For-profit Businesses with Nonprofit Ideals: An Experiment that Works at RHD

Abstract

Resources for Human Development was created as an experiment nearly 40 years ago, and by any measure this unique and innovative experiment has worked marvelously. All nonprofits are by definition mission-driven to some degree, but the idea behind RHD was, to quote board chairperson Bertram Wolfson, “to create an organization that from the beginning is based upon ideals.” RHD is a values-driven corporation that strives foremost to create healthy workplace communities. As RHD’s CEO and founder, I believed such an enterprise could pursue diverse paths, better serve people in need and also be financially viable.

Since 1970, RHD has grown from a single property in Philadelphia with a $50,000 grant to a human services organization to an organization supporting more than 160 locally managed programs in 13 states, with revenues of nearly $180 million. Today, Resources for Human Development is one of the largest and most successful nonprofits in the Northeast.

And now it’s time for the next experiment. Can nonprofit ideals and practices apply to for-profit ventures? Can these “crossover” businesses – entrepreneurs with a social agenda – succeed?

At RHD, the answer is an unequivocal “yes.”

Resources for Human Development fully embraced the for-profit crossover when it created Murex Corporation in 1998. Murex is a social entrepreneurship program, a group of investment funds providing capital to small businesses in the Mid-Atlantic. With more than $20 million under management, Murex invests in strong companies that share upside with employees. Murex’s industry targets include both technology companies that are needed to grow the regional economy and manufacturing and service companies that can provide quality jobs for low- to moderate-income people. Murex invests in new businesses only if they are likely to achieve social as well as financial goals.

Murex management includes professionals with extensive investment and operations experience and it is governed by a Board comprised of some of the region's outstanding investors and entrepreneurs.

Out of Murex have blossomed success stories including the SQA Pharmacy, Service Works, Computer Systems and Solutions and Brothers’ Keepers (a program that provides employment to marginalized populations including ex-offenders and adjudicated youth). Each year RHD launches as many as three new crossover businesses – for-profit enterprises with social agendas.

To be sure, this practice is not RHD’s alone. Resources for Human Development is proud to be a member of the Social Venture Network, and one of many organizations seeking the “double bottom line” that balances profit-making with a social agenda. The difference at RHD is that everything springs from the values-driven approach and innovative thinking of the nonprofit organization.

Take, for example, Equal Dollars Community Currency, a community currency RHD founded in 1996. Equal Dollars is a non-interest bearing currency that promotes the exchange of goods, services and labor through a membership network. Businesses that accept the currency build stronger relationships and a greater affinity within the community.

This year, RHD awarded its employees annual bonuses paid partially in Equal Dollars. And in July Equal Dollars issued an interest-free loan to the SHARE food program for the purpose of hiring a new employee. While the United States has a long history of alternative or community currencies used in conjunction with the US dollar, the loan is believed to be the first of its kind in the nation’s history.

I founded the One Percent Solution Club at RHD in 2001. I place 1 percent of my CEO salary into a pool to which employees can contribute to and from which they draw. RHD is a human services nonprofit that works to help society’s most vulnerable citizens, but it is still a corporation that pays some people more than others. After quite a bit of conversation about some of the lower salaries RHD is able to pay, and the tensions between fellow workers as a result of large differences in pay, the One Percent Solution evolved.