Are Maximizing Financial Returns and Maximizing Social Outcomes Mutually Exclusive?

Best friends Scott Thomas and Sammy Politziner have shared a lot of experiences: being college classmates, teaching in New York City public schools, working on Wall Street and volunteering for Obama’s 2008 presidential campaign. Inspired by that moment and a desire to be “part of the solution,” says Politziner, the pair founded Arbor Brothers, which provides money and coaching to nonprofit organizations dealing with growing pains. NationSwell spoke to the two members of the NationSwell Council about how nonprofits can adapt to changes in the social service sector.
Talk about the “second-stage gap”—after an idea’s seed funding runs out, but before the organization has proven results—that you’re trying to bridge.
Thomas: There’s a lot of incubators, fellowships, business plan competitions. At the other end of the spectrum, traditional philanthropy is really risk-averse; a lot of folks get paid every day to find those things that are really proven solutions. Between this throbby start-up area and this staid, traditional funding lies this big chasm. That holds true for even the most talented entrepreneurs. Take the example of Wendy Kopp and Teach for America: She was scrambling to keep the lights on at TFA in years three and four. We used to joke, “It shouldn’t be that hard to change the world.” If you have a good idea and that passion to develop it, someone should be there to help you across that funding landscape.

These days, there’s so much emphasis on numbers. How do you develop an outcomes-focused culture?
Politziner: We don’t believe changing someone’s life is a math problem. We have seen the philanthropic space, once somewhat unconcerned with numbers, swing maybe too far towards them. At Arbor Brothers, we’re quantitative by nature, but we recognize that a lot of changes cannot be measured quickly. We shouldn’t not invest in something simply because we can’t see the change right away. That said, the leader can’t just say this change is so far down the line, we shouldn’t bother to track indicators along the way.

How do you find the most promising leaders?
Thomas: There are a bunch of intangibles that we consistently mull on when we look back on the really successful organizations. One thing that we’ve grown ever more focused on is what Jim Collins talks about in “Good to Great,” this notion of deep humility. The really great leaders are so humble about how hard the problem is to solve, how long it’s going to take to find something that works and how many times they should expect themselves to fail and to struggle. If you’re the kind of person who’s never been wrong in your life or you’re not interested in learning from the failures of others, it’s really hard to get where you need to go fast enough.
What book would you recommend for someone to better understand your approach?
Thomas: “Leap of Reason,” by Mario Morino, a former software executive turned philanthropist in the [Washington] D.C. area. His Venture Philanthropy Partners, on a much bigger scale than Arbor Brothers, has really set the standard on what it means to help an organization with high potential become high performing. His book really distills what it means to be focused on outcomes—not just the philosophy, but the systems to make sure it persists over time.
What philanthropic trends excite or disappoint you?
Thomas: Speaking personally, there’s a tension between the perception and reality around social-impact businesses. Having spent some time with a couple, I personally have yet to see an organization that both achieves meaningful financial market returns and meaningful social outcomes. The tension between are you maximizing profits and are you maximizing outcomes has never been truly resolved. People’s hand-waving over that challenge leads to a lot of wasted time and money in this area.

Only 1 in 5 New York City Students Graduates from College. This Nonprofit Is Going to Change That

It’s a sad fact that fewer than one in 10 American kids raised in impoverished neighborhoods will graduate from college. But in two major U.S. cities, one organization successfully has flipped that statistic on its head.
OneGoal, an educational nonprofit geared to low-performing students in low-income Chicago and Houston neighborhoods, has demonstrated its worth: 83 percent of OneGoal fellows have earned or are actively pursuing a college degree.
That’s why the organization’s leadership is ready to take OneGoal’s proven model to New York City, America’s largest school district and the place where education reforms either make it big or fall apart. Once there, they’ll be graded alongside Harlem Children’s Zone, InBloom (which, it should be noted, got an F), Amplify, Knewton and other innovators changing the way classrooms work.
The city has an acute need for OneGoal: 12 years after entering public high school, only one in five New Yorkers will earn a college degree. Plus, a quarter of the city’s high school grads drop out of college during their freshman year.
“We have been in Chicago for the last eight years, and we’ve really proved what’s possible with a set of students. Once we started to see real results, we almost had a moral imperative to work to serve more students,” explains Nikki Thompson, executive director of OneGoal’s New York operation. After the expansion to Houston in 2013, “it became clear that we could replicate it in other cities. And in the world of social justice, there’s no school system like New York.”
OneGoal’s key belief is that students succeed by empowering themselves. The program’s teacher-led model focuses on training educators to boost the lowest achievers by conducting an intervention with the ones who are usually overlooked: OneGoal’s fellows begin with an average GPA of 2.7 (B-) and a 729 SAT score. Half are black, 42 percent are Latino and 90 percent qualify for free or reduced lunch. In contrast, QuestBridge, an organization with a similar mission, tries to pluck out what Thompson calls “the talented tenth,” students most likely to succeed at a selective college.
Pioneering a form of character development, OneGoal’s unique three-year curriculum spans from junior year of high school to freshman year of college and is centered on shattering stereotype disadvantaged students’ carry about themselves so they come to see college as “realistic” and “attainable.” Project directors hone a student’s ability to ace standardized tests, admissions essays and financial aid applications, instilling them with leadership skills of “professionalism, ambition, integrity, resilience and resourcefulness” early — all of which puts them on a path bound for college, and from there, gives them the tools to succeed.
In classes of 25 to 30 kids, “we do actual role-play with the students, not just reading the material,” Thompson says. Analyzing real-world situations, they discuss what actions to take when you and your roommate get into a fight, for instance, or how to manage when there isn’t a teacher saying, “Make sure to bring your homework.” “Once they’re in college,” Thompson says, “it becomes almost muscle memory.”
In New York City, OneGoal is looking to replicate success stories like that of Kewauna Lerma, who was profiled in Paul Tough’s “How Children Succeed: Grit, Curiosity, and the Hidden Power of Character.” Raised on the South Side of Chicago, Lerma was barely pulling in a C- average and already had a rap sheet when she became a OneGoal fellow. “I didn’t really have a family. I was scattered all over the place, no father, with my grandma sometimes,” she says in the book. “It was all messed up. Jacked up.” Through the program, she went from being the girl who scored in the bottom percentile on a practice ACT test to having straight A’s on her report card senior year of high school.
Freshman year at Western Illinois University brought Lerma new difficulties, like a tough biology class that seemed far over her head. She didn’t know half the big words her professor used, but she sat in the front row. After class, she always asked him to definitions the words that stumped her. Money was always tight, and Lerma says she once didn’t eat for two days when she had no cash. But she persisted, as OneGoal taught her to do. Her biology grade? A+.
Like Lerma, OneGoal will face many challenges when it makes the move to the Big Apple, particularly in winning support from key political players and making sure they don’t overstep any boundaries with the powerful teachers union. “New York is just so different when you talk about size and scale and competition. There are 100 high schools in Chicago. In New York, there are over 500 high schools. It’s just a different ballgame,” Thomson says. “The challenge is differentiating ourselves.” Additionally, the New York City pilot will need to navigate through a few changes OneGoal is making to its Chicago model, including a fee structure to help fund the nonprofit’s work and a data systems program to help track academic and non-cognitive progress.
But Thompson, a Teach for America alum and chief of staff while Joel Klein served as NYC’s school chancellor, has a network of connections she can draw on. Her efforts so far are showing results. After a roundtable last year, Acorn Community High School in the Brooklyn neighborhood of Prospect Heights signed on to host one of the seven to 10 pilot classes that are anticipated for fall. And the Arbor Brothers, a philanthropic organization that funds social entrepreneurs in the Tri-State area, gave a $60,000 grant to the expansion efforts.
After New York, the group plans to take on five more school districts by 2017. For all their rapid success, OneGoal’s staff has never lost sight of their mission. Whether for seven students or 7,000, the group’s “one goal” remains the same: College graduation. Period.
LISTEN: To This American Life episode, which features former OneGoal Fellow Kewauna Lerma.
Correction: A previous version of this article stated that there are 40 or 50 high schools in Chicago. The correct number is 100.
(Homepage photograph: Slaven Vlasic/Getty Images)

These ‘Brothers’ Left Wall St. to Make a Difference, and Their Big Bet is Paying Off

NationSwell works to elevate solutions to national challenges both through powerful storytelling on and its NationSwell Council membership network and events series. Here, we introduce you to some of the innovators who are part of the community.
Over the years, there have been some bad decisions made in the college bars of Ann Arbor, Mich. This is a story about a good one.
Sammy Politziner and Scott Thomas met while students at the University of Michigan when they lived next door to each other as freshmen. The two worked at summer camps together, and after graduation, both served as corps members of Teach for America (TFA). From there, like many of their classmates (even the most idealistic ones), they both decided to pursue careers in finance.
In 2008, nine years out of college, both worked in New York City: Politziner was a vice president at Kildare Capital, and Thomas was an analyst at Neuberger Berman. While in Ann Arbor one weekend for a football game, they got to talking about their lives as they sat before the row of taps at Ashley’s, their favorite haunt. Both decided something was missing.
It had something to do with the year. Recently, the duo had volunteered for the Obama campaign, and the feelings of hope and change that the campaign had infused in so many also struck a powerful chord with the two friends.
They spoke about the difference they hoped to make, the lives they still wanted to lead. When they thought about what they might have to offer, they wondered out loud if perhaps the business skills they had developed during those years in finance combined with classroom experience from their TFA days could help make a positive social impact.
They made a decision to find out.
“We just looked at each other and said, ‘We don’t know what we’re going to do…but we have got to go back to being a part of the solution,’ ” Politziner says of the moment that led him and Thomas to found Arbor Brothers, the philanthropic organization named for their college town.
Arbor Brothers makes grants to social entrepreneurs focused on education and employment in New York (where they are based), Connecticut and New Jersey. Politziner and Thomas support nonprofits they identify as “second stage,” organizations that have already gone through seed funding but have not yet established a track record that would give them access to larger pools of capital. These groups tend to be two to 10 years old with two to 10 staff members and a budget of less than $2 million a year.
The founders of Arbor Brothers practice the concept of engaged philanthropy, combining financial support with countless hours of consulting. Each of their current grantees receive $250,000 in funding over the course of three years, while Politziner and Thomas spend 200 to 300 hours a year working with the leaders of each organization.
“Our view, one of our guiding principles, is not that we have the answer. It’s our job to build a relationship where we can be helpful in discreet, meaningful ways along that path,” says Thomas.
After the pivotal conversation at the pub, the two returned to their finance jobs. But to learn more about the social solutions they might support, they made a commitment that each week for six months, they would have dinner with various leaders in their fields. These foundation officers, nonprofit heads and social-impact consultants revealed there was a real hole in the funding market.
The friends who would go on to form Arbor Brothers learned that members of various second-stage organizations “were doing really good work with kids, but they had never run an organization before. They had never hired somebody, let alone fired somebody; they were doing their budgets on a napkin,” Politziner recalls. “We thought, these people are so talented, and they’ve got such a great idea, and yet, they’re slowly figuring out how to run an organization. And oh, by the way, they have to spend 70 percent of their time actually going out and raising money.”
Once Politziner and Thomas determined how needed they really were, there was no turning back.
While maintaining their day jobs, the two started with a few pilot projects. They spent 100 hours with Nick Ehrmann, then a Ph.D. student at Princeton University, who founded Blue Engine, a nonprofit that places teaching assistants in public high schools in New York City. They worked with Hot Bread Kitchen, an organization that empowers women and minority entrepreneurs in culinary workforce programs, a loan package that financed a move to a full-time kitchen. Then in September 2010, they quit their jobs and focused all their efforts on Arbor Brothers.
When they first got started, Arbor Brothers raised $15,000 — Politziner and Thomas put in some of their own money, and family and friends also contributed. Last year, the public charity had a budget of over $1 million, resulting from donations from individuals, family foundations and donor-advised funds. Because the nonprofit raises its own money, Arbor Brothers has to prove its value to its donors every year in a quantitative way.
One organization that has benefited from Arbor Brothers is the Connecticut-based All Our Kin, which empowers child-care providers as business owners, provides parents with safe and stable care for their kids and gives children a strong educational foundation before they enter kindergarten. The organization licenses people to run family child-care programs in their homes, then involves them as part of a professional development network — at no cost to participants.
From 2011 to 2014, Arbor Brothers provided All Our Kin with $190,000 in unrestricted funding (money with no strings attached). While the grant money has had an impact, it’s the guidance and knowledge of Arbor Brothers that has really made a difference. Jessica Sager, executive director of All Our Kin, says the hundreds of hours Politziner and Thomas spent with the team in New Haven, Conn., helped the organization set up systems to manage fundraising and budgeting. Arbor Brothers also helped Sager and her co-founder create a plan to expand their model to a second site, and now All Our Kin is in three cities and considering national expansion. “We are rigorous about evaluation,” Sager says, explaining how Arbor Brothers taught her how to use data to track outcomes. “We put everything on spreadsheets”
Politziner and Thomas talk about the importance of an “outcomes focused culture” and “scale of impact versus scale of number of people served” with as much enthusiasm as they talk about their other shared passion, Michigan football.
“At the end of the day, we’re going to step away, and I hope we’ll be close to these organizations,” Thomas says of the Arbor Brothers’ relationship with All Our Kin and other groups. “But unless the tools we built and the conversations we had become embedded into their organizational culture, they’re not in our view likely to be sustainable and successful over the long term.”
Over the past four years, Arbor Brothers has evaluated nearly 500 nonprofits and made site visits to at least 75. Through experience, they have become better at finding the right fits for their funding and expertise. “We made this mistake a couple of times where we would meet a young entrepreneur with a lot of passion and charisma and an exciting vision for change, but we had this nagging anxiety that they were more style than substance,” Thomas says of one of the lessons he learned the hard way. “They were great marketers, and while that is important and can raise money, if someone does not have a high internal standard for quality, those are not the people we’re equipped to help.”
They’ve also gotten better at taking cues from the leaders of the organizations they serve, figuring out the best ways to put their analytics background to use. For instance, when Arbor Brothers assisted All Our Kin on its financial model, they worked hard to make the numbers user-friendly, later realizing that the organization’s leadership felt more at ease knowing the ins and outs — no matter the complexity.
Politziner and Thomas believe not only in the importance of learning from their mistakes, but also in promoting transparency, so they conclude each of Arbor Brothers’ quarterly newsletters with a “We Blew It!” section where they detail the ways they can improve moving forward.
In the past five years, Arbor Brothers has funded 3 percent of the 500 high-potential, second-stage organizations located in the tri-state area that work to address the root causes of poverty. While Arbor Brothers is on a path to grow (this year’s budget is likely $1.25 million), they want to remain focused on finding, funding and supporting only the most promising of the organizations that fit this description.
“The lens through which we make grants is the concept that social change is extraordinarily hard and it takes a really long time and it’s messy,” Politziner says. “Those three simple tenets inform how we think about how our small pot of capital can make the biggest difference. That means we invest in organizations that make a deep investment in people over time.”
Another way that Arbor Brothers sets itself apart from other funding groups is that they don’t believe in forcing themselves on to boards or attaching strings to their funding. “We come to understand the organization so that we’re on the same side of the table, and their success is our success,” says Thomas.
Arbor Brothers carefully tracks and reports these successes. Doing so helped the organization settle on its three-year-long funding model, which gives them enough time to get these groups to the next level while also having a time pressure in place to reach organizational targets.
Last summer, Politziner and Thomas gathered the four organizations “graduating” from three years in their portfolio for a backyard barbecue in Brooklyn, N.Y. “It was a moment that caused me to reflect on how far we’ve come,” Thomas says.
All Our Kin celebrated its expansion to two new cities; Green City Force looked back on the long hours spent vetting and prioritizing service opportunities so they could improve placement outcomes for their corps members; and exalt now had refined performance standards in place and looked forward to doing even more for teens who have been involved in the criminal justice system. The fourth graduate, ROW New York, was able to raise more than $3 million over three years to double their program size and outfit a new boathouse — thanks in part to support Arbor Brothers provided on marketing materials and earned-income strategy.
Last fall, four new organizations joined the Arbor Brothers portfolio: New Heights, Coalition for Queens, Springboard Collaborative and OneGoal. (BRICK Academy, which is transforming failing schools in Newark, N.J., GirlTrek, which NationSwell has featured for its work mobilizing black women to walk their way to better health, and The New American Academy, which brings new models like teacher teams to New York City public schools, will continue receiving their funding.)
So far, Arbor Brothers is walking the talk of engaged philanthropy — and it’s working. “It’s a really tough balance, but they do it well, where they’re supporting the growth of an organization — talking about best practices — but they’re not imposing things,” explains Jukay Hsu, founder of Coalition for Queens, which looks to the tech ecosystem to provide economic opportunity to a diverse community.
“It’s not an outsider coming in saying, ‘Do X, Y and Z.’ … They have a unique level of human empathy and understanding and an ability to listen and digest.”