Creating Social Value Blog / Social Innovation

Notes from the Case Files: Everyone Has to Worry About the Money

By Jesseca P. Timmons, a case writer in Entrepreneurial Studies and Social Entrepreneurship for The Lewis Institute at Babson College.

Every entrepreneur tells a powerful story. In case interviews, they often describe concepts and changes they put in place which ended up completely transforming their business, or even their industry. When we interviewed Sy Friedland, former CEO of Boston’s Jewish Family and Children’s Services (JFCS), it was the concept that in any organization, no one has the luxury of not thinking about where their salary comes from.

The JFCS case was about the leadership transition when Sy decided to step down after 17 years as CEO. Sy rightly anticipated that his decision to step down had the potential to paralyze the agency’s fundraising ability, but the way he and the board handled the transition did not go quite as anticipated (as described in the Babson case study “Sy Friedland and JFCS.”) What we learned about Sy’s phenomenal leadership, however, was a case in itself. His successor, Rimma Zelfand, said of Sy: “He is like a brand. The way he does things, his leadership—you should be able to just buy it and give some of it to everybody!”

When Sy came to JFCS in 1994, the agency was running hundreds of programs ranging from suicide prevention to care for the elderly, and the staff was comprised of hundreds of dedicated mental health professionals. When Sy took the helm at JFCS, the agency’s board—in light of recent massive change in the funding model from Combined Jewish Philanthropies—charged him with the task of making the agency financially self-sufficient.

Sy asked the staff to start thinking, for the first time, about where their paychecks actually came from: were their services and programs generating enough revenue to break even, or create profit? Could federal grants or philanthropy close the gaps? Sy recalled:

When I first came, there was this attitude of: what difference does it make if we lose money? We’ll just ask the board for more money! So I said, well, we are going to cost-center everything. Everyone is going to make a budget, and you are actually accountable for your budget. It was really unheard for that time….there was this belief that being successful financially was mutually exclusive with delivering good services.

As Sy put this concept into place, many staff members protested, complaining that worrying about the finances was just for “bean counters.” Sy tried to explain his rationale to his staff:

One of the mottoes that we had at some point–which again, is I think sort of radical for a non profit–is “You eat what you kill. That if you make more money, you get to keep more money, and you get to grow your program!

Sy advocated for a balance of programs for each staff worker: while some programs would always lose money, others could bring in enough revenue to support the ones that would never profit or break even. Most staffers eventually came around to the idea of financial accountability, but many departed the agency.

Within a few years, Sy had brought all the remaining staff around to the new way of thinking—which, twenty years later, is the norm for non profit organizations. Next month, I’ll write about Sy’s unusual approach to finding his successor at JFCS.