Sunday, November 1, 2015

Break-Even Analysis: Two Answers






What can your manager do if a break-even analysis indicates that a venture will lose money?

The simplistic answer is that if a manager is looking at a break even analysis and the analysis shows that the venture will lose money is to not do the venture. 

Realistically though, the answer is more complicated than that. The simplistic answer assumes that all the variables in the equation are fixed – static without the possibility of changing. There are three variables in the equation for the break-even analysis. There are the fixed costs, the price you are selling your good or service, and the variable costs included in your service or product. All of these can be examined and perhaps tweaked so that the anticipated quantity is above the break-even quantity – can you charge more or pay less for inputs or not rent as big a space. 

One thing to be careful with is that these things are not strictly linear. If you pay less for inputs like labor, you might not be able to recruit the kind of people you want; if you try to up the price, you might dampen demand. (At that point, price and quantity demanded is dependent on the elasticity of demand of the good, and you’re calling in the economists to see if your estimated new price will support a break even quantity you expect.)

Monday, October 26, 2015

Quick Thoughts: The Jossey Bass Handbook of Nonprofits

This book, in its third edition, was the assigned text for both my classes in my MBA program for introduction to nonprofits and  board management.

For the intro class, I was assigned to read the whole thing in eight weeks, which I did. During that class, we covered up to four chapters a week for an eight week class, so there was not a lot of retention going on except for the areas I had flagged for use in my discussions and papers.

I had to read fewer chapters for the next class, and I think that was where the book shined. Reading some of the chapter in a more in-depth manner suited both me and the text. I say this because for the most part the book’s chapters are a fairly deep introduction to the subject they cover, and in spite of worrying that the book and the class wouldn’t be applicable to me since I have worked in nonprofits for five years, I learned a lot. The structure of the book is that it has chapters written by subject matter experts, so there is some inconsistency in the voice of the text, but that is eclipsed by the expertise that it brought to bear on the individual subjects covered. And there are a lot of subjects covered. It is a thick, long book with a lot of type on each page, so it is not a quick read, but it is well worth it as it is broad and fairly deep. I pulled my copy because I think I can pass it off to one of my subordinates in hopes that it might teach and inspire her about the entire context of the work we do.

Monday, October 19, 2015

The Limelight Fund – Mission and Board Selection



Note: The following is the assignment for my class in Board Government and Management of Volunteers at Concordia University. The people are real, but the organization is not. None of the listed are of my acquaintance.

Writing in the Jossey-Bass Handbook of Nonprofit Leadership Management,  David Renz speaks of a whole board development cycle, which starts off from the most basic level of defining the work and designing the board, to recruiting and selecting members, to building member capacity, building the team, ensuring focus, engaging in the work, conducting effective meetings, and ensuring accountability. Renz emphasizes that this is a cycle where any of these points might be an entry point to the cycle, the most obvious is in defining the work of the organization (Renz  p. 153).
This paper will present an organization, and the board I have chosen to run that organization, along with a justification of the people chosen as well as their potential interactions.

The Organization
            I have long been interested in the performing arts. Though the closest I ever got to being on stage was an invitation to try out for Oklahoma by the show choir director, the tryouts overlapped the practice times for my football team. I decided not to even ask my football coach if I could miss practice so that I could try out. I think I missed something I could have enjoyed. I hope that others will not miss the chance. This is why I am pleased to announce the formation of a new organization that will help give young people the opportunity to develop themselves on the stage. The Limelight Fund has been seeded by a very generous anonymous grant that will aid the organization. What the Limelight Fund will do is give grants to deserving theater companies and aid the grant recipient companies in all aspects of operations from space rental and insurance to marketing the work. The hope is to fund the arts outside the upscale, urban centers that are traditionally associated with the stage. The Limelight Fund will target the growth of companies in nontraditional areas where perhaps the only opportunities to act and direct and write have been for the school stage, if even that was an option. We will help the youth by providing opportunities so that the arts can flourish and be a viable career choice. There is no reason why the talented youth of Peoria and Davenport and Englewood cannot stay around and help their own communities grow. Though located in Chicago, the plan is for the Limelight Fund to grow into a national organization. I have curated a team to work for me to help me find, identify, and nurture the right companies.
            All of this leads to the mission statement, which is the guiding light of the organization: The Limelight Fund grows the arts to grow the community.

The Board
                       
Robert Falls, Artistic Director - Goodman Theatre
Martha Lavey Artistic Director - Steppenwolf Theatre Company
Leslie Buxbaum Danzig co-founder - 500 Clown
George Zoghbi Chief Operating Officer of U.S. commercial business - Kraft Heinz
Tony Parasida Senior Vice President, Human Resources and Administration -The Boeing Company
Danielle M. Winkle, CPA  Director - Ostrow Reisin Berk & Abrams, Ltd.
Joe Adams Managing Partner and Chief Executive Officer - McGladrey LLP
Rich Stoddart CEO, North America - Leo Burnett Company
Justin Massa Director of Business Strategy - IDEO and Founder - Food Genius
Lynne Kiesling Associate Professor of Instruction in Economics- Northwestern University.

Board Background
            The first member of the board is Robert Falls. Falls has long been active in the Chicago theater scene. Receiving his BFA in directing and playwriting from the University of Illinois, he came to Chicago to work. He was first the Artistic Director for the Wisdom Bridge Theatre Company from 1977 to 1985, and from there he moved to his current position as the Artistic Director at the Goodman Theatre. During his tenure at the Goodman, it has been nationally recognized by various publications as one of best theater companies in the nation (“Robert Falls”).  He is a white male, age 61, and a native of the central Illinois Town of Ashland.
            The second member of the board is Martha Lavey. Martha has also been a long-time fixture of the Chicago theater scene. She ascended to her current position as the Artistic Director of the Steppenwolf Theatre in 1995. Though she is stepping down from her post at the end of the year, her connections in the arts will remain valuable. She received doctorate in Performance Studies from Northwestern University after receiving her bachelor from the same university in 1979 (“Martha Lavey”). She was born in the college town of Lawrence, Kansas in 1957 and is a white female.
            The next member of the board is Leslie Buxbaum Danzig. Danzig is the co-founder of the 500 Clowns Theater Company, also located in Chicago. The 500 Clowns and its associated teachings are considered more avant-garde than the more traditional plays staged by companies like Steppenwolf and the Goldman. The approach is summed up on their website: the basic elements of 500 Clown Theater by taking emotional and physical risks through play. “Our belief is that physical action is a language everyone shares, and we have developed fun ways to work together and individually with risk that helps move participants from passive observers to active participants.  By introducing ourselves to our risk threshold we can mine it for value both on and offstage.” (“Training”). Danzig has long been working in theater, moving from New York to Chicago in 1996 before co-founding the 500 Clowns with her partner (“Leslie’s History). Danzig graduated from Brown in 1990 with her bachelor’s in women’s studies, and received a Doctorate in Performance Studies from Northwestern in 2007. Danzig has also taught at the University of Chicago under the auspices of the Theater and Performance Studies program, as well as in North western’s MFA Directing program (“Program Staff”).  She is a white female.
            The next member of the board is George Zoghbi, age 49. George has recently been elevated to the head of the U.S. Commercial Business at The Kraft Heinz Company. Before that, he has served in the preceding company’s leadership moving up quickly since he joined the firm in 2007. Prior to entering employment with the company he now works with, he worked with several other food companies. He hold several credentials, including a Diploma of Business (Marketing), as well as a Master’s of Enterprise from the University of Melbourne, as well as completing completed an Accelerated Development Program at MC London Business School in the United Kingdom (“Executive Profile”). Zoghbi is a native Australian of Arab descent.
            The next member is Tony Parasida has served at Boeing for thirty-seven years. In his current role, “He oversees leadership development, training, employee relations, compensation, benefits, diversity initiatives, privacy and corporate administration. He also leads Boeing’s Global Corporate Citizenship organization and the Shared Services Group, which is responsible for providing common infrastructure and services to Boeing businesses.” His training includes a bachelor’s degree in civil engineering from the University of Pittsburgh and a master’s degree in engineering management from Drexel University. (“Executive Biography”). He also serves on several boards. Parasida is 59-year-old white male.
            The sixth member of the board is Danielle M. Winkle, CPA. Winkle is a director at ORBA, one of the Chicago area’s top accounting firms according to Crain’s and a consistent performer in the Chicago Tribune’s annual 100 best companies to work for survey. She has been with ORBA since 1984 and was made director in 1994. Her biography on her website cites “Clients frequently rely on Danielle for her expertise. Her work in the field is sought after and she often leads seminars on accounting and internal control procedures for clients and community organizations.” She received her B.S. in Accounting from the University of Illinois at Champaign-Urbana. Aside from her work with The Limelight Fund, she is also on the finance committee for the Chicago foundation for women (“People”). Winkle is a middle-aged white female.
            The seventh member of the board is Joe Adams. Joe is the CEO of McGladery, another large accounting firm centered in Chicago. McGladrey sells itself as “a leading provider of assurance, tax and consulting services focused on the middle market. We guide our clients through complex business challenges by understanding their needs and bringing together the right team to address them.” He has been the CEO since 2011, helping grow the company through mergers and acquisitions. Prior to that, he has been in other leadership positions in the company, leading growth of the great lakes region tenfold in the 13 years he was in charge of the region. Joe is a white male who received both his BA and MBA from DePaul University, with the Master’s coming in 1979 (“Profiles”).
            The eight member of the board is Rich Stoddart. Rich is the CEO, Leo Burnett North America, one of the nation’s leading advertising firms. He is glowingly praised on the company web site: “Under his leadership, business has grown, management has flourished, EFFIE Awards for effective advertising have piled up and the agency was named one of Advertising Age’s Agencies to Watch and twice recognized by Advertising Age as a Best Place to Work” (“About Us”). Rich graduated with a BA from Dartmouth in 1985 with a major in history. He joined Leo Burnett right out of school and worked for them for eleven years. Then he took a detour working with a rival agency and then working for Ford as the Director of Marketing Communication until his return to Leo Burnett in 2005 (“Rich Stoddart”). He is a white male.
            The ninth member of the board is Justin Massa. Justin is part of Chicago’s growing startup scene, founding Food Genius, a company that made an app that worked as an analytics too for restaurants. It was highly praised, as Justin describes “Food Genius was part of Excelerate Labs (now TechStars Chicago) class of 2011, the first-ever Startup-in-Residence at IDEO, the first graduate from 1871, and a recipient of a 2012 Chicago Innovation Award. In 2014, we were named to Entrepreneur Magazine's list of "100 Brilliant Companies".” (“Justin Massa”). Justin has an interesting background, working as a programmer at other venues, but also putting his time in at the community working as a teacher at the Chicago Public Schools. He has a BA from Loyola-Chicago granted in 2001 and a Master’s in Teaching from the National-Louis University in 2004. Massa is a male of Hispanic descent.
            Rounding out the board is Lynne Kiesling. Kiesling is an Associate Professor of Instruction in the Department of Economics at Northwestern University. At Northwestern, she is also a Faculty Affiliate in the Searle Center on Law, Regulation, and Economic Growth. She is also the author or co-author of many academic journal articles, book chapters, policy studies, and public interest comments, most of which analyze electricity policy and market design issues relating to regulation and technological change. Her specialty is industrial organization, regulatory policy and market design in the electricity industry. She examines the interaction of market design and innovation in the development of retail markets, products and services and the economics of “smart grid” technologies. Before coming to Northwestern, Lynn had positions as an Assistant Professor, College of William and Mary, Manager, Price Waterhouse/PricewaterhouseCoopers LLP, Director of Economic Policy, Reason Foundation, and Research Scholar, Interdisciplinary Center for Economic Science at George Mason University. She holds a BA from Miami University in 1987 and a PhD from Northwestern in 1993 (“Bio”). She is a white female.

Context and Justification
I have had this assignment in the back of my mind for weeks now. My first struggle was thinking about the form of organization I would even want to make. I needed the organization and its mission before I could even think about the board-make up because in my mind everything is driven by the mission, from the day-to-day activities to the makeup of the board.
I then had to think about the structure of the assignment. If I were really starting the Limelight Fund, what kinds of people would I need? When talking about this assignment with my boss, a middle-aged white female, she joked that the board would be all rich white men. A secondary concern of mine was diversity in terms of demographics. If I were making a real board, I would want a multiplicity of voices.
When I was thinking of the structure, I started with an archetype in mind. At one point, I had thought about structuring this paper like a fantasy novel where each board member has some key quality that makes them a member of a team that will ultimately come together to slay the dragon. There are no dragons in the nonprofit world, but many small issues that can come together to look like a dragon if you do not have the tools to address them.
            In the end, what I was choosing for were certain sets of skills. I had an outline drawn that said three from arts, two from operations of big corporations, two from finance or accounting firms, two from advertising or marketing, and one economist. The layout of the board reflects this. I wanted more than one person from each of the main operations so that there was not just one voice.
Falls and Lavey both come from the big, established theater scene in Chicago. Having them on the board would be invaluable because of their knowledge of the arts scene, as well as the connections they have built through a career working in Chicago Theater. However, I felt that I could not just have them; I needed someone from the more off beat scene to be a counterpoint on the board. That is why I chose Danzig. She has experience both in New York and in Chicago and is well educated, but she knows the struggle of the small storefront theater troop, since she founded one herself. 500 Clowns does not have a space of their own, so Danzig has had to work in partnership with more established theaters and civic organizations to get her work staged. That knowledge is a valuable tool for the board of the Limelight Fund.
The next two counterpoints are George Zoghbi and Tony Parasida. I was focused on finding some people from the bigger companies in the area, so I went to the organization charts of a couple to pull the names of workers higher up in the businesses who would also have organizational experience that could be helpful for the organization. I also thought that perhaps these positions would also be the rainmakers for the fundraisers, as though the Limelight Fund has been seeded with a very generous gift, making sure the organization remains an ongoing concern remains a goal.
The next set I was looking at was for people with accounting backgrounds. Though we have not fully fleshed out the work of the board in specific, we will need a finance committee. I chose the Director from ORBA because I personally have experience with the firm and I have good feelings about it as an organization, as do outside observers. The CEO of McGladrey is important, as they are a top five Chicago accounting firm as per Crain’s, and the CEO is local.
The last three are a more interesting group. My original outline was to have two people with direct advertising or marketing experience. The head of Leo Burnett will help there. I also thought that we would need people with experience in start-ups and entrepreneurship. The people we will serve through the Limelight Fund are going to be in organizations in transition. Our money can help, but we also want to offer the expertise that we have, not just from the employees of the fund, but to also to use the board as consultants, as Peter Drucker suggest in his book Managing the Nonprofit Organization (p. 173). This is why I went looking for someone with start-up experience under this heading since starting a new business successfully involves a lot of marketing. Finally, I wanted an economist on the board that would allow the board to have a perspective of what was going on in an economic context at a higher level, and Kiesling fits the bill and her research interest is applicable to the needs of the Limelight Fund.

A Note on Diversity
As I said, my boss had joked that the board would all be old rich white men. I was deliberately trying to make a board that was more diverse to represent a plurality of views. My outline was defined by section, but allowing more than one person in each of my buckets. I also know that people at the level I was looking at have many various transferrable skills. You may not just be an operations maven, but you could have skills in marketing and finance. Moving up the ladder should give you context for all those things.
What I found though that looking for both certain sets of qualifications and desired skills and diversity in terms of race and gender is incredibly hard to do. There have been sorting at every level where for whatever large systemic reason that is outside the scope of this paper that leaves women and minorities behind. I ended up with a board that is comprised of eight white people with a Hispanic and an Arab. Gender-wise it is a little more balanced, with four women and six men. Even I am not pleased with that result, since it is reflective of my own biases but also as society’s as a whole.


 
References

“About US” (2015). Leo Burnett. Retrieved from http://www.leoburnett.us/chicago/about-us/
Drucker, P. (1990). Managing the Nonprofit Organization. New York: Harper Collins
“Martha Lavey” (2015) Steppenwolf. Retrieved From https://www.steppenwolf.org/ensemble/members/details.aspx?id=9
“Leslie’s History” (2015) 500 Clowns.  Retrieved from http://500clown.com/leslies-history/
“People” (2015) ORBA.. Retrieved from http://www.orba.com/about-us/people/danielle-m-winkle
“Leslie Buxbaum Danzig” (2015) Linkedin. Retrieved from https://www.linkedin.com/pub/leslie-buxbaum-danzig/6/105/287
“Justin Massa” (2015) Linkedin. Retrieved from https://www.linkedin.com/in/justinmassa
Kiesling, L. (2015). “Bio”. Retrieved From http://www.lynnekiesling.com/
Renz, D .(2010). "Leadership, Governance, and the Work of the Board". The Jossey-Bass Handbook of Nonprofit Leadership and Management, (2010), 3rd Edition. San Francisco, CA: Wiley.  125-156.
“Rick Stoddard” (2015) Linkedin. Retrieved from https://www.linkedin.com/pub/rich-stoddart/1/548/255
 “Robert Falls” (n.d.) Wikipedia. Retrieved from https://en.wikipedia.org/wiki/Robert_Falls
 “Teaching and Training” (2015) 500 Clowns. Retrieved From http://500clown.com/training/
 “Tony Parasidia” (2015) Boeing. Retrieved from http://www.boeing.com/company/bios/tony-parasida.page

Wednesday, October 14, 2015

Volunteering at the Center of the Organization

The main take-away for centering volunteering is that for a volunteer program to work, they volunteers have to be integrated into the agency and the agency needs to build a relationship with the volunteers. One way of looking at is is that the volunteer is not tangential to the agency, but serves a key part of the mission - unpaid team members instead of just volunteers, even those coming to help bigger events.

As part of having the institutional commitment is having someone who a key component of their job is to coordinate volunteers. As part of my research, I worked through our organization’s process of what it takes to volunteer, and there were a lot of frictions. I had to talk to several people, and then it was delayed because someone was on vacation. It was very frustrating, and I bet part of the volunteer experience at a lot of organizations. Every point of friction made volunteering more difficult, and I was someone who wanted to go through the training and knew who to talk to. Our organization does not have that easy flow that would lower the bars.

Other things that volunteers crave include meaningful work and feedback. Again, just because they are unpaid is not a reason to leave them unsupervised or taken for granted.

I contrasted this with a good volunteer experience I had. I was unemployed for a while after the financial crisis, and I ended up trying to look for volunteer gigs to help my resume and keep me from going stir crazy. Several organizations were like CSS, where limited resources and lack of institutional commitment made me feel unwelcome. An organization that made me feel welcome was Open Books, a literacy advocacy group located at the time north of the river. They had someone who was the facilitator and made my volunteering easy and eliminated frictions in my service. That made me feel like a valued part of the organization.

There are a lot of barriers to getting to this point though. The main issue is the institutional commitment, There needs to be a person, or at least a very defined set of processes for recruitment and intake. We currently don’t have any. When I was doing the research, I found out that we have few volunteers is because of our contracts with the state. Governmental bodies stipulate that the people doing the service have to be compensated, and that is the bulk of our mission-oriented work We do have some programs that are not billed to state contracts that rely on volunteers. My wife is a volunteer at such a program. In this program, our participants get work experience while working at the Play Zoo at Brookfield Zoo. There is one individual at a time doing the program, and it runs 10 weeks during the weekends with the participant working both weekend days. We often have the participants ready to go, but the issue has been for several years in finding the person who will volunteer to work alone with the participant, finding them, vetting them, and training them. Because the volunteer experience is not central to our mission, this process takes much longer than it should. I would like to see more community involvement with our participants, but I have not had the vision on how that would work in practice with our current contractual status. Compared this to Open Books where the volunteer is focused in because so much of the labor of the organization was done by volunteers. It wouldn’t happen if it weren’t.

Tuesday, October 13, 2015

Reich is not a Red, But an Optimist: On Saving Capitalism for the Many, Not the Few

First thing first, Robert Reich isn’t a red communist. The title of the book is “Saving Capitalism,” to get that point across. But there is further proof. There are multiple places where he defends Reagan’s firing of the air traffic controllers. He makes of point of saying in an aside that the strikers had no right to strike (129), but I would say that everyone has a right to withhold their labor in an action of collective will. It’s a weird aside and a debatable point, but just one of several places where Rob and I diverge. Another place is where he unquestionably praises large foundations like the Gates foundation (146), without noting that the political pushes in places such as school reform are part of the problem.

I mention all of this because for the most part, the book as a whole reads like a very learned critique of the capitalistic system as it exists in America today. A note I wrote myself is that Rob and I have some of the very same critiques, so it was treading familiar ground. The issue between us is if the capitalism that he wants to save is saveable. For the most part he holds up the economy roughly during the Bretton Woods system as one that we want to return to. I am doubtful that we can retur to that since we have moved more towards an information econimy than the industrial one we had back then. Reich acknowledged this, with a chapter later that looks at what can happen when the robots come and take all our jobs.

What I really like about this book is the framing that Reich uses. He emphasizes that the market is not free, so there is no real fight between the government and the free market, but that the free market is created by rules set by the government. There is no market without the rules, and the state makes the rules. Like I said, there is a lot of parallel between Reich and the Reds, but ultimately the question is if capitalism is saveable or if it is even worth it. The history he covers shows the swing between greater and lesser equality and more and less power for the people and the elites. The history is one of movements from the trust busting progressives to the new deal to the great society to what we have now with a  multiplicity of angry groups but little action. Reich sets a clarion call heeded by both the supporters of Trump and Sanders, keying into a populist anger, but even if successful I am not optimistic that in my lifetime we wouldn’t need new books that were sequels to the book - Still Saving Capitalism for the Many - because it is a great cycle.

Ultimately, he comes down on the answer that a basic income would be the best way to soften the blow to capitalism as it really exists. It sounds like a nice reform that would free up people from the worst excesses of capitalism, but it is just that - a reform. I don’t know if even the ambitious plan that he outlines in his prescriptive chapters is half implementable politically because they involve so much reform in the face of concentrated power and the people's power is diffuse and unfocused. That means that for the time being we will keep snipping at the edges. When it comes down to it, Reich is just so much more optimistic than I am.

A MIrror to Society: Megan Erickson's Class War

The mashup with Jacobin and Verso has been a continued parade of fresh new voices on the left, and Class War by Megan Erickson is another fine entry in the series.


What starts as a specific indictment of the current mania for privatization of the child through their means of education builds towards a critique of the patriarchy becomes at the end a critique of security as a whole - during the raising of our children into a mirror of the society we are, but also the society that we one day can be.


The only critique is that there are places where Erickson repeats herself, including information that she previously addressed without calling back to the fact that it was mentioned before. One example is the three times at least that she mentions New York’s Mayor Bloomberg calling for halving the teacher population. It is as if the sections were assembled separately and were later combined as a book. This is noticeable in the series in other books, even the apart from the one that is deliberately an anthology.

In spite of that drawback, the book is eminently readable. One thing that I love that is against some current trends is that it is footnoted and not end-noted, so that you can just look down at the references.

The Summit Bretton Woods, 1944 by Ed Conway: A Review

For whatever reason, I have not been very into the sausage making of monetary history. I am big on economics and following the current debates, especially in macro, but I have never read anything about the Bretton Woods conference. I have read a book that ends up with a very similar premise to this book, Keynes Versus Hayek, but the conference is just a footnote since it came near the end of Keynes’s life and it was tangential to that author’s purpose of playing up the continued importance of F.A. Von Hayek.


I say that that other book is similar as what this book boils down to is at its core a debate or jousting match of sorts between Keynes and his American counterpart Harry White as they hashed out the agreement that would carry the name of the area the hotel was in, and which was the global monetary policy for 25 years there when a lot was right with the world if you were a white male American. The framing of the two men at the center make the book a compelling read, if even the real action of the conference doesn’t start until about page 200. The prelude introduces the men and introduces the reader to global monetary history up to the point of the conference.


The only thing that centering the narrative on the participants and not the matters at hand do is perhaps obscure what was at stake at the conference. There is a lot of ink spilled over the fight that different countries would have to contribute to the Bretton Woods institutions (The IMF and the World Bank,) but if Conway really pulled back to examine it, my mind elided the reading of that section.   Instead we get a whole chapter and more detailing the possibilities that White was a Soviet spy of some sort.


Once the conference is over, there is an extended bit on the Bretton Woods system and its abandonment with the closing of the gold window and free-floating currencies, something that is more recent and more in my wheelhouse. There was only one troubling bit for me, right near the very end where the author is talking about the balance of payments and the resulting debt where he mentioned that China holds a third of the outstanding debt (403). The fact is that foreign holdings of US debt are only about half of the outstanding debt, and China only holds about a third of that. Japan also holds a similar proportion. This is not to catch the author out in a ah-a moment, but errors of fact  or lack of specificity like that bring into question the details covered that I don’t know the numbers on. Overall though, it remains an interesting book about a glossed over summit that should receive more attention.

I received a complimentary copy of this book for review from the publishers.