Diversification is a big topic for every organization, but particularly those in the health and human service market. With such a large proportion of spending coming from government sources and a lot of question about both federal and state policies and budgets, hedging your bets—so to speak—only makes sense.
But there are many flavors of diversification. There are extensions of current services for current customers, like adding medication assisted treatment (MAT) to an existing addiction treatment program. And, there are high-risk diversification strategies—typically new services in a new market. Most of the time, for most organizations, it is the low-risk path that executive teams opt to take.
That’s why the Lena Pope case study is such a rarity. Todd A. Landry, MBA, Ed.D., the Chief Executive Officer of Lena Pope, presented the strategic odyssey of the organization in the session Meeting The Challenge Of New Service Lines, at The 2018 OPEN MINDS Children’s Services Executive Summit. It is unusual for a non-profit health and human service organization to succeed with the “big” diversification strategy, but they did.
Lena Pope started in 1930 as an orphanage, began residential treatment, family counseling, and alternative education in 1980, started foster care in 1987 (ended in 2009), and in 2011, began counseling and substance abuse treatment, and school- and community-based services. In 2008, the executive team of Lena Pope took a big leap in a different direction by opening the Chapel Hill Academy Charter School—a new service in a new market. Chapel Hill Academy provides education and family support to more than 500 students in pre-K to 5th grade. In their model, none of the families pay tuition for charter school, and entrance is lottery based. Mr. Landry explained that Lena Pope works with the state for the amount to cover most of the cost, while all extras that the school includes (such as family wrap-around services) are covered through philanthropy.
Four years later, the executive team opened the Lena Pope Early Learning Center, providing early childhood education to 114 children, ages six weeks to five years (see Diversification, One More Challenge For Child Services- Q&A With Lena Pope’s Todd Landry). Lena Pope’s latest annual report documents $12.7 million in revenue (see Lena Pope Fiscal Year 2016/2017). With recent years growth, the budget has grown to $16 million with a staff of over 240.
Speaking to Lena Pope’s push to launch charter schools, Dr. Landry explained:
The board made the decision to divest completely from residential and go into the front end of prevention efforts. And over 10 years, that’s what we did. When I’m talking about new service lines, one example is the charter school piece. Why did we change? Back in the early 2000s, it was about delving into the research and the belief we could get better outcomes. Externally, the county was moving aggressively to prevention, particularly from the juvenile justice side.
What does the future look like for Lena Pope? In 2016, the board approved an expansion of current campus to include additional K-3rd grade classrooms, and the addition of 6th-8th grades, with planned growth to 830+ students by 2020. To get this up and running, the organization obtained a tax exempt, private placement bond for $6.2 million. Landry noted, “Over the past six years, we’ve built a four months operating reserve, about $4 million. In part, that helped us with the bond, which is locked in at a low 4.026% interest rate.”
For organizations that are looking to take on a high-risk (i.e., new consumers with new services) diversification attempt, Landry suggested heeding the words of Dwight D. Eisenhower—”In preparing for battle I have always found that plans are useless, but planning is indispensable.” When implementing a diversification attempt, it is critical to plan but be willing to adapt based on needs. Remember—what’s important is the ultimate outcome of the plan, not the plan itself.
For more on Lena Pope, check out these resources:
- Fundraising In A Competitive, Social Media-Driven Environment: Strategies For Non-Profit Executives
- Fundraising To Fill The Budget Gap
- The Formula For Sustainability In The Children’s Services Market
- The Changing Children’s Services Market
- Diversification, One More Challenge For Child Services- Q&A With Lena Pope’s Todd Landry
- Winning Proposal: Texas’ Tarrant County Awards Behavioral Management and Support Services Contract to Lena Pope Home, Inc.
- Creating & Growing A Charter School: The Lena Pope Home Case Study
- Charter Schools As A Diversification Option
- Creating, Launching & Growing A Charter School: The Lena Pope Home, Inc. Case Study (Executive Web Briefing Recording)
- Running A Best Practice Digital Marketing Program: Using Online Marketing & Social Media To Your Advantage
For more, join us at The 2018 OPEN MINDS Technology & Innovation Institute on October 23 in Philadelphia for the session: “Mapping Performance To Manage Value: The Clinical Data You Need To Manage The Risk Of Value-Based Reimbursement”, featuring OPEN MINDS Senior Associate Joseph P. Naughton-Travers; Vinfen President & Chief Executive Officer, Bruce L. Bird, Ph.D.; and Project Transition Chief Executive Officer, Luke Crabtree, J.D., MBA.