From yogurt to the inner city: Ending poverty with living-wage jobs

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March 26, 2012
By: Tristan Pollock
Tristan Pollock
You may not know Steve Rothschild, but you probably know Yoplait yogurt. Rothschild launched the Yoplait brand during his 24 years at General Mills. Eventually he moved on to become an executive vice president there. Despite being a highly lucrative position, Rothschild was no longer inspired. He called it quits at General Mills soon after his passion faded and turned to focus on his family and the Minneapolis community that he loves. That was 19 years ago. Now a corporate boardroom is the last place you’ll find the reborn social entrepreneur.

After leaving General Mills, Rothschild went on a sabbatical of sorts. He invested in a few small businesses, got involved with the Minneapolis Initiative Against Racism, and started contemplating the growing problems of poor inner-city Americans, particularly adults of color. What Rothschild found disturbed him, ultimately driving him to travel the country in search of answers.

Rothschild attended meetings, reviewed leading poverty-alleviation nonprofit operations and talked with some of the foremost authorities on generational inner-city poverty. His knowledge of the intractable problems of racism, poverty and incarceration grew exponentially during these months, but he wasn’t satisfied with the nonprofit models he found. Nearly any, it seemed, focused on moving the hardest to employ, especially black men, out of poverty by helping them secure full-time, living-wage employment. Additionally, these public assistance and nonprofit job-training programs were based neither on economic incentives or personal accountability. Rothschild was astonished, but took the challenge head on and Twin Cities RISE! was born.

Twin Cities RISE!, which is based in the North Loop neighborhood, was Rothchild’s first attempt at starting a nonprofit, but he didn’t dive in blindfolded. In addition to his meetings with experts in and outside of Minnesota, Rothschild heavily researched the connections between people of color, the unemployed and underemployed, and the current needs of employers. He then pulled the ace from his sleeve: his corporate background and nonprofit board experience. Combining both of these worlds over the years led Rothschild to make the important connection between social return on investment and results-based job training.

In line with Rothschild’s strategic approach to nonprofit ROI, he developed a list of seven principles that would lead him through the economic ups and downs of the coming years:

• Have a clear and appropriate purpose
• Measure what counts
• Be market driven
• Create mutual accountability
• Support personal empowerment
• Create economic value from social benefit
• Be learning driven

Rothschild developed the seven principles, now published in his new book “The Non Nonprofit: For-Profit Thinking for Nonprofit Success” released this February, through a combination of his business métier, extensive work with Twin Cities RISE!, service on myriad nonprofit boards, and awareness that there is an evermore urgent need for nonprofits to evolve to a more sustainable, entrepreneurial and enterprise-focused way of going about things. With proliferating social and environmental problems, rising health care costs and dwindling public money funneling to nonprofit contracts, grants and foundations, many organizations are floundering. And Rothchild’s own Twin Cities RISE! was feeling the heat.

From the onset, Rothschild had structured Twin Cities RISE! as a social enterprise, a sustainable way of creating an impact-driven organization that relies on means other than donations. Every time a graduate is placed at a job, the state awards Twin Cities RISE! an appropriation based on each time it places a participant in a $20,000 job with benefits, an increase of at minimum $10,000 more than they started the program with. Half the payment is at placement, half is turned over a year later if the participant is retained. The one-year retention rate averaged 82 percent over the last 15 years. Twin Cities RISE! also used to charge businesses fees for placements, which was almost completely covered by a tax credit. However, since then labor supply grew faster than labor demand, thus eliminating the tax credit and the businesses willing to pay fees.

“As I got into writing the book, I started to realize that the world of nonprofits is getting more difficult,” Rothschild explained. “Especially with the upward shift in health care costs. Even the nonprofits with successful results need to figure out how to do well in a tough environment.”

High health care costs are nothing new — according to Reuters, the United States spends more on health care than any country in the world — but, as mentioned in a recent Minnesota State Demographic Center report, with the baby boomers retiring, nearly as many people in Minnesota will turn 65 during this decade as in the previous four decades combined. This will cause a enormous strain on a state budget that is already in turmoil.

Because of health care, the tumultuous economic environment and other yet-to-be predicted events, the principle of “Be Learning Driven”  is becoming of the utmost importance in all sectors — public, private and citizen. A perfect example is Rothschild’s principles themselves. There weren’t always seven.

“The principles changed a little bit post-launch,” recalled Rothschild. “I added one more after two years: Supporting Personal Empowerment. We were working with people, even more than we originally expected, with two-to-three generations of poverty living. Most of the people who came to us didn’t understand what accountability was. They used street rules: Don’t defer gratification because the best years are behind you, not in your future; if confronted with an issue you fight or run, not negotiate, and you have few choices and feel powerless to change your life. The need for personal empowerment grew out of that.”

Today, you’ll find Rothschild splitting his time between Twin Cities RISE!, the Greater Twin Cities United Way, the University of Minnesota, Minnesota Public Radio, and a new nonprofit initiative titled Invest in Outcomes.

Through Invest in Outcomes, Rothschild is pioneering an innovative new financing vehicle to both improve the productivity of state human service spending and to attract private investment capital for high-performing social-service providers. It’s called Human Capital Performance Bonds and a statute was passed by the Minnesota state government last July providing a first-of-its-kind $10 million pilot.

Planning is underway, and, if successful, this unique bond could completely alter the accountability and funding landscape for hundreds of effective nonprofits and social enterprises throughout the state.