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Harlem Children Zone

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Strategic Analysis and Recommendations

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Memo
Date: March 26, 2015 To: Harlem Children’s Zone Executive Committee From: MITA Consulting Group Re. Strategic Analysis and Recommendations:

Per your request, MITA Consulting Group has prepared the following analysis of The Harlem Children’s Zone (HCZ) strategies. HCZ’s main strategic focuses’ have included penetrating the zone, tracking performance, building the organizational team, expanding boundaries, and informing the field through governance and open communication to other organizations and policy-makers. The imperatives have enabled HCZ to continue to focus and build upon its set vision of actively helping children while building a scalable and replicable model. Although we agree with this holistic approach, our analysis indicates that three major strategic issues exist that are hindering long term growth capitalization. The issues are: 1. HCZ is struggling to create a culture of effective measurement and analysis. They are plagued with information silos and technology gaps that make it difficult for program directors to create any significant actionable insights through the data. 2. HCZ’s ten year vision is to reach $46 million in revenues, serve 24,000 people, and expand to an area three times the size of its current zone. However, a growth strategy solely focused on zone expansion will not allow them to reach this vision. Tigist’s suggestion to reword:

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HCZ’s growth strategy solely focused on zone expansion will prohibit 3. HCZ’s shift from a decentralized to centralized approach to managing their business has created challenges in reporting, implementation, knowledge sharing, accountability, trust, and leadership. The key issue HCZ faces is its zone based expansion strategy cannot sustain the revenue and people served objectives outlined within their ten year vision. Our horizontal analysis indicates that although revenue increased by 217.62% from 1999 to 2000; they dropped by 22.95% from 2000 to 2001. During this same period, operating expenses increased to a record high while operating income decreased. Between 1999 and 2000 HCZ was operating with a negative $579,427 total operating income. We have identified a few potential solutions to address these concerns: 1. Embrace Chancellor Klein’s opportunity to expand beyond the northernmost boundaries of future zones to provide services within elementary schools in District 5 in Harlem. 2. Invest in generating additional donor funds by hiring a fundraising director and support team. HCZ has proven that it can launch and sustain programs such as The Baby College, through 100% private funding sources. 3. In order to maximize systems and measurement vehicles, HCZ needs to decrease administrative time that program directors, senior leadership invest in data mining and analysis. HCZ must invest in resources that help monitor and evaluate programs to provide information that can be easily actionable and shared among stakeholders.

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Our recommendation is to embrace the opportunity for expansion within elementary schools in District 5 in Harlem. The pros in this recommendation is that it provides HCZ an opportunity to expand its boundaries while helping influence The Department of Education who is amidst a massive reorganization, reach more people, and inform the field of HCZ’s current wisdom in youth and community development. The cons is that HCZ needs to increase its operating income and manage conflicting direction amongst all programs. Our pro-forma exhibit anticipates revenue attainment required for expansion prior to 2004. Total revenue through our strategy will increase to $22,430 (dollars in thousands) by 2003. Although operating expenses will increase it will be offset by our ability to increase the total reach that has been a long standing tenant within HCZ.

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Harlem Children’s Zone Step 1: Detail the Strategy: I. Strategic Mission/Purposes
1. Business Type: Education Health and Wellness | Youth Clinic |

Exhibit # 1: Overall Strategy

2. Customer/Target Market: Underserved Children of all ages and their families in cities most devastated neighborhoods of Harlem. 3. Product/Service: Children, young adult, adult education | Recreational Facilities | Community outreach | and funding offices Programs include: Before The Harlem Children’s Zone, programs were already established and in place, The Countee Cullen Community Center was the one of the many programs opened in the early 90’s where utilizing the local schools sought to provide programs in sports, adult education, and offering parenting support. Also opened was the Neighborhood Gold a homelessness prevention program. A program in place to improve tenants quality of life and start to build, maintain, and expand Community Pride; that being the central theme throughout the other programs. Since then the HCZ has gone on to create, Baby College, SMART (Shaping minds around reading and technology), and TRUCE (the renaissance university of community education). 4. Geographic Domain Current operation area includes: 1. Beacon School PS 194 on West 144th Street 2. TRUCE was established in 1995 near 119th street. This program placed college aged AmeriCorps interns into classrooms in Harlem where they assisted teachers with lessons tutored after school and many other services 3. The starting point for HCZ being 150 buildings between 116th street and 123rd street in Central Harlem between 5th and 8th Avenue. th 4. Blocked off sections of Harlem NY, starting off at 109 street and extending up in to sections of Washington Heights. Over the next several years Mr. Canada would expand the reaches of the HCZ from the simple beginnings of 109th street up all the way to Washington Heights at 143rd Street.

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5. Growth/Survival/Turnaround: Growth- Starting from Richard Murphy 1970 with the Rheedlen Center, the organization went from a passive leader to being lead by a charismatic leader in 1991 Geoffrey Canada. From the first beacon school in 1991 on 144th street to the major expansion lead by Mr. Canada. Taking Harlem section by section starting from 109th street to 123rd street between 5th and 8th avenue. The Harlem Children Zone got some momentum when they were awarded a $250,000 grant from the EMCF Survival- order for the HCZ to grow and survive the decade Mr. Canada was worried In about the effectiveness of the organization. The main focus and general theme overall and throughout all organizations in the theme of “Reviving Community Pride”. With the business plan established the EMCF funded $5.5 million along with the Robin Hood Fund totaling $7.7 Million. The HCZ had to show meticulous scrutiny over the funds accounting and monetary uses. But in order to move forward Mr. Canada knew the model had to be revised. Turnaround- HCZ had issues with historic figures and facts. The directors were put The in situations that handcuffed them to a state of ignorance. Not having the data needed to make crucial decisions made the top management feel like they could not do their jobs. Mr. Canada led the meetings for 4-5 hours a week discussing solutions . Although Mr. Canada regretted becoming involved he noted that the meetings were in the end progressive and cost effective. The Fund decided to concentrate their efforts in the 24 block zone. The ne focus would be on pro-school, they needed to close 4 programs and rework the structural standing and Split HZC and Beacon schools. Among the discussion implementations the HCZ would develop tracking performance metrics and developing the report card tracking metrics. 6. Financial Standing: All donated income received from foundations, private corporations, and other donations, especially from members of the boards associated with The Harlem Childrens Zone, have been a critical part to HCZ’s successful operation. The donated funds enables HCZ to create new programs such as The Baby College, which is 100% privately funded, and to accompany efforts that are in part of public funding, such as extending the hours of the universal pre-kindergarten program. Other organizations may not be able to garner as much private funding as HCZ. The primary reason is that public dollars are the first lost in an economic downturn. Revenue or grants issued increased from 1997 to 2001 by 11.29%. Total assets significantly increased by 80.908%. The northern expansion has median income of 14.13% higher than the southern territories. The agency outputs the fiscal results show from 2000 to 2009 the estimated growth at 3.49% to a total output of 63.60% at the end of 2009

7. Technology:
Tracking system implemented to evaluate projects.

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SMART, off-the-shelf software designed to improve literacy with HCZ tutors and incentives ith the . W implementation of TRUCE some centers would be converted to Arts and media educational facilities. Managers had no concept of the way data was being utilized if at all. There was no real oversight that a system containing 15,000 names had over 3000 duplicates. A fifth of the data was useless. Also the implementation of SHARP a measurement on the progress of literacy. This technology can be uniformed to today’s modern teenager and developed into a smart phone application for easy use and direct connection with the facility.

8. Philosophy/Self-Image: Harlem Children’s Zone has been committed to helping disadvantaged and at risk children secure educational and economic opportunities. The Harlem Children Zone mission is rooted in the belief that the cycle of poverty can be broken by the joining of caring, engaged and involved, supportive families with the access of readily accessible early and progressive intervention in children’s development. This combination is absolutely essential to help youth achieve the educational and economic opportunities that would otherwise be denied to them. The philosophy is simple : if poverty is a disease that infects an entire community in the form of unemployment and violence, lack of education the horrible truths behind broken homes, then the community or group can't just treat those “symptoms” in isolation or as results. We have to heal that entire community and get to the route and cause of problem..

9. Stakeholders: Children, donors,community members, government officials standing in support, those whom they serve, and employees. Children can enter the Harlem Children Zone family at any age and they will be supported with all the programs available. The HCZ has progressive outreach efforts and campaigns and multiple entry events because Mr. Canada wants families to easily access the HCZ program whenever they are able to do so. Once they have entered, retention is the most critical obstacle. Mr. Canada promises parents that if their children regularly attend the programs regularly, HCZ will prepare them for college. Parents are invited to receive education and to partake in the events and classes offered by the HCZ. Mr. Canada explains that poverty creates a gap in negative childhood outcomes even before a child is born. Parents who dwell below the poverty line more often have a limited education and insufficient access to high quality medical care, which can affect children in its prenatal care and early development. Parents who are above the poverty line tend to have higher education, typically expose their infants and toddlers to more experiences that help to develop the young physically and mentally. Children are shaped and profoundly affected by their environment. The most important aspects of their environment are the family and home. But what children face once exit outside also plays a role. The community in the neighborhood develops and maintains the

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environment. Investment and strong thoughtful local leadership must exist alongside stable families and effective programs. It is residents or “stakeholders “and local institutions and their leaders that will develop and grow the community and environment. Mr. Canada and The Harlem Children Zone utilize careful and meticulous hiring practices to help bring individuals with the right values and ethics to HCZ community. Continuous training and leadership development help to build and develop the human capital within the organization. The staff is ambitious in the goals and determined to meet them. Mr. Canada and his staff believe and work tirelessly to ensure that all the children under their care will succeed. The only way to do this is with a motivated, dedicated, highly-trained staff working together with a common purpose.

Goals or Objectives
1. What to strive for in the short-term?
• Serve an entire neighborhood comprehensively and at scale. Engaging an entire neighborhood helps to achieve three goals: it reaches children in numbers significant enough to affect the culture of a community; it transforms the physical and social environments that impact the children’s development; and it creates programs at a scale large enough to meet the local need. With the new business plan Mr. Canada hopes to achieve over the next 10 year period: • Create a pipeline of support. Develop excellent, accessible programs and schools and link them to one another so that they provide uninterrupted support for children’s healthy growth, starting with pre-natal programs for parents and finishing when young people graduate from college. Surround the pipeline with additional programs that support families and the larger community. • Build community among residents, institutions, and stakeholders, who help to create the environment necessary for children’s healthy development. • Evaluate program outcomes and create a feedback loop that cycle’s data back to management for use in improving and refining program offerings. • Cultivate a culture of success rooted in passion, accountability, leadership, and teamwork.

2.) Quantifiable, Measurable, Time-Specific Targets ● Select a specific neighborhood and work comprehensively and at scale within it.
● Engaging an entire neighborhood helps achieve three goals, Reaches children in numbers significant enough to affect the culture of a community; ● Transforms the physical and social environments that impact the children’s development; and creates programs at a scale large enough to impact the local need. ● Create a pipeline of support. Develop excellent, accessible programs and schools and link them to one another so that they provide uninterrupted support for children’s healthy growth, starting with pre-natal programs for parents and finishing when young people graduate from college. Surround the pipeline with additional programs that support families

and the larger community.

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i.

Build community among residents, institutions, and stakeholders, who help to create

the environment necessary for children’s healthy development. ii. Evaluate program outcomes and create a feedback loop that cycles data back to

management for use in improving and refining program offerings. iii. Cultivate a culture of success rooted in passion, accountability, leadership, and

teamwork

Major Policies
1. How to achieve goals?
1. To ensure that environmental impacts have a positive effect on child development, we surround children with role models, programs, and messages focused on success. As an increasing percentage of the community becomes imbued with these positive influences, it reaches a tipping point, shifting away from some negative norms and turning toward positive norms. 2. To permeate a neighborhood, we focus on a finite area where we can concentrate intensive services on a large number of children and families, including those who are hardest to reach. This strategy changes the odds for a whole neighborhood rather than just helping a few kids beat the odds. With millions of children living in poverty nationwide, programs must scale up to neighborhood size to transform the lives of a critical mass of children.

• Community Organizing: Community Pride helps to organize and provide essential support to tenant and block associations. Participation in these associations fosters a sense of community among residents and empowers them to address local quality of-life issues. • Leadership Development: e offer leadership training for community members, W particularly the leaders of the tenant and block associations, and we host retreats to bring leaders together around issues of concern in the community. In addition, we continually recruit residents to serve on the HCZ Community Advisory Board. We want to make certain that the voice of Central Harlem is always heard clearly at HCZ. • Neighborhood Revitalization: Community Pride staff and local residents identify areas for neighborhood improvement and execute beautification projects to upgrade the community’s physical environment. When residents see a chaotic, unsightly area transformed into an orderly, beautiful space, the physical change fosters a positive psychological change. We bring young people from HCZ programs together with adult residents and corporate volunteers to work on an array of revitalization projects, including painting, cleaning up streets, and creating and maintaining community gardens. In working together to reclaim a lost neighborhood, neighbors find a new and powerful sense of community. • Referrals to Social Services: Social workers are essential members of the Community Pride staff. They work alongside the community organizers to refer families to services like counseling, housing assistance, and emergency food and

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clothing 2. Culture: Harlem Children’s Zone culture is built from the top down. It embarked on a program of planned growth at the core. Mr. Canada was careful to construct a management structure sturdy enough to handle the regular tasks and duties asked of his staff. He could not do the work he does, at the scale in which they want, without an organizational culture that emphasizes accountability, leadership, teamwork, & shared passion to improve the lives of the poor. Through rigorous hiring practices and training, reinforced by an open and effective communications framework, Harlem Children’s Zone aims to ensure that each person shares the same core values and ethics and ethics on which the founder’s intended. Mr. Canada is deeply proud of the HCZ culture and the shared values, strong leadership, and teamwork its staff embodies. HCZ staff share a passion for helping children and families and placing children at the core of their work; maintaining high standards for themselves, their colleagues. They do this holding themselves and others accountable for outcomes; connecting with the community; and upholding the highest ethics in their lives and work.
L eadership Style:

Mr. Canada has a particular style of management and that style is comparable to a business. He treats philanthropists and fellow donors like venture capitalists and angel investors. Thier return on investment is a promise and a brighter tomorrow for hundreds and thousands. The Harlem Children Zone business plan focuses on business oriented ideas like market penetration target, new technology, information applications and performance tracking systems. Mr. Canada addresses customers like a community and outreach initiatives is branded as marketing. Administrative staff are required to dress appropriately suits, meeting starts on time; reports, and evaluations are always being evaluated Management Systems: Open communication must be instilled across all branches of HCZ. Directors need to hire a case study manager or an individual whose sole purpose is to quantify the effects of the policies instilled by the organization. This individual will be able to free up the time spent by the director or those in upper management from being able to creatively instill the practices and teachings in the HCZ community. Structure: The Harlem Children Zone is a massive organization that utilizes many fascists of its funding. But with all the programs available it still relies on its core beliefs for guidance as well self image. They hold these ideas as their core and basis of the entire organizational structure. Rebuild the community from within. Developing leaders from the area. Local politics can work to an advantage when the right individuals are put in place

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2. Start early and be relentless. Providing services from prenatal care all the way through completion of college. The HCZ developed a plan for success if met consistently and reinforced. 3. Think and plan big. Always be looking for the next big idea. The rest is just details. Mr. Canada used imagination and ingenuity to scale out the Harlem Children Zone. The donations and funds were the details that came later. To build a dream you need the dream to build. 4. Evaluate meticulously. Under Mr. Canada’s command there is a small army of full and part-time employees accountable for the results of the programs. Each staff member regardless of position individually contributes to the success or failure of the organization. The program have a ten year business plans with goals, targets. It is in the hands of HCZ staff to see it that Mr. Canada and the families under his care make it. Control System: The control system would be the SMART. Resource Allocation System: The Harlem Children Zone tries to figure out what the least amount of money and time they can spend and still have the impact and change kids. Is that system perfect, no that's just not the way it should work. HCZ has to have programs that start at birth a get them through college. That requires massive amounts of capital. Functional Area Policies:

Total Quality Management (TQM): The staffs at The Harlem Children’s Zone under Mr. Canada’s leadership have many key common traits and characteristics in common. They all serve their entire neighborhood to create the shift in the culture of the community. Those ambitions and passions are channeled and trained to help create a pipeline of coordinated, best-practice programs to give the children and families support from birth through college to help reshape the notion a stereotypical predetermined future. These qualities are built constantly and reinforced with: ● Building community among residents ● Engaging in outreach programs in and out of their everyday lives ● Display of natural enthusiasm and leadership qualities The skills and lessons Mr. Canada and his staff instill on the children and families are not restricted to the New York metro area. They are reinforced and instilled and are sent wherever the children might end up for college and employment. That only happens when the staff learns

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from experience so that they can continually refine their performance, creating increasingly effective services. It provides measurable metrics of what works so that other parts of the organization can evaluate what has been learned. Value is added everyday by everyone. No voice is too small and no figure is too great to squander insight. Mr. Canada instills the value of opinion. The HCZ is an ever evolving idea, thus all new ideas need to be heard to help shape and grow the community. Also, it must be used as an aid, rather than a threat, in the process of continually improving services and staff performance. Experience, is the best value from an assessment is through an internal evaluation team with access to an internal database, nationally with evolving assessments for an evolving world. The Staff of The Harlem Children’s Zone are held to the highest standards not just by Mr. Canada, but by the people who depend on them. The communities they serve are greatly dependent on the services provided. Without the HCZ many families would be swallowed up by the hardship and stereotype realities that crime stricken inner city poverty offers. This sanctuary provides them and their children hope for a future, brighter and full of promise. This is the image that Mr. Canada preaches to his staff to motivate them to work through tough days and long nights. It isn’t just a career and or a job, it is a mission; a mission of great importance and selflessness. Each staff member embraces the individualistic efforts for the advancement for the greater community.

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Exhibit #2: SWOT Analysis Strengths: ● Harlem Children’s Zone has a good track record of successful social service programs throughout New York City. ● Exceptional leadership quality of Geoffrey Canada, CEO ○ Charismatic with a strong vision of improving lives of poor children ○ Created excellent relationship with foundations such as Edna McConnell Clark Foundation. ○ Made difficult decisions and removed three unrelated programs ○ Changed management structure with new reporting relationship to focus on growth strategy, which resulted in new funding opportunities. ○ Implemented business growth plan to ensure long term success of organization through attracting new sources of funding from foundations. ○ Engaged with program leads to improve measurement and evaluation to drive performance. ● Harlem Children’s Zone has been able to effectively secure sources of funding from government, foundations, and other s . ● Passionate and committed directors, who has been with the organization more than seven year, who independently designed, planned, implemented and reported on programs. ● Conducted experience sharing forum s among between program heads to exchange lesson s learnt and exchange gave feedbacks project design and implementation on . ● Invested in resources and technology resource to effectively monitor and evaluate the overall effectiveness of program of its interrelated programs s . ○ Hired Betina Jean-Louis, director of Evaluation ○ Deployed electronic scanners ○ Created central database management system. ● Implemented Employed Business planning process , which allowed Harlem Children’s Zone create theory of change, which is , which is SMART – Specific Measurable Attainable Realistic and Timely. ● Innovative approach of “Zone” gave HCZ competitive advantage to attract potential donors.
Weaknesses:

● Inadequate management & information systems to measure growth and progress ● Discouraged Changed from decentralized to centralized approach was not well accepted by program heads.

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● Program directors did not buy-in the concept of concentrating within the zone and was dissatisfied with pressure to measure and evaluate program using quantitative data. ● Solely relied on consultants to create indicators for program without involvement of directors. ● Insufficient and outdated monitoring and evaluation methodology, which limited program to measure achievements using qualitative data. ● Lack of monitoring and evaluation personnel for each programs to relief program managers from data collection and focus on program objectives and overall implementation. ● Lack of central database used across programs to alleviate duplicated data. ● Lack of synergy amount programs - each program was managed independently, which did not allow them to leverage resources.
Opportunities:

● Community driven fundraising initiatives to expand fundraising pool; ● Development of major donor programs within central Harlem to address: ○ 61% poverty rate among children ○ 18% unemployment rate through vocational training ○ 40% dropout rate, 25% high school diploma, and 20% ability to read at grade level ○ Forester case placement problems. Source: HCZ Case Exhibit 1 ● Prospect to expand existing programs to other zones within Harlem through increasing outreach of children and families in poor neighborhoods. ● Prospect to add programs to its arsenal to achieve objectives (i.e. the needs of children in the pre-school age buckets) ● Prospect to increase outreaching using the new headquarters ● Increased interest from donor organizations as a result of HCZ’s ability to provide qualitative reports. ● Partner and collaboration with public schools. ● New programs to increase income and livelihood of poor families in Harlem through partnership with vocational training education providers and small and medium businesses in fields such as hairdressing, art and handcrafts, community gardens, and other small businesses.

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Threats:

● ● ● ●

Attitudinal or lack of interest at the community level. Uncertain economic condition affects funding. Change presidential administration and government leadership affect grant funding. Competition from other grass root non-for-profit organizations with similar causes fight for funds from the same donor pool. ● Security issues such as the World Trade Center terrorist attack. ● Possibility of losing funding due to the inability of HCZ to show how money is spent ● Losing interest of directors because the organization is taking them away from the purpose of their jobs and instead having them perform measurements.

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Harlem Children’s Zone Analysis
Horizontal Analysis

Exhibit # 3: Financial Performance

● Total revenue more than tripled (with an increase of 217.62%) from 1999 to 2000; but then dropped by -22.95% from 2000 to 2001 due to a decrease in grants and contributions. ● Total operating expenses increased between both time periods; although there was a greater increase between fiscal year 2000 and 2001 due to increased management and general expenses. ● There was a significant decrease in total operating income between 1999 and 2000 due to a negative operating income ($579,427) in 1999. There was a lesser decrease in the total operating income between 2000 and 2001 due to less revenue and greater expenses in 2001 than in 2000.

Vertical Analysis ● The percentage of grants and contributions dropped off significantly in 2001 from where it had been in 1999 & 2000 in relation to total revenues. ● As a percentage of revenue, the management & general expenses (salaries and general overhead) more than doubled between 2000 and 2001. ● The change in Net Assets increased significantly between 1999 and 2000 due to the increased revenue HCZ received during fiscal 2000. However, in 2001 the percentage of expenses in was greater and the percentage of revenue was less, so the change in net assets decreased from the previous year.

H&V Conclusion HCZ received an influx of revenue in 2000, which (per their business plan) gave them the necessary funds to increase their expenditures, particularly in the Management and general area. This increase, however, decreased their net assets because their revenue in 2001 was 22.95% less than the previous year.

Sources Analysis ● Grants and contributions was the largest source due to a decrease in the asset from 2000 to 2001. This is because there was an influx of contributions received by two major sources in 2000 that was not received in 2001. ● There are also undesignated contributions that increased from 2000 to 2001 based on stipulations given from previous contributions.

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● The third largest source is the increase of bank loans which were taken due to a decrease in grants and contributions received in 2001; and a necessity to increase expenses due to their business plan.

Uses Analysis ● The largest Use by far were the investments made between 2000 and 2001 ($14.9 million). These investments were made primarily in the infrastructure as well as the program services. ● The second use was the investment of property and equipment ($1.5 million) from 2000 to 2001, assumedly to support the building of the infrastructure. ● Third, the temporarily restricted contributions decreased from 2000 to 2001 as the funds became available to HCZ.

Sources & Uses Conclusion There were many investments made between 2000 and 2001, mostly with the contributions that were made in 2000. Those investments were mostly made in the infrastructure of the organization. The organization is in a position to grow further. Their net assets have increased, which will also enable them in this growth.

II. Financial Accountability Based on the general information given in the case, there wasn’t much attention paid to their financial resources, other than how they were going to meet the operational contractual obligations when a large contribution was offered and received. So, it appears that their revenues and expenses seem to not follow any sort of trend analysis from year to year if you look at each revenue or expense individually. (See below)

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Additionally, if you look at the same information by year, you can see that again, there is no real consistency other that the program expenses remain about the same.

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Some of this inconsistency has to do with the influx of contributions they received in 2000, from EMCF, an initial contribution of $250,000 to create a business plan with an additional $5.75 million in funding over the following three years (once the business plan had been created). Additionally, the Robin Hood Foundation as well as The Picower Foundation contributed an additional combined total of $7 million. This created the significant decrease in total revenues between 2000 and 2001, but also the increase in cash from 2000 to 2001. At the end of fiscal year 2001, assuming monthly expenses of $980,146 (2001 Total Expenses: $11,761,755/12 months), the HCZ Foundation would have approximately 1.67 months of cash on hand, which does not give them enough bandwidth to increase the capital to extend their program very far into the future. Based on their assets and liabilities, however, HCZ is in good financial health with a current ratio of 32.26, making most of their assets liquid, that will aid in their growth – as their business plan necessitates. While it is unknown what the benchmark is for this type of organization, the profit margin for HCZ of 41% is very good – especially considering that their administrative cost ratio 20.8%, which should be much lower. This creates an issue with the amount of funds they can spend on their program services – which is only 79%. This number should be much higher – at least in the upper 80% range, if not low 90’s. This indicates that perhaps the salaries of their senior management may be too high – or that there are too many people at the senior level, and the overall structure needs to be changed to focus more on the programs and less on the management of the foundation. At this time period, it could also be that, based on the business plan, there was some upper level management hiring that took place, which contributed to the increase in the administrative cost. Regardless, the administrative cost for a non-profit organization should be in the single digits so that the revenues can be spent on the programs for which the organization was created.

Mission Fulfillment In late 1999, Bridgespan, was hired by Rheedlan (now HCZ) with the funds from a grant from the Edna McConnell Clark Foundation (EMCF) to evaluation the Harlem Children’s Zone organization and then aid in creating a business plan. One of the imperatives of the business plan is Imperative #3: Building the Organization. imperative recognizes the growth and plans to strengthen the core This management and staff and operating systems at HCZ between 2000 – 2005. This includes creating three new positions: a Chief Operating Officer and two Senior Program Managers. It also includes developing new in-house units for functions that have previously been outsourced (i.e. Evaluation, Facilities Management and Human Resources). They also plan on enlarging existing administrative units in Development, Fiscal Management, Information Technology and Administration; as well as invest in appropriate new information technology applications. This planned growth could account for the 66.0% increases between 2000 and 2001 in Management and general expenses. Assuming that this is the basis for the increase in management and general expenses, the offer from Picower Foundation in November 2002, giving HCZ the opportunity to

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expand into (and beyond) their Northern Zone earlier than planned to the elementary school in District 5; HCZ is better prepared to accomplish this task.

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Harlem Children Zone

Exhibit # 4: Strategic Assessment

1. Built-in-contradictions of Harlem Children’s Zone (HCZ) Strategy: ● HCZ is moving towards a more centralized operating model which contradicts the decentralized approach that existed during its early success. Richard Murphy, the founder of Rheedlen Centers was afraid of structures and planning, because he felt this approach was adopted by other less effective agencies. ● Geoffrey Canada started working for the truancy prevention program at Rheedlen in 1983. At that time the agency had a strong culture of promotion from within and Canada slowly moved up the ranks. Today, Geoffrey Canada is looking to bring in numerous outside talent and develop new roles for the agencies continued success. ● In the past HCZ had run a variety of successful programs that were funded separately and worked somewhat independently of each other. Today, HCZ is looking to attract larger funding resources by leveraging a new integrated model. ● Canada and his senior staff are confident that HCZ would prove to be a replicable model for social delivery and child advocacy across the country. His ambitious growth plan entails growing into an area three times the size of its current zone. However the spirit of the early Rheedlen centers focused predominantly on the city’s most devastated neighborhoods. Having a very micro outlook in terms of service area and deliverability. Does the strategy make sense? ● Mr. Canada and HCZ’s holistic vision has always been to reach a broader audience to help build awareness and support mechanisms that children need to be successful. Geographic boundaries become less imperative when replicable systems are administered and leveraged for success. Mr. Canada’s commitment to creating that system is illustrated through his willingness to implement the strategies outlined by Bridgespan a subsidiary of Bain & Company. ● Total revenue more than tripled (with an increase of 217.62%) from 1999 to 2000. 2. Significant weaknesses ● Program Directors historically made decisions quickly and adapted programs as needed. They had not had the time, resources, or skills to analyze their efforts. For many becoming accountable was an uncomfortable process. One Program Director described it as; “we rarely had the historic facts and figures that they wanted…it made me feel like I was not doing my job.” ● The technology to gather, measure, and make actionable insights does not exist today. ● The cultural shift needed to become an analytically driven organization was challenging. Canada commented; “the process was harder and more time consuming that I’d expected. It was four to five hours a week of thinking, and talking, and working through issues that came

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up. If I had known before what it was going to take, I probably would not have gotten involved.” Does the company have the strengths to pull off the strategy? Yes, HCZ does have the ability to pull off the growth strategy. Canada and Khaldun have already instituted several initiatives that seek to keep the various stakeholders engaged in the growth strategy. Through investment in measurement and tracking capabilities and processes over time, Rheedlen embodied a new type of analytical thinking combined with a deeper underlying economics of its programs. Management now had the ability to think holistically about the agency and compare performance and relative impacts of each program.

3. Significant threats ● Uncertain economic conditions could affect larger corporate funding sources. This would limit HCZ ability to execute its growth strategy and likely adopt a more opportunity based growth strategy within the constraints of the existing geographic, people, and systems capacity. ● Much of the vision, strength, and ability to stay the course stems from the leadership currently administered at HCZ; Geoffrey Canada. If leadership changes needed to be put into effect as part of the granting process this could threaten the larger Directorial team’s willingness to perform to meet directives. ● Competition from other grass root based organizations focused on similar mandates. Smaller organizations have a nimbleness and ability to connect with the community. One director described it as; “the power of conviction in our community that matters.” Is HCZ in a position to take advantage of opportunities? ● HCZ is in a very attractive position to take advantage of the opportunities. They have a proven track record to be able to add in new successful programs and extend their reach through zone based expansion. ● HCZ has increased special event income from 2000 to 2001 by $252 (dollars in thousands).

4. Competitive Edge ● HCZ operates from a twin principals; one to help children they must be surrounded by a critical mass of caring adults and two, early in their lives they must be exposed to sound health care, intellectual, social stimulation and guidance. ● HCZ has been a long established organization with a vision for growth and a leadership team that’s willing to make tough decisions and investments today to achieve those. ● HCZ has positive funding sources that are largely vested in its success and believe in it’s team, cause, and impact.

22

5. Does financial performance indicate the strategy is effective? Financial statistics supporting strategy:
● Revenue or grants issued

Financial statistics NOT supporting strategy:
● Total revenue dropped by -22.95%

● ●





increased from 1997 to 2001 by 11.29% Total assets significantly increased by 80.908% The northern expansion has median income of 14.13% higher than the southern territories. The agency outputs the fiscal results show from 2000 to 2009 the estimated growth at 3.49% to a total output of 63.60% at the end of 2009 Total revenue more than tripled (with an increase of 217.62%) from 1999 to 2000

from 2000 to 2001 due to a decrease in grants and contributions · Total operating expenses increased between both time periods; although there was a greater increase between fiscal year 2000 and 2001 due to increased management and general expenses. ● There was a significant decrease in total operating income between 1999 and 2000 due to a negative operating income ($579,427) in 1999.
The percentage of grants and contributions dropped off significantly in 2001 from where it had been in 1999 & 2000 in relation to total revenues.
·

6.

Is the strategy workable? ● Yes. By focusing on expansion beyond current zone based strategy, HCZ achieves numerous objectives. First, it increases its reach within the community. A long standing tenant in the vision that Mr. Canada had set forth. Second, it allows HCZ to influence the District School Board, a holy grail for Mr. Canada and HCZ as an organization. Third, HCZ has proven it can increase revenue year over year while introducing successful new programs. A focused Fundraising Director will allow HCZ to seek additional private funding sources.

23

Where will it take the company if it is left unchanged? ● If HCZ does not change its strategy, it will not be able to achieve its ten year revenue targets, create exposure and reach more people, be the model for other agencies and organizations across the United States.

24

Harlem Children’s Zone
For Exhibit 5

Exhibit #5: Pro Forma Income Statement

I.

Pro Forma Income Statement for FY 2003 (ending June 30, 2003). a. Use FY1999 – FY 2001 income statements to develop a “change” scenario. Include assumptions. b. Do you think the strategy you recommend would enable the organization to meet management’s targets shown in Exhibit 9? Why or why not?…...

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