combination of grants fromgovernment agencies, private foundations, and corporations andcontributions from individual donors that were netted throughpersonal connections, annual appeals, and a golf tournament. Hebelieved he had a talented development staff; however, he was stillseen as the fund-raiser in chief for the organization. It was anexhausting and never-ending task. Bruno shared his frustration oneday over lunch with his board chair, Bob Delaney, a recentlyretired bank executive. “I understand feeling like you’re a hamsteron a never-ending wheel when it comes to keeping the place afloat,”he sympathized. “And I have the utmost respect for the work you doand how vitally important it is to people in our community. As I’vetold you many times, I think Independence Matters literally savedmy son’s life when he lost his legs. You got him through hisdarkest hours and showed him that life was worth living. Now I havea beautiful daughter-in-law and granddaughter as a result, and Ithank God every day for the part you played in making that happen.But I’ve been thinking, Bruno, we need to figure out a differentway of raising money so that we’re not so reliant on philanthropy.”“What do you mean?” asked Bruno. “Well I’ve been doing some readingand research, and I have an idea that I think we should explorewith the board,” replied Bob. “The idea is to start an arm of theagency that would retrofit the homes of people who need that typeof assistance, including seniors and others who fall outside of ourtraditional service population. I’ve taken the liberty of talkingto Norma Chavez, a lender in the bank’s community reinvestmentgroup, about the general concept, and she told me that she’d bewilling to talk to us about putting together a special loan andgrant package to get something like this off the ground if wecreate a viable business plan. Now that I’m retired, I have thetime to work on something like this—as a volunteer of course—thatis, if you and the board believe this is a concept that is worthpursuing. Norma also has strong ties with the Gunderfeld Foundation(her husband is on the board), and she told me she thought theymight be willing to put in a low-interest loan and grant money foran idea like this—assuming, again, that it pencils out, and thatyou and the board agree that we should give it a shot.” Bruno’seyes lit up. “Bob, I think this is a fantastic idea! Let’s bring itup at next week’s executive committee meeting and, if they approve,move forward with a proposal to the full board to explore thefeasibility of the project.” In the weeks that followed, the ideatook off like a wild fire. The executive committee quickly andunanimously approved the idea as did the full board. A smallcommittee was formed to develop the business plan, and a specialgrant was secured from the Gunderfeld Foundation to hireconsultants with expertise to guide the plan’s development and,subsequently, to assist the business in its early stages if theplan proved viable. Within a year, Independence MattersRetrofitters (IMR) was born. At the end of 2 years, it wasgenerating $2.5 million in net revenue that was funneled back intothe operating budget of Independence Matters. Bruno and the boardof Independence Matters were overjoyed with the success of theretrofit arm. IMR had a reputation for providing reasonably pricedhigh-quality services that were specifically designed for theindividual needs of each client’s home. In addition, several of itsstaff members were former Independence Matters clients who weregrateful to have steady, meaningful work; they were especiallysensitive to the needs of the people they served. As word of IMR’swork spread, business grew quickly. Then Bruno and Eliezer Guzman,IMR’s managing director (who was also disabled) received a specialcommendation from the governor, and the organization was discoveredby the press. It was profiled on 60 Minutes, which led to callsfrom people across the country who wanted similar services, wereinterested in donating money or expertise, and from othernonprofits that wanted to replicate the model. IMR had to hire adirector of media and community outreach whose job it was to fieldthese inquiries, interact with the press, arrange interviews withstaff and clients, and lead tours of the operations. A line of IMRproducts was developed that included a number of specially designedand patented hardware items for adaptive homes as well asparaphernalia such as IMR hats, mugs, and T-shirts. Revenues boomedto $18 million annually. Independence Matters used a small portionof the IMR revenue to expand its programs, beef up its fund-raisingdepartment (which was needed to handle the surge in donations tothe organization as well as increased interest from nationalfoundations), gave senior staff generous and significant raises,and set aside more than 2 years of operating reserves. IMR hadbecome so large and successful that Bruno and Eliezer decided toprepare a proposal to the board to hire a director of fieldoperations who would fly around the country setting up nonprofitfranchises of IMR. That would bring in even more revenue for theorganization. It had been only 4 years since Bob had first proposedthis idea to Bruno, and now it seemed like the sky was the limit onhow much they could earn through this enterprise. When Bruno andEliezer presented the idea to the executive committee, they weresurprised at the response they received. These were the questionsthey raised (which you should also consider):

Case Questions 1. What is the defining difference between anonprofit organization and a social enterprise organization? 2.What are the legal and financial implications of a nonprofit whollyowned social enterprise? 3. Is IMR causing Independence Matters todrift from its core mission? 4. Are there any apparent conflicts ofinterest in the current setup of IMR as a program of IndependenceMatters? 5. Are there operating structures that could be put inplace to minimize conflicts and ensure accountability? 6. Are thereethical implications for a social enterprise that generates muchmore revenue than is needed to fund the operations of the nonprofitparent? For instance, what about the time and energy needed tooversee both arms of this work?