Chapter 11: Reorganization Creates Multi-Corporate Structure (1990s)
On Jan. 1, 1992, the 81-year-old Family Service America (FSA) was created anew. It implemented an entirely new organizational structure: a parent holding company would oversee both the nonprofit arm as well as the for-profit company, FEI Behavioral Health (FEI). It was, at the time, a bold—even audacious—idea.
During the mid 1980s, there was a great deal of scrutiny of nonprofit organizations potentially competing with for-profit businesses. The tax-exempt status of many YMCAs, for example, was challenged by for-profit health clubs. FEI’s profits were becoming such that FSA’s nonprofit status could have been jeopardized. FEI revenue in 1992 was $6 million, with a 37 percent expansion in business in the past year alone.
“FEI was a unique opportunity for FSA and member agencies to work collaboratively and provide the economic underpinnings to underwrite other work. But the government looked upon it as a commercial venture,” says Ed Ruzinsky, long-time board member and past president of Jewish Family Service in Teaneck, N.J. Ruzinsky also served as FSA treasurer and chair, and also became chair of the newly-created Families International Board of Directors. “There was also the concern that a not-for-profit organization’s assets could be at risk if the organization was sued.”
The tipping point was the FEI contract with General Motors (GM). It was not for an employee assistance program (EAP), but to manage the care for the corporation’s drug and alcohol program. “Within three years, we cut GM’s costs by about half. That got a lot of national publicity,” Geneva Johnson remembers. “With an EAP program, we are working directly with employees for counseling and referral. It is part of their benefits package. But with the GM contract, we demonstrated that we could save them a lot of money by managing their care. As a nonprofit organization, we were not in business to save corporations money. That was key to our decision to restructure. I think we were one of the first, if not the first, national nonprofit organizations in the country to create a for-profit subsidiary.”
More than a year before the restructuring in 1992, FSA had organized a committee of representatives from across the country who were heavily invested in the organization. They recognized that times change and that change is never easy to implement. They worked arduously and collaboratively, and presented the corporate reorganization plan to the board of directors and the membership. Johnson credits Ed Ruzinsky and Jack Childs, who were board chairs during this transition, with their vision and outside-the-box thinking.
Their proposal was to create separate corporations: FSA and the newly-created Family Foundation of North America (the development arm of the organization) each would be nonprofit organizations. The EAP and managed care business, renamed Family Enterprises, Inc., would become a new for-profit corporation. A parent holding company, Families International, Inc., would encompass the three separate entities. Under this structure, each organization would be financially independent but would collaborate with one another and with member agencies.
“In typical fashion, social workers have a yen to study these things ad infinitum. We’d been working this problem for six months when some of the agency directors, many of whom were on the FSA board, told me they wanted to study it another six months,” says Ruzinsky. “I told them succinctly that in 30 days we were going to vote. If it flies or dies, we’re going to vote. We’re not going to make a career out of studying this. In the end, we received almost 100 percent concurrence to proceed.”
Among members, other changes were taking place. From their earliest days, the charity organization societies worked within the communities they served. But as counseling became the predominant service of these agencies, there had been a pullback into the office and behind the desk. The social upheaval of the 1960s, combined with new government funding that promoted care in the least restrictive setting, began to change that approach. It evolved slowly, but by the early 1990s new approaches to behavioral health care began to focus on community-centered initiatives. This work encompassed far more than counseling; it provided an array of outreach services and partnered with other resources to help individuals and families maximize self-sufficiency.
“We got out of the office and into the community in 1987. Our clients are in the community, and that’s where we need to be,” says Jerome Johnson, president and CEO, Family Service Association in Egg Harbor Township, N.J. “In 1987, we got free space in housing projects for our workers to provide counseling. We haven’t been a traditional, office-based agency since then. The next year, we got funding to open satellite offices and partner with schools. It took awhile to get the Titanic turned around. Some of the staff members were too entrenched in being office-based therapists. Now our staff understands that they are community-based providers of service.”
Brian Langdon, who retired as president and CEO of FSW in Bridgeport, Conn., in 2009, confirms that getting the clinical staff on board was the biggest hurdle for his agency. In 1988, FSW moved to a new building three blocks from its former office. It was a different world. “In the late 1980s, that was the most critical area for violence. There were guns going off. There was prostitution, break-ins. That move was based on our board’s commitment to use our resources in the community that needed them most,” Langdon explains.
In the minority community, FSW had a reputation as a white agency, serving white people from the suburbs. The move demonstrated where the agency’s commitment was. FSW was moving away from the mental health model—largely driven by the educational degrees of its staff—to a community-based model. “Those were interesting times, when social workers wanted to be called clinicians or therapists. Our clinical staff told us that we were doing the right thing, but it wasn’t what they wanted to do. Most of them went into private practice,” Langdon says. “That was a turning point for FSW. At that point we became a real community asset. We began to employ people from within the community as case aides. They might not have the educational degree, but they knew the community; they knew life stuff that the therapists didn’t ever touch. Today, we have minority folks who started without any degree and have gotten an education and worked their way up the ranks of the agency. Two of our vice presidents are women who came through that way. They are major leaders of this organization, and it happened because they were able to bring the community together around the agency.”
When Geneva Johnson announced her 1994 retirement, FSA conducted an extensive year-long search for a new CEO.
Peter Goldberg was president of the Prudential Foundation. He had a wealth of experience in corporate philanthropy and social responsibility, as well as an extensive background in the public sector.
Eugene Fram, FSA vice chairman of the board at the time, was a member of the search committee. Its goal in selecting a new leader was to serve the membership well and to become a national force in the human service field. “Peter had those national connections and strengths. Even now, when members of the search committee see each other, we congratulate ourselves on how good the decision was,” Fram says with humor.
“What grabbed me was the mission of the agencies that FSA served,” explains Goldberg. “The opportunity to help strengthen their capacities so they could better serve that mission was compelling. And I wanted to be back on the front lines, with a sense of urgency running a nonprofit organization.”
Goldberg immediately recognized the challenges ahead. He saw that the times were changing faster than the member agencies could adapt. United Way was an imperiled funding stream. The majority of FSA member agencies were small; in an era of increased privatization, they were not well-positioned to access government contracts. These agencies likely would have to become larger and more comprehensive to survive. Thus, they were faced with the leadership challenges of CEOs who were trained in a different time for a different purpose.
“We needed to get oriented very quickly to a future that was going to be very different from the past,” Goldberg says. The board had created a task force on strategic planning when Johnson announced her retirement. A new mission, vision, and three-year strategic plan were implemented in 1995. “The board recognized that to better enhance FSA and member agency capacity, we would have to grow via merger, acquisition, or consolidation,” Goldberg says. Among the eight strategic goals for 1995–1997, those with highest priority were to:
- Maximize services and programs to benefit and strengthen families and communities.
- Develop and launch significant initiatives to strengthen families and communities.
- Ensure short-and long-range financial independence.
- Position FSA as a leading information and communications resource on families
In 1991, the FSA Research and Development Department completed evaluation of Families Together with Schools, a program developed by Lynn McDonald at Family Service Madison in Wisconsin. The evaluation found that the program had a powerful and lasting impact. By 1992, FSA was implementing the program nationwide. Renamed Families and Schools Together (FAST), the program was designed to facilitate parental involvement and strengthen families. The eight-week program targets parents of elementary school children who are at risk of school failure. Parents meet weekly at local schools, sharing a meal and participating in fun, research-based activities.
The DeWitt Wallace-Reader’s Digest Fund, the Charles Stewart Mott Foundation, and the MetLife Foundation were among those funders who facilitated nationwide expansion of the FAST program. The State of California adopted FAST as a violence prevention initiative. FAST was recognized as one of the best prevention and parental involvement programs in the country by the U.S. Department of Education, U.S. Department of Health and Human Services, U.S. Department of Justice, Harvard University, Ford Foundation, and others. By 1996, FAST was offered in 350 schools in 25 states and two Canadian provinces. The program attracted more than $20 million in funding by 1997.
As FAST developed, it was clear that community building was both a primary goal and outcome of the program. FAST became part of the association’s Community Centered Initiatives Department. As the latter evolved and expanded to include numerous other community centered programs, FAST ultimately was transferred to the FAST national office in Madison, Wis. in 2004. Members offering the program had greater access to a fuller array of products, services, and funding with this move.
FSA understood that empowering individuals and communities was the only way to achieve lasting social change. Innovation was an important key to meeting this critical need. FSA worked to create, support, and replicate programs that strengthened families and communities nationwide.
The FAST program already had rolled out for national replication. FSA now was preparing another project, the Family Loan Program, later renamed Ways to Work, for replication beginning in 1995.
A 1994 grant to the Family Foundation of North America by the Rockefeller Foundation and the Lynde and Harry Bradley Foundation provided funding to examine linkages between family service agencies and communities. The year-long assessment resulted in a comprehensive report, “Prospects and Strategies for Community-Centered Family Service.” It presented a compelling analysis of new community-oriented strategies, an assessment of the barriers and opportunities that member agencies faced in pursuing those strategies, and recommendations for new strategies and programs.
Through this research, FSA recognized the effectiveness of stepping out of the box and into the community. Blending traditional counseling while engaging citizens as resources for each other was pivotal in empowering disadvantaged families and strengthening neighborhoods. FSA created the Community-Centered Family Service Initiative Department in 1995 to foster connections between member agencies and their communities. The department designed and adopted creative strategies that could be replicated by local agencies. Education, consultation, technical support, fund development, and a wealth of other resources were available to help agencies implement programs.
“When I was a brand new agency executive, Peter Goldberg started me thinking about the community development movement, seeing ourselves as community organizers—not being an office in the community but being of the community,” says Betsy Vander Velde, president and CEO of The Family Conservancy in Kansas City, Kan., Vander Velde was a member of the first FSA steering committee on community-centered initiatives. “Peter cautioned me that freestanding mental health clinics would not be relevant in the future. We were coming from a rigid mental health model, so it was a different and very provocative way of thinking about provision of services.”
As she reinvented The Family Conservancy, Vander Velde relied on trend reports, research, best practices and affinity groups of other forward-thinking member agency executives. “I truly believe that our membership in Family Service America/the Alliance for Children and Families has positioned The Family Conservancy to be a leader in the community,” she says today. “It’s made us a much stronger agency, more strategic, and really empowered our board and senior staff. It’s been an amazing journey. The return on our investment has been enormous.”
Ways to Work was modeled after a Minnesota program that provided small loans to low-income parents who couldn’t get loans elsewhere. The loans help pay for unexpected expenses that keep them from a job or school. Most loans are used to purchase a car or repair one the family already owns. FSA implemented the program in 1995, when it was called the Family Loan Program. Under the leadership of the McKnight Foundation, the program was piloted at four demonstration project sites in 1996. Its growth was phenomenal, in terms of both new programs and funding. In 1998, the program was unanimously approved by the board as a new nonprofit organization, called Ways to Work, Inc., under the Families International umbrella.
Ways to Work quickly attracted millions of dollars in private grant funding. The program obtained its first federal funding commitments in 1999 from the Departments of Transportation and Labor. A federally-certified Community Development Financial Institution, Ways to Work provides a safety net to economically disadvantaged families and protects them from predatory lenders. Today, its network of loan offices extends across the country. All are housed within member agencies of the Alliance for Children and Families, ensuring that borrowers have access to services that help them attain economic self-sufficiency. All loans are used to help borrowers remain in or move forward in their job. In 2006, Ways to Work reported that borrowers averaged a 41 percent increase in income. Ways to Work also helps increase borrowers’ financial literacy, raises their credit rating, heightens their sense of self-esteem and, for those obtaining a vehicle, and brings significant improvement in their family’s quality of life.
By the 1990s, FSA emphasized advocacy as a fundamental function of the organization. The FSA Office of Public Policy in Washington, D.C., initiated a state advocacy project in 1995, positioning itself and member agencies as a vital resource and partner to family-related state councils and coalitions. FSA’s strong position on “real” welfare reform—reform that would help lift families out of poverty—included a call for improved resources for education and job training, job placement service, developmentally appropriate child care, affordable health care, and counseling and case management. The Insider, an advocacy newsletter, included up-to-date information and analysis on these and other legislative and regulatory activities.
In 1996, the Personal Responsibility and Work Opportunity Act forever changed welfare as it was known in the United States. As the name of the legislation makes clear, the act framed economic status in moral terms: The exit from welfare and the path to self-sufficiency lies in accepting responsibility for one’s life.
(Author’s note: With the 1998 merger of Family Service America and National Association of Homes and Services for Children, the new organization was renamed the Alliance for Children and Families. See this chapter for more detailed information.) The Alliance for Children and Families was alarmed by how this legislation impacted millions of Americans at the bottom of the economic ladder. In 1999, the Alliance launched the Faces of Change project in collaboration with the Community Service Society of New York. Over a period of several years, the project gathered first-person narratives from 415 people whose lives and families were impacted by welfare reform. The Alliance worked with 38 member agencies and seven other partners to collect these firsthand accounts. Faces of Change: Personal Experiences of Welfare Reform in America, published in 2001, included 100 narratives gathered in the first phase of research. In 2002, the Alliance published Faces of Change: Welfare Policy Through the Lens of Personal Experience, edited by Thomas C. Lengyel of the Alliance and David Campbell of Community Service Society of New York.
Faces of Change gave voice to those who had none and was a critical contribution to national understanding of how public policy affects individuals and their families.
“What emerges as universal is their struggle to survive impoverishment, protect their children, and salvage hope for a better future and decent quality of life. The Faces of Change stories demonstrate emphatically that becoming self-sufficient is not simply a matter of personal responsibility … The process of impoverishment and its resolution nearly always implicate other forces and other people, whether they be an absent parent, lack of education, ill health or responsibility for the care of a disabled or chronically ill child, changes in the market for job skills, or the nature and capacity of community resources. The solutions we as a society fix on must recognize this complexity of cause. Our policies ultimately will say as much about our understanding, compassion and commitment to fairness as they do about the group of citizens upon whom, for lack of an effective voice, these solutions are imposed,” wrote Thomas C. Lengyel, director of research and evaluation for the Alliance, in the introduction of Faces of Change Analysis: Welfare Policy Through the Lens of Personal Experience.
The Alliance public policy division and the research and evaluation department collaborated with Senators Edward Kennedy and Olympia Snowe to co-sponsor a 2002 Congressional briefing, where four women who participated in the Faces of Change project shared their experiences with welfare reform. More than 100 Senate staffers and project partners participated in the event.
Residential care facilities that provided only long-term custodial care began disappearing in the 1960s. Some closed permanently, while others merged. Those that grew and thrived in the coming decades were large enough and nimble enough to adapt to new opportunities.
The trend—and the funding—favored keeping children in a home environment. A diverse range of services developed rapidly, from short-term residential treatment and foster care to community and in-home services. The National Association of Homes for Children (NAHC) changed its name in 1990 to National Association of Homes and Services for Children (NAHSC) to reflect the growing diversity among its membership.
“Starr Commonwealth and other children’s organizations across the country were evolving and expanding,” explains Marty Mitchell, president and CEO of Starr Commonwealth in Albion, Mich. “Their goal wasn’t necessarily to serve children in residential care alone; it was to serve children at risk, children in need. Evidence-based practices were showing that young people could be treated in less restrictive forms of service.” Children’s agencies were beginning to understand that treatment wasn’t an isolated event, with young people then being sent back into the original environment without the support system they needed. A continuum of care began to emerge, where a young person could come into care at any one point and move seamlessly into other areas of care. In addition to the long-standing residential service, children’s agencies began providing early intervention alternatives, community-based services, and adequate follow up support to make sure the gains that had been secured in the care setting would be maintained and built upon.
“At the same time children’s agencies were expanding services, we realized that the traditional emphasis on the child had very little emphasis on family,” says Mitchell. “Today, one of the first pieces of a diagnosis occurs with the developmental audit. We ask, ‘What is the context of this child’s family, school system, and community?’ ”
Numerous child welfare and family service agencies expanded into multi-service, multi-site organizations. As they became more diverse, they became more indistinguishable from one other; consolidations were increasingly common.
As NAHSC president-elect in the mid-1980s, Arlin Ness recommended that NAHSC give up its accreditation program and join the Council on Accreditation (COA). He also advocated strongly that national organizations were splintered and those with a common mission and goals needed to come together.
By the 1990s, many national nonprofit organizations were financially strained, NAHSC and FSA among them. “Finally, we felt that NAHSC had to merge with either FSA or the Child Welfare League of America,” says Ness. “It was partly economics. But a number of us in the NAHSC leadership felt the time was right to bring the field together in one national body.”
Ness was part of the NAHSC committee that explored merger. From an economic standpoint, they hoped to eliminate duplication and reduce costs. But a greater goal was to advance knowledge and improve services to members.
“We wanted our membership base to be blue ribbon. When you increase the service quality of multiple members, that puts pressure on all the agencies to raise the bar,” Ness explains. “And we wanted a national office that would lead the field in broader strategic thinking and innovation.”
Another fundamental goal was to more strongly advocate for quality services and influence legislation. “Our hope was to have many more organizations speaking with one voice for children and families,” says Sister Linda Yankoski, president and CEO of Holy Family Institute in Pittsburgh who was a board member of NAHSC.
The NAHSC committee talked with the Child Welfare League of America (CWLA). There was a history there, and NAHSC came away with the feeling they would be the poor stepchild. It would not be a merger, they felt, but an acquisition. But discussions with FSA immediately took on a different tone. “Here comes Peter Goldberg and some of his board members with an attitude of respect,” Ness describes. “There was a mutual recognition of hopes and aspirations of what we could do together.”
The two organizations merged in October 1998 as the Alliance for Children and Families. C.T. O’Donnell, who served as NAHSC interim director to shepherd the organization through the merger, remembers that inclusion of the word “children” in the name of the new organization was a non-negotiable for NAHSC. Family Service America, whose own members increasingly were offering services to children, was accepting of the proposed name.
“It was a very natural match for FSA and NAHSC,” says Mitchell of Starr Commonwealth. “The very thoughtful coming together of these two organizations capitalized on the emerging research and knowledge base. It greatly advanced the expertise and service to children and families.”
Peter Goldberg, who had been president and CEO of FSA and its parent company, Families International, became president and CEO of the Alliance. Both organizations worked hard to honor and respect each other’s unique histories and cultures. They understood that a common culture, an Alliance culture, would take time. The NAHSC board had been made up of agency executives, while FSA board members tended to be committed volunteers from the corporate and philanthropic sectors. For the first two years, the Alliance had a shared governance structure, with co-presidents from each organization. The new Alliance board was restructured to include more agency representatives.
“There was an interesting tension,” says Jim Campbell, who was at the time of the merger was an executive at Leake & Watts Services and served on the NAHSC board. Following the merger, Campbell served on the Alliance board. “I remember when people at the Alliance heard what my agency budget was, they said, ‘What, are you running a city!?’ Agency executives like me are used to running the show and having the final word. But when we join a board like the Alliance, we have to give authority to the executive leadership. As executive directors, it’s something we fight for all the time with our own board—we don’t want them to micro-manage us. But as board members, there was a sense of, ‘Who is in charge here?’ We had to be able to give Peter the space to run things.”
Campbell acknowledges that some NAHSC members left when the merger occurred. “Some agencies didn’t think the Alliance had enough focus on residential care,” he says. CWLA traditionally had disregarded residential care, but began to add programming to attract new members. But when a leadership change occurred at CWLA, there was a unique opportunity for the Alliance to bring back agencies that were looking for the full spectrum of services. “The Alliance was experiencing a kind of phoenix, and agencies were taking another look,” Campbell says.
“The first three years of merger implementation were very tough. Anytime you do change, everybody feels threatened,” acknowledges Goldberg. “The question becomes: can you focus on what you’re going to gain in the future as opposed to what you’re going to lose from your past? At a certain point, the board and leadership realized that fighting for the past was destructive and we needed to orient to the future. The alternative for both organizations was to take a slow, respectable ride to oblivion. I’ve never liked that destination.”
Goldberg gives a great deal of credit to Susan Dreyfus, who joined the Alliance as chief operating officer in 2003. “Susan had a strong background in child welfare issues and was relentless in her focus on membership as well as organizational management,” says Goldberg. “She did a lot of the hard work of making this thing work.”
The Family Conservancy and Community-Based Initiatives
As a result of The Family Conservancy’s work with Family Service America and the Alliance for Children and Families, the agency has become one with the metropolitan Kansas City, Kan., community. “Instead of having people come to us at stand-alone facilities, we began providing our services on their turf, in schools, child care centers, housing developments, and churches. … more
Consuelo Foundation: Ke Aka Ho`onã community
Seventy-five native Hawaiian families are living their dream because Consuelo Zobel Alger had a dream too … and shared it with others. She created a foundation in 1988, dedicated to improving the lives of disadvantaged children, women, and families in Hawaii and the Philippines. Consuelo Foundation in Honolulu uses an asset-based approach to community building. Thus, the plan to create a self-help housing neighborhood was a perfect fit for its strategic goals. … more
Peninsula Family Service
Peninsula Family Service (formerly Family Service Agency of San Mateo County) in San Mateo, Calif., launched the Ways to Work program in 1997, the first organization in California selected for this national demonstration project. The program provides low-interest car loans to low-income families who do not have access to conventional credit. Families can rise above poverty when they receive the help they need and reduce their reliance on public assistance.
Merger of Family Service America and National Association of Homes and Services for Children
“I was positive about the merger. I felt that NAHSC’s growth potential was limited. NAHSC had a great executive director. People were actively involved and we had a wonderful camaraderie, but we didn’t have the staffing and financial resources to sustain it. I remember that we had a big ‘wedding’ ceremony to celebrate our merger as the Alliance for Children and Families.”
–Curtis Mooney, former president of the Kentucky Baptist Homes for Children, NAHC president from 1994–1995, current president and CEO of DePelchin Children’s Center.
With continued United Way funding cutbacks, many nonprofit agencies faced increasingly severe financial constraints. Mergers and acquisitions became more common as agencies looked for ways to continue their mission.
In Paramus, N.J., a 1995 merger transformed a traditional child welfare agency and a traditional family service agency into an innovative new service delivery system for society’s most vulnerable children. … more