01 Dec 2010

The Transformers

An HBS professor and Bain’s worldwide managing director teamed up to show nonprofits and foundations how to bridge the gap between good intentions and real, measurable impact.
Re: Susan Ditkoff (MBA 2001); John Whitehead (MBA 1947)
by Roger Thompson


A decade ago, Jeff Bradach (PhDOB ’92) and Tom Tierney (MBA ’80) cofounded a risky Boston-based venture that would measure success, in part, by how much it gave away. If that seems counterintuitive at best and downright crazy at worst, think again. The Bridgespan Group, the consultancy they created, has turned the standard business model on its head. While consultants usually consider their intellectual property as good as money in the bank, Bridgespan has shared its reports, case studies, and other content freely in the interest of promoting knowledge in the social sector.

When your clients are nonprofits and foundations, Bradach and Tierney reasoned, the true measure of success isn’t an entry on a balance sheet. It’s social impact. And the way to magnify that impact is to give away valuable knowledge to anyone who can use it.

Bridgespan is unique in another equally important way. It is a pioneer in the application of data-driven strategy and consulting services to enhance the effectiveness of social sector organizations. That may sound like standard practice today, but ten years ago a lot of nonprofit leaders were deeply suspicious of “suits” showing up with advice lifted wholesale from the for-profit arena. They had tried that before, and it didn’t work. Bradach and Tierney had a fresh approach. “The core idea was to take the best thinking of the for-profit sector and customize it in ways that would actually make it useful for nonprofits,” recalls Bradach.

“We really were in uncharted territory and learning as much as we were teaching,” Tierney adds.

Like its clients, Bridgespan is a nonprofit, although from the beginning it has been closely affiliated and supported by Bain & Company, where Tierney was worldwide managing director before leaving in 2000 to cofound Bridgespan. Over the years, Bain’s support has been instrumental in Bridgespan’s success, says Tierney. Many of its consultants have joined Bridgespan as temporary externs, permanent staff, and board members. Of the current staff of 170, spread over offices in Boston, New York, and San Francisco, 22 arrived from Bain.

Bridgespan also maintains close ties to HBS. Bradach relinquished his associate professor post at the School to launch Bridgespan. Over the years, the firm has assisted HBS professors in writing several social enterprise cases, and two have been written about Bridgespan itself. For his part, Tierney is chair of the HBS Social Enterprise Initiative’s advisory board, having succeeded founding chairman John Whitehead (MBA ’47) two years ago. (Under Dean John McArthur, the initiative was launched in 1993 with initial support from Whitehead.) The links to HBS run in both directions. Today, 11 of Bridgespan’s 27 partners have degrees from HBS.

Good Intentions Are Not the Same as Impact

Like other successful entrepreneurs, Bradach and Tierney identified a problem in need of a solution. A booming economy during the 1990s, culminating in dot-com mania, generated a tremendous amount of new wealth that in turn ratcheted up the flow of charitable contributions. From 1990 to 2000, U.S. charitable giving nearly doubled to approximately $275 billion annually. But the Golden Age of Philanthropy, as some began to call it, risked spending much of that money unproductively. Of the nation’s more than 1.2 million nonprofits, most operated on shoestring budgets. Donors largely based their decisions to give on good intentions and a sense of loyalty to a local organization. As for the foundations that distributed billions to nonprofits, they rarely held their beneficiaries accountable for results.

Just as result-driven thinking entered the business world decades ago, giving rise to a multibillion-dollar consulting industry, cutting-edge thinkers in the 1990s began to ask why a similar approach couldn’t be applied to the social sector. The conversation took root in places like HBS’s Social Enterprise Initiative; Bain; the Edna McConnell Clark Foundation, a pioneer in high-impact philanthropy; and venture philanthropies New Profit and NewSchools Venture Fund.

Harvard Business Review also served as a springboard for new ideas. In the March–April 1997 issue, MBA Class of 1957 Professor of Management Practice Allen Grossman cowrote an article that introduced the concept of “venture philanthropy.”

Two years after Grossman’s article, Bishop William Lawrence University Professor Michael Porter coauthored a groundbreaking November–December 1999 article titled “Philanthropy’s New Agenda: Creating Value.” The authors made the case that foundations devoted too little attention to thinking strategically about how to create social impact.

Against this backdrop of intellectual and social ferment, Bradach and Tierney hatched their plan for Bridgespan. They came to the task well prepared. While at Bain, Tierney had spent years serving on nonprofit boards and participating in pro bono consulting projects. That experience led him to assign several Bain teams to analyze the viability of setting up a nonprofit consultancy. The need quickly became evident. Bain research turned up “some 3,000 solo practitioners who offered consulting services to nonprofits and a number of small boutique firms,” says Tierney. But nothing of the scope and scale of what he envisioned.

Along the way, Tierney enlisted Bradach, a former Bain consultant then teaching at HBS, as an adviser. “I’ve always lived on the boundary between the social sector and the business world,” says Bradach, so Tierney’s idea had great appeal. Together, they interviewed more than fifty thought leaders in the social sector to gain their insights. What emerged was a shared conviction that by bridging the gap between business and nonprofits, they could create significant social change.

By late December 1999, with Bain and foundation support lined up, Tierney and Bradach faced a final hurdle, writing a business plan. “There was no analysis that could have been done that we hadn’t done,” recalls Tierney. “But it’s one thing to help somebody else write a business plan. It is entirely different when your name is on the cover.”

Tierney recalls a fateful day at home during the Christmas holidays when Bradach came over to finish the final plan. Hours on, after completing their task, Tierney recalls suddenly seeing themselves in the climactic scene in Butch Cassidy and the Sundance Kid. That’s when the desperate duo, trapped at the edge of a cliff, cast knowing glances and jumped. “There was that feeling that submitting the business plan was like jumping off a cliff,” says Tierney. “We couldn’t say after that, ‘Oh, we changed our minds.’”

A Targeted Approach

From the beginning, Bridgespan has focused on a special set of clients. “We aimed to serve disadvantaged populations and the organizations that serve those populations,” says Bradach. Adds Tierney: “Rather than working with big institutions, such as universities and hospitals, we wanted to serve organizations that didn’t have access to wealthy donors and that didn’t have big bricks-and-mortar institutions.” That approach has led Bridgespan to organizations like Harlem Children’s Zone (HCZ) and Youth Villages.

The HCZ started modestly in the early 1990s with the idea of providing a range of support services to address the problems of poor families living in a single block of New York City. As one of Bridgespan’s early clients, HCZ needed help with developing a plan for long-term growth. The plan that emerged redefined HCZ’s mission and mix of programs, created practices to carefully evaluate and track results, and defined a new organizational structure needed to support program expansion. Under the leadership of president and CEO Geoffrey Canada, HCZ has grown to provide services to more than 8,000 children and 6,000 adults living in nearly a 100-block area.

Youth Villages, founded in 1986 in Memphis, Tennessee, serves emotionally and behaviorally troubled children and their families and is recognized as a national leader in delivering effective, low-cost children’s mental health ser-vices. In 2004, Youth Villages sought Bridgespan’s help in developing a strategic growth plan that charted expansion into six states, called for building a business development unit, and introduced new approaches to local staffing and contracting. Today, Youth Villages serves more than 15,000 children in ten states and the District of Columbia.

When they came to Bridgespan, HCZ and Youth Villages both ran successful programs that faced difficult organizational and strategy challenges impeding their growth. This is the sweet spot where Bridgespan adds value. “It’s important to distinguish between a program that works and an organization that can scale,” says Bradach. Bridgespan helps successful nonprofits build the strategy and organizational strength to reach their full potential for scaling their impact.

“Harlem Children’s Zone and Youth Villages are the kinds of clients that are at the heart of what Bridgespan is all about,” says Tierney. “We are very small relative to demand, so we are careful on the front end who we work with because we want to pick those spots where we can create the most social value. We are trying to grow our impact, not our organizational size.”

While roughly two-thirds of its clients are nonprofits, Bridgespan also works with philanthropists and foundations. The Edna McConnell Clark Foundation, for example, was an early Bridgespan client and has been at the forefront of implementing strategies designed to increase the social value of its philanthropic giving. The foundation recently raised a $120 million Growth Capital Aggregation Pilot fund that is investing in only three social sector organizations, including Youth Villages.

The Decade Ahead

Bridgespan today is far different from the organization laid out in the original business plan. Drawing heavily on its Bain DNA, it started out as a strategy consulting firm. “But we discovered quickly that most nonprofit organizations need organizational assistance as well as strategic assistance,” explains Tierney. Adding organizational consulting led to an understanding of the challenges nonprofits faced in recruiting senior-level leaders. “Most organizations trying to scale couldn’t find a chief financial officer or a chief operating officer, so we got into executive search,” adds Bradach. To address this need, in 2003 Bridgespan launched Bridgestar, offering a full range of executive search services and an online jobs board.

Growing organizations also wanted Bridgespan’s advice on new funding models, which led to adding consulting services for developing revenue streams. In sum, says Bradach, “You need strategy. You need talent. You need funding. And Bridgespan has evolved to provide an integrated package of those kinds of services.”

Not content with what they have built, the Bridgespan partner group and board have crafted a plan for the next stage of the organization’s evolution. “In the first decade we built the organization; expanded the breadth of its integrated services; and developed the capacity to identify, create, and distribute useful knowledge in the form of articles, speeches, and research projects and books,” says Bradach. Even now, despite the economic turndown, demand for these services remains robust as organizations struggle to do more with less.

“In the second decade, it’s all about what we call 100X. It’s about dramatically scaling our impact without scaling the organization,” he continues. “So if the first decade was direct service and knowledge, the second decade will be about taking that platform and generating 100 times more impact.”

One target of their ambitious plan is philanthropy, and for good reason. Experts in the field project that the wealth transfer to philanthropies over the first half of this century will be ten times the amount recorded during the entire 20th century, says Tierney. With thousands of philanthropies already in existence, and the number growing yearly, Bridgespan doesn’t have, and can’t possibly build, the capacity to directly serve even a significant portion of them. So what to do?

With a $5 million grant from the Bill & Melinda Gates Foundation, Bridgespan has launched a “Great Giving” initiative that will build an online resource center to compile and distribute the best thinking in philanthropy. Bridgespan’s Web site already offers a rich library of cases, working papers, and articles free of charge and attracts more than 1 million visitors a year. Building on that accomplishment, “we are trying to figure out what kind of additional content will really help decision makers,” says Tierney. “We’re not looking for thirty-page research papers. We are certainly going to share individual success stories and explore multimedia formats. So this grant gives philanthropy an enormous boost.”

As part of the initiative, and with the support of Goldman Sachs, Tierney is working on a book with Joel L. Fleishman, faculty chair, Center for Strategic Philanthropy and Civil Society at at Duke University, to guide individual donors and foundation executives. Set for publication next spring, the book draws on a decade of experience and years of research to frame a series of questions that, if rigorously addressed, will guide donors to better results with their philanthropy.

Bridgespan also envisions nurturing peer-to-peer networks for philanthropists to share ideas on how to increase the social results of their endeavors. The idea emerged from a philanthropy conference held at HBS in the fall of 2009 where the participants responded most positively to conversations with like-minded philanthropists rather than formal research presentations. “Creating peer-to-peer touch points is a very important goal,” says Tierney. “We’ll still selectively advise individual philanthropists and foundations, but the 100X part of the initiative goes well beyond traditional consulting.”

Another 100X initiative, with current key funders Omidyar Network and the Packard Foundation, involves ramping up leadership and skills training for nonprofit executives. “With trends in the sector pushing toward larger, more complex organizations focused more on how to deliver results, there’s an increased demand for a different set of management skills,” says Bradach. While the initiative is still a work in progress, the goal is to help leaders through peer-to-peer learning in group settings. “We expect over the next few years to dramatically increase the scale of work we do in this area,” says Bradach.

The 100X plan doesn’t stop there. Bradach and Tierney are working on other avenues to grow Bridgespan’s impact. Curiously, the plan’s grand ambition stands in stark contrast to the uncertainty that accompanied Bridgespan’s launch.

“Ten years ago it was unclear whether we would succeed,” recalls Bradach, “and we have certainly not accomplished anything alone. We have had all manner of helpers and partners along the way.” But their timing was right, and Bridgespan caught the wave of demand for results over good intentions. It’s a wave that shows no sign of cresting.

Social Enterprise graphic

Courtesy HBS Social Enterprise Initiative

Social Enterprise Attracts Broad Student Interest

Bridgespan’s founders readily acknowledge their intellectual debt to the HBS Social Enterprise Initiative, an innovator for the past seventeen years in applying business skills to the challenges of running social sector organizations. From the beginning, Bridgespan’s mission, to help nonprofits and foundations deliver breakthrough results, has been informed and energized by the groundbreaking thinking of the School’s social enterprise faculty.

It is easy to forget today, but the Social Enterprise Initiative was a bold and risky move in 1993, when Professors Kash Rangan and Jim Austin agreed to lead the program. Today, it’s part of the fabric of the School. “We have developed a very rich portfolio of courses, cases, projects, and field studies to engage students,” says Rangan, the Malcolm P. McNair Professor of Marketing. Last year, 535 HBS students enrolled in core social enterprise electives, some 400 joined the Social Enterprise Club, 27 social enterprise teams entered the Social Venture Track of the annual HBS Business Plan Contest, and 94 students pursued a Social Enterprise Summer Fellowship (see chart above). Clearly, the initiative reflects a shift in the Zeitgeist.

Students today are searching for a deeper meaning for business leadership than just creating shareholder value, says Professor of Management Practice Allen Grossman. “It’s hard to think of yourself as a business leader anymore without thinking about the environment, or education, or poverty.” Broad student interest in social enterprise “is part of a much deeper shift in terms of truly educating leaders who can make a difference in the world,” he adds.

Susan Wolf Ditkoff (MBA ’01), a partner at Bridgespan and a member of the HBS Alumni Board, agrees. “The old model of learn, earn, and return was fine for previous generations,” she says. “But for a growing number of people in their 20s and 30s, that model is no longer sufficient.” That explains why an increasing number of HBS students and graduates are eager to apply their leadership and management skills to social sector problems, she adds.

To learn more about the Social Enterprise Initiative, visit www.hbs.edu/socialenterprise/.

Featured Alumni

Featured Alumni

Class of PHDOB 1992
Class of MBA 1980, Section I
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