Systems Practice versus Thinking pt 1

Since January 31 of this year, I have been involved in a course titled Systems Practice but haven’t written about it since February 4.  For myself, there were three objectives in taking this course. One, come up with some useful insights for Jo Foraker's endeavors to create the Last Mile Food Truck as a sustainable system to provide nutritious food to the unsheltered homeless living in camps around Portland, Oregon featured in the blog series Modeling the Last Mile to Feed the Homeless parts 1 to 6.  Next, in doing so, to demonstrate the potential of systems thinking to assist in coming up with practical solutions. Third, to do so through real world interactions with nine other individuals, though still online, group process. It has to be admitted that there have been some challenges with all three. 

My involvement in the Last Mile Food Truck concept has been in existence through two other Philanthropy University / Acumen courses, Financial Modeling and Social Impact. Those courses demonstrated that what the Last Mile Food Truck project was attempting to accomplish, finding effective means of addressing homelessness, was far more complex than might first be assumed. 

The course seeks to answer three questions beyond the specifics of any particular challenge. One, how does the environment within which you work operate as a complex, dynamic system? The course helped with this by taking a distinct approach to systems thinking. Two, how will your strategy engage the system in order to have a highly leveraged impact? The course endeavored to assist here as well though that depends on the level of achieved leverage. Three, how will you test your assumptions and hypotheses so you can learn and adapt effectively was considered though not really addressed at least not by our efforts.

Something first needs to be established before proceeding further. I will have to declare here that systems practice both significantly informed the approach I contributed over time and induced me to substantially change it in ways during the course that I would not have if I had worked solely on my own. 

Second, this analysis will be abstract, looking at meta-issues related to homelessness. The decision to make the tangible effort to feed the unsheltered homeless or any act of social contribution is not based on how viable or sustainable a system to do so is. It is based on moral conviction which can be a driving force even under conditions of impact which are exceedingly limited or even diminishing. Any inability to establish a viable, sustainable system does not lessen the worthiness of the effort. There are, however, realities that have to be met to establish such systems. 

One suggested insight that arose from past explorations is that the human etiology of homelessness, especially chronic homelessness, could be defined as community-lessness, not a lack of physical shelter, as bad as that obviously is but the lack of truly viable community that arises from being in that situation. Qualitatively, in terms of psychological well-being, this is a far more detrimental situation compared to someone who is poor but still has a home and is still part of a community. Even if a community is destitute, it often has systems in place to help its members cope. Social support systems in this country may be created for the very low income but more for those who still fit within society’s framework. The homeless for the greater part do not, so programs need to be specially designed for them. The homeless instead need to adapt to the system as it exists, the system does not adapt to them and even upon adapting, the homeless still remain outside the system which is often more interested in control than it is in true integration.

The most viable long-term social community-based solution to homelessness may be the creation and provision of permanent housing, as the aforementioned study coming out of Calhoun County, Michigan indicated That though will take an extended amount of time and the homeless, in the meantime, need food for sustenance and nutrition to maintain health. Our current food systems, however, are not well designed to assist the homeless, especially those who are not in shelters.

This post and the next are meant to look more specifically at the process of systems practice and how it relates to systems thinking because I don't believe they are quite the same thing. It took awhile though to realize that the differences were due to systems practice's attempt to focus on group interactions in coming up with solutions. Despite having finally come in line with the systems practice way, there are still a few things I would like to see be done differently. 

I had some background in systems thinking but came with my cup perhaps too full. In some ways, I had been working backward until about more than halfway before coming in alignment with the course and with the team. I had a personal problem with the advertised use of Kumu mapping not occurring until after the third week. Personal, because I started using Kumu just a little before the beginning of the course which put me out of alignment with the course or perhaps more accurately with the others on the team.

Many people taking the course were more likely familiar with the usual linear reductionist approach to understanding which means breaking things up into smaller pieces for ostensibly better control. The challenge then is developing a means of helping them to cross over to a more holistic, systems thinking or in this case a systems practice perspective through a group process. I don’t believe, however, that there was a strong enough foundation in systems thinking provided at the beginning of the course and introducing Kumu at the very start could have helped with that.

Systems Practice introduced terms such as factors, forces, enablers, inhibitors, and themes as parts of their approach to systems thinking.  Unfortunately, these operational terms were not defined either adequately or precisely enough, at least in my view, often being exchanged with other terms generating some confusion and necessitating questions raised by one of our teammates. Those questions provided a substantial amount of information for what is written in this critique. The terms are all intended to result in the end in the creation of feedback loops (Causal Loop Diagrams) familiar to systems thinking but prior to that Systems Practice has a few unique steps of its own. It wasn't clear until later in the course but thanks to the questions asked by one of our teammates and others, we can start with defining what is a factor?

In Systems Practice a factor, according to Rob Ricigliano the course instructor, is "something, a person, an environmental condition, an attitude, an institution, a phenomenon, etc., that makes other things happen or has agency." What in terms of map display Kumu calls elements. That one thing or a factor changing another thing could also be thought of as a driver, which according to the course could be categorized as either enabling or inhibiting within the system under question.

The first step then in the Systems Practice mapping process is brainstorming as many factors as possible related to the system under review, based on a previously established mission focus through what the course calls the Guiding Star, Near Star and Framing Question created prior by the group. Skipping this earlier part, for now, this stage then is only a collection of factors at this point in the mapping, presumed to be part of a system but with no real understanding as of yet of the relationships, like cutting up a picture for pieces of a puzzle. To emphasize the point, a collection is not a system, it requires dynamic or purposeful assembly.

The course then has participants collect factors or drivers together into separate clusters as either enablers or inhibitors. It is necessary now to stop and insert the System Practice concepts of forces and themes. These served supposedly as an intertwining path or steps that resulted in confusion for me as to how they all relate to the overall Systems Practice process. 

Taking a step back with the benefit of some hindsight, they are part of the dynamic assembly mentioned above occurring after factor collection. We spoke before of factors being drivers as either enablers or inhibitors. Enablers and inhibitors can also be thought of as forces. In the process of separating enabling forces from inhibiting forces, it is also possible to subsequently combine such forces into various themes or collections of common ideas. 

So a collection of related enablers should become a cluster of enablers or an enabling theme and the same is done then with inhibitors. Similar, it would seem, to the practice of separating outside, edge puzzle pieces from inside pieces or sky pieces from the ground ones. 

It is presumed to be less confusing for a group if the clusters are made up of either all enablers or all inhibitors but it can result in getting clusters with the same names on both the inhibitor side and the enabler side such as enabling factors that drive the cost of living down alongside inhibitors that drive that same cost of living up. It will then end up being suggested doing two different types of loops based on a particular thematic cluster, one on the dynamics that drive the cost of living down and then one on the dynamics that drive the cost of living up. 

Another reason for separating forces into two groups of enablers and inhibitors is to ensure that the group is putting sufficient attention not only on those that make things worse but also on those factors that make things better before merging them into loops. The tendency had been for groups doing the mapping to focus on what was not working, what was making things worse, giving too little attention to the things that stabilized the system or could even make things better. It is hoped that focusing on enablers and inhibitors separately gets groups to put significant attention looking for those "forces" or phenomena that aren't thought about in the first place, particularly on the enabler side of the equation. I believe that this also should have been made more explicit earlier in the course. 

So the group has various collections of factors organized into different themes bringing up the image of a puzzle party, though a closer analogy would be if instead of puzzle pieces each person brought their own photos of their particular perspective to create one common collage. Now it is a matter of putting them all together.

The Story behind the Systems Practice Challenge

The last post started the Acumen sponsored Systemic Practice course connecting it back to the posts on the previously completed Financial Modeling for the Social Sector course. In these posts, systems thinking will take the lead.

The final post in the Financial Modeling series ended with developing an abstract financial model for the very real purpose of feeding the homeless. We reached a particularly abstract juncture as the focus was primarily on a still unrealized future.  

This post will take another look back, again quoting the systems thinking mantra for this blog, “Essentially, all models are wrong, but some are useful.” or a longer version “Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful.” 

One reason models are wrong is they often don’t reflect continually changing on the ground or granular reality. Things in real life change, an RV that was to be donated for food delivery was used instead as a residence for two pregnant homeless women. Models are also wrong because they never fully reflect the entire set of systems involved. One system not examined until the end was the political one, or political reality. 

In January 2016, the mayor of Portland established a“safe sleeping” policy meaning that homeless, sleeping in a doorway, would not be woken up by authorities to be moved to another location. This has since been rescinded. The mayor had major sweeps done around town with 72 hours notice, expecting everyone to pack up and move on but without giving options where to go and sometimes taking everything they had. The supporting advocacy groups were extremely busy trying to find housing for hundreds of people or at least some place for them to pitch their tents and be safe.

Practical on the street, as well as the economic and empirical realities of the Financial Modeling course put a damper on unrealizable idealism and helped to add a focused, disciplined financial perspective. A general goal of systems thinking is to avoid so-called unintended consequences of the invariably bad type. Doing good, true good is not easy. We started though with a model and ended up with, while still wrong, a better model.

Striving towards economic growth and equity, through democratic processes such as participatory budgeting, still requires better economic understanding and a means of budgetary discipline. When Seattle youth voted through participatory budgeting to spend $300,000 out of a $700,000 budget, on programs to address homelessness, how closely was the manner in which the money was spent examined?

The term “Last Mile” used in the title of the project came from the public transportation sector concept that it is easier to get a thousand people from point A (Station) to point B  (Station) and back again than it is to get that same thousand people from point B to point B1, B2, B3, and so on for each individual destination. People may be willing to ride a bullet train or light rail but don’t because they can’t cover that last mile to their destination. 

Similarly, the unsheltered homeless often cannot cover the last mile to get to the food so the intention is to cover it for them but the difficulty of doing so is comparable to that of the public transportation challenge because of multiple changing sources and targets, a version of the Traveling Salesman Problem.  Perhaps invoking the use of apps for finding the most efficient routes. 

Creating a sustainable and scalable enterprise to feed unsheltered homeless proved itself to be embroiled in a number of complex operational systems, food distribution, transportation, and others. Multiple social systems were also operating, though often not meshing together well, a system (weak social community) of homelessness within the community, a system of economics creating homelessness (perhaps as an unintended consequence but nonetheless), an institutional system to address different detrimental aspects of homelessness, and systems of existence among the homeless (social complex) in interacting with those community and institutional systems. 

The specific challenge was delivering food to those that were not only without means of sustainable nutrition but also without minimally decent, proper shelter of any type. There is an institutional system for food provision for those less fortunate, a primary source of which is systemic food wastage, a problem in its own right. One early idea was to develop apps like Cerplus, OkCupid, Leftover Swap and Spoiler Alert, which was built by MIT graduate students, to address food distribution challenges.

“Food waste happens not because businesses intend to waste the food but because they’re often disconnected from one another and lack a real-time solution,” says Ricky Ashenfelter, co-founder, and CEO of Spoiler Alert.

"It takes so much planning," said Al Brislain, CEO of Feeding America San Diego. "All the routes, all the-- you know, making sure the temperature is right, making sure that the food is still nutritious and fresh.”

Tax legislation in 2016 allowed business to benefit by getting tax deductions for donating food thereby hopefully preventing food waste. Inefficient solutions do little though to address the underlying causes of massive food wastage in the food and service industry which is said to happen because of consumer demand for price competition, depending upon massive overproduction to remain profitable.  Most programs do nothing to address this. Instead, they help to maintain overproduction through tax incentives created specifically to make surplus supermarkets viable. This food does not, however, readily reach the homeless.

Although the community food distribution system is available to the homeless, it is not necessarily accessible to them. Local pantries might bend over backward for a person with no address. 

“But that homeless person has to figure out a way to get the groceries back to camp or shelter and the street person is limited to what he can carry on a daily basis. It is very limited what kind of healthy ‘walking food’ the pantries carry”. - Jo

Besides a lack of choices, there is an inability to keep food fresh once it is distributed because it is given in quantities too large to be used in a timely enough manner. 

“They don't have much choice in food so they end up with five loaves of bread that go bad before they can use it.” - Jo

Overall, the most financially effective and sustainable remedy to address homelessness is providing homes rather than continually providing services which while necessary in the short run do not make a significant enough of an impact to bring about the needed change in the long run. The last post cited the study coming out of Calhoun County, Michigan, 

“The most ironic obstacle to implementing the fundamental solution was the community’s very success in providing temporary shelters and supports.”

Salt Lake City also started a project to provide housing for every homeless person.

However, while building homes may be one of the best remedies for homelessness, lack of a home is not, it was proposed, the primary etiology of the detrimental and acute afflictions of homelessness. It is a lack of community, separation from deeply structured community or social relationship network that can be defined as civil society. 

Such a social structure can be taken for granted by most of us because we can make decisions to bypass such relationships but remain, even if only subconsciously, confident that they will be available if we need them. Including those community relationships that we forge through our economic transactions. While this does not encompass the whole truth of homelessness and as a model is wrong, it might provide an important insight.

While it is obviously good that a beneficial social effort is sustainable that does not lessen any immediate needs. The question of scaling to assist more people does not make current local efforts to meet such needs unhelpful. The financial model helped to prevent wasting resources on enterprises if unviable and to expand them if viable.

Extending services to help different organizations find people that might be helped further, moving individuals from the streets and camps to supportive, permanent housing options and back into the community was considered. A larger question then was whether this more focused approach would make a long-term difference for only some of the homeless or would a far less focused approach help more people if only temporarily.

Learning to Apply a Systems Practice to the Wicked Problem of Homelessness

This is the beginning of another online course sponsored by Acumen and another course in collaboration with Jo Foraker with whom I worked with on the Modeling the Last Mile to Feed the Homeless series. In that course, the focus was on financial modeling but systems thinking modeling was always included underneath near the surface. Again, only a flavor of the course is going to be provided here and not the course itself. Instead, the focus, as before, will be more on how the course connects with new community paradigms.

This course is more directly on Systems Practice and is being taught by Rob Ricigliano of Omidyar Group’s Systems & Complexity Team. It appears that it will seek a more pragmatic or on-the-ground application of systems thinking than did the previously taken systems thinking certification course. One new aspect will be how to launch a team. This course will also be using the often featured Kumu relational mapping tool. Here is a perspective on Kumu by Rob Ricigliano.

The course focuses on solving what it calls groundhog day, whack-a-mole and opposite day problems, a little imagination will paint a picture. Another more operationally viable term is "wicked problem". The trouble for those trying to communicate this reality to others is that this reality can be confusing, frustrating and messy. The course sees systems thinking as a necessary mindset in addressing this reality by providing clarity and insights into points of leverage within such systems at which the greatest impact with modest force is possible. It makes it possible to enhance an organization’s adaptability to changing environments. Making it more aware of causal ripple effects, those instances of cause and effect which are separate in time and space from the more ostensibly obvious events within our immediate reality. 

Homelessness is seen as a wicked problem, a complex problem involving large scale system inputs and outcomes having very close, personal and detrimental impact on those afflicted by it. It will arguably require then a wide perspective to find viable solutions. 

In particular with the issue of homelessness in which communities have spent a large amount of money on shelters in many large cities yet did not reduce the overall number of people living on the streets within those cities. 

The course explores why. With the homeless shelter question, the suggested answer is “Shelters were never meant to provide a path to sustainable living.” Beyond that, no one program can address all of the underlying challenges facing our communities. They are all interconnected and interwoven. It is a complex perspective on reality as opposed to an imposed complicated top-down perspective. 

One positive example cited by the course and in the past by this blog, is the Calhoun County, Michigan study which used systems thinking to address homelessness. They looked at the “whole system” under which the incentive for funders and providers had been to provide quick fixes, addressing the immediate problem, rather than sustained change. They used systems thinking to determine where they could effectively intervene with higher level approaches such as housing first. This worked even when unemployment in the area was rising.

1. Setting goals
2. Good Systems Analysis
3. Finding Opportunities for Leverage
4. Preparing to Learn and Adapt Effectively

The course considers how to do a systems analysis through a dynamic systems map of key forces affecting the system under study. How to identify opportunities for impact or leverage points within that system to create the desired change. How do we get started on the process of learning and adapting so that if we manage to do that very well in the context of the complex system (meaning constantly shifting) we are working in we are able to adapt?

1. Mindset for how the world works and how to create change.
2. A set of tools and processes as to how to actually design and implement actions for change.

Rob then goes into what they mean by a system or what makes a system, differentiating it from more tangible physical systems such as an automobile or the healthcare system. Complex social systems produce results or consequences such as homelessness or other social ills to use his examples. This type of system is made up of complex forces that affect each other and more importantly for one’s efforts the issue with which you are concerned. For example, the “things” that produce homelessness are likely diverse but not isolated, they are interrelated in a manner that I would deem organic and intrinsic. These relationships between the things or factors contributing to homelessness can interact in unpredictable ways. 

So a system has discrete and diverse components or elements that are interdependent and interact in complex ways that dynamically change over time. This makes predictability more difficult, not impossible but the ability is far more constrained as one needs to constantly reassess one's systems analysis and the time frame for an accurate prediction can be shortened. 

The Omidyar Group’s take on systems thinking consists of three key components. It is a mindset. A way of thinking about how the world works and how to work with that messy world to promote desired outcomes. It is a set of tools to do analysis and develop a strategy. It is a particular set of processes which demands collective intelligence and sense-making resulting in collective action. This requires certain specific processes, such as participatory deliberations and dialogue.

The course recognizes that there are certain problems that are not solvable by directly addressing the apparent symptoms of the problem. With homelessness, it was the notion that we build shelters but that didn't actually solve the problem. It may have gotten certain people off of the streets but they were replaced and increased by more people. It can be necessary to look at the entire system to determine what it is about the system that is producing that and other negative outcomes. The conundrum is that certain acute challenges cannot be ignored until a complete and permanent solution to the chronic problem is found.

The feeding of the unsheltered, isolated homeless (even in homeless camps there is still isolation) is one such challenge. Those that can’t find occupancy in the shelters can also find themselves isolated from the community's food systems.  The direct approach to the problem, getting food and taking it to the camps is already known to be a tremendous logistical challenge. The question is how to create a system, an enterprise that works most effectively and efficiently in the existing larger systems and that can also, hopefully, begin to change that larger system to not only stop whatever activities it is doing to create the problems but to also directly work on the larger system issues to resolve them.

1. The nature of the environment one is working in.
2. The nature of the goal you have set for yourself.
3. One’s ability to implement this type of approach.

Rob then goes into three criteria for determining whether a systems approach should be applied. First is the nature of the environment one is working dynamic and constantly changing? Have supposedly obvious approaches been tried before and failed? Can change be overwhelming, not just for oneself but especially for those one is trying to assist? Even solutions that may work in one case don’t work in another. 

The second is the nature of the goal that one is striving to accomplish. This one is more problematic. Rob speaks of relief efforts to feed a specific group of people for a specific period of time or to house them so that they don’t die of exposure which can be seen as a relatively mechanical process. However, I don't believe the distinction is so apparent or that the Last Mile program truly fits into that configuration. The relationship between doing A to get B is not as deterministic in dealing with the unsheltered homeless as it can be with other forms of relief aid. 

Now it is true that finding ways to permanently house homeless individuals or better to prevent them from becoming homeless in the first place would be a higher point of leverage within the larger system. However, in focusing on the first approach of finding ways to permanently house the homeless, the status of those individuals in terms of health must also be considered and malnutrition and anemia will make helping them far more difficult. How all this will be addressed though will change from place to place. 

The third is what is happening with one’s self. Are you in an enabling environment, the ability, time and resources that allow you to step back and have the means and capability to think through the building of a strategy, say like taking this course then systems thinking is worth investing in. Rob warns, however, that it is not a magic solution. It does not make complex issues simple or worse yet if wrongly interpreted, simplistic. What it can do, from a new community paradigms perspective is make that complexity coherent. 

Modeling the Last Mile to Feed the Homeless part 6

This is the last post in this series examining relevant systems in developing an abstract financial model for the very real purpose of feeding the homeless. We have reached a particularly abstract juncture because our focus now is primarily on an unrealized future.  The difficulty with effectively putting a financial model together, so that it works within the parameters of a particular enterprise, at least on paper, has hopefully been conveyed. Making the actual enterprise a reality is even harder. It is, however, not the only path, good or bad, forward.

A number of times throughout this series the concept of ABCD or Asset Based Community Development has been referred to. Now I do not really know that much about ABCD in-depth having only started to learn so I am only referring to generalities. These would though be intentionally bottom up, community generated approaches. Jo illustrated examples of homeless working with her. In these cases, there is no scaling, simply direct assistance with the resources the community can muster. Faith-based organizations have used an ABCD approach before in addressing homelessness. Even institutions like libraries look to use an ABCD approach to assist their clientele, like the Denver Public Library working with homeless teenagers. 

In the last post, questions arose in determining scenarios for scaling the operational units from 1 to 3 units and perhaps beyond. Is it better to buy short buses or long buses and is it better to use 36 months or 60 months for the term of the financing and in what combination? The decision could add up to $0.80 per meal but could also create greater impact. 

The extended service food bus could help different organizations find people that could be helped further. The goal would be to move individuals from streets or camps to shelters to supportive housing options and back into the community. This would likely require a more Collective Impact effort supported by a backbone organization of which the “Last Mile Mobile Food and (now) Community” program might be a spearhead. Likely, we would need a bigger bus, raising the question whether it is actually possible to design a long bus which could handle both food delivery and additional services. A larger question is whether a more focused approach could make a long-term difference for some of the homeless or would a far less focused approach help more people if only temporarily.

                                                                                                   

This could mean getting as much value into each visit as possible to maximize impact. If more services were donated then it would provide more bang for the buck. One could perhaps supply personal hygiene items or even showers which are seen as very important, the homeless referring to toilet paper as "white gold”. There could also be community health interventions including ABCD approaches to community health through organizations such as the Commonwealth Fund, World Health Innovation Summit and other alternative community health approaches which could be explored and developed.

At the start, we said that all models are wrong but they can be useful. One reason they are wrong is models don’t reflect continually changing on the ground or granular reality. The RV to be donated for food delivery is now in use as a residence for two pregnant homeless women.

Models are also wrong because they never fully reflect the entire set of systems involved. One system we have not examined up to this point is the political one, or perhaps closer to the mark is the political reality. This last January, the mayor of Portland established “safe sleeping” meaning that homeless, sleeping in a doorway, would not be woken up by authorities to move to another location. This has now been rescinded. The mayor is also having major sweeps done around town with 72 hours notice, expecting everyone to pack up and move on but without giving options where to go and sometimes taking everything they have. The supporting advocacy groups are now extremely busy trying to find housing for hundreds of people or at least some place for them to pitch their tents and be safe.

The political force motivating this change in policy is known as Safe & Livable Portland, who assert that the “safe sleep” policy or homeless camps would not solve the problem of homelessness and, “…resulted in violence, unhealthy conditions, and pain and suffering for our most vulnerable residents."  The sincerity of this outlook though might be questioned by some closer to the situation. 

Other cities have taken a different approach. In Seattle, youth voted through participatory budgeting to spend $300,000 out of a $700,000 budget, on programs to address homelessness. This also though may have its own limitations, as to whether the programs being developed will actually effectively impact homelessness? It depends on the overall attitude held by those in power. In Los Angeles, the LAPD ordered officers to show 'compassion and empathy' to homeless people. The institutional system for helping the homeless though can be very bureaucratic.

Using a true community based ABCD approach could make developed systems more resilient, helping to protect it hopefully from entrenched institutional system’s political arbitrariness or overcomplicated bureaucracy.

At least for now, this turn of events has undone any further progress regarding the current efforts. It didn’t stop all efforts, though, just the path they were taking. Jo is currently looking at getting a 1987 Mercedes truck with a little over 14,000 miles on it for food deliveries. In this political environment will it be possible to get the resources to scale the enterprise? Are there other pathways that could be taken?

One idea we had discussed was an expansion of the Church delivery of homemade meals. There is a community food-sharing system out there. Unfortunately, it is currently illegal.

“There are lots of people out there that love to cook. Maybe I need an application that helps people find camps that need food and coordinates delivery.”  - Jo

Jo wondered how the laws affect people who are not selling the meal just delivering it. Another option could be working more closely with the Farmers Markets. 

The issue is that both add to the number of pick up points for food delivery. This is not necessarily an immediate problem as long as one has enough willing volunteers. However, there could be a point at which such a system is not able to respond adequately to the need and a more efficient system needs to be put in place. 

Another idea raised was working in low-income districts trying to get ahead of those who might become homeless. Although the idea had some merit, feeding the homeless for this assignment was seen as already a huge undertaking.

Rents across the board have gotten so high that most minimum wage people can no longer afford to rent. But it is also the people who have good income just too much debt. They get evicted and then can't find anywhere else to rent. - Jo

Another idea was providing the homeless with their own form of community currency which would have a better exchange rate than standard currency.  

The community currency idea is in the vein of the Farmers Markets, though it may not work with all homeless types. There are differences with the Farmers Markets program which seems to be absorbing the economic cost of doing and assumedly has a rationale for taking such an action. My idea was community-based backed by Social Impact Bonds, combining both to make it go further. There would have to be a great deal of community support. The community currency could only be used within the community with specific vendors. Community banks or something similar would also have to be involved. Selected vendors would accept the community currency and be reimbursed from a dedicated fund in standard currency. A Kumu map was created exploring the concept.

Social Impact Bonds also are known as "Pay for Success" have been used in Massachusetts to address the issue of chronic homelessness through the Home & Healthy for Good (HHG) low-threshold housing initiative. HHG has demonstrated that treatment of often traumatic and under-treated health conditions besetting chronically homeless individuals was better after a person gained a basic level of stabilization provided by permanent housing. HHG also demonstrated significant cost savings to the Commonwealth and successfully housed those often considered the hardest to serve. Whether it would be possible to obtain similar type funding or perhaps an extension of such funding is an open question? 

The inclusion of community currency doesn't really change the short term transaction costs but long term, at least potentially, could help tie the homeless back into the community through economic transactions. At some hopeful point in the future, those individuals become members of the community again, although only if they can find adequate housing. A final solution will be able to address challenges of a wicked nature, addressing not only the systemic processes and structures but the mental models associated with the problem as well. Whatever the configuration, it will likely be a model that helps us understand it. 

Modeling the Last Mile to Feed the Homeless part 5

Over the last four posts, we have discussed the challenges of feeding the unsheltered homeless and have devised means of addressing those challenges through a proposed social enterprise.  This social enterprise follows a systematic financial model that is very similar to one that could be used by entrepreneurs in establishing a start-up for-profit business. We can now go deeper into the workings the Financial Model though this will not be an attempt to capture all of the details of the course. For that, I strongly recommend taking the course which being free can be expected to be a good return on investment. 

The external customer or beneficiary for our enterprise is the unsheltered homeless who require a different delivery or business model than those living in shelters or those who are low and very low income but not homeless. 

Among some of the constraints to serving the targeted beneficiaries are how much food can be carried and delivered within a defined distance and period of time-based on the equipment and available personnel. It also needs to be recognized that the homeless still have choices they can or have to make, like any client, which could impact the success of the venture. 

The financial model, according to the course, also represents an internal customer. 

The financial model is the voice of your “internal customer” whose needs need to be met just the same as your external customers. 

It is this “internal customer,” or donors who use the model for decision making, that must be convinced of the project’s financial sustainability and sometimes potential scalability to fund the entirety or substantial portion of a nonprofit enterprise. While there is potentially strong external demand for our proposed enterprise no expectation can be had of the enterprise being grown or even maintained based on a future revenue stream because it does not exist.

However, even if we cannot depend upon a future revenue stream, we will undoubtedly be facing future operational costs. After some experimenting and sticker shock as to the costs of running such an operation, we came up with admittedly rough estimates. We were not preparing for an audit, simply making some sense of the parameters of our enterprise. It was fully recognized that all of the numbers would have to be tested in the real world and adjusted accordingly, perhaps even to the point at which the model would break down.

The costs reflected were for human resources, equipment, leases and operations. Constraints brought on through such costs had us reconsider our transactions per month based on the estimate of what one bus with three people could accomplish based on a set criteria. That criteria could range from quickly passing packages out to those in nearest proximity to endeavoring to make some form of connection to establish relationships for future interventions. The criteria I chose leaned closer to the later.    

I calculated 3 salespersons (with one being supervisor/driver) for each Operational Unit, running scenarios for one, two and three buses. The human personnel costs were based on 2016 Oregon minimum wage plus 25% benefits. A premium for a supervisor for each truck was provided at 10% higher. 

We operationalized the cost of the buses mentioned in the third post by depreciating their cost. We then calculated costs related to running a Home Office. Whether this would be necessary could be a question but for purposes of the course, we went ahead. It might seem to make little sense with just one bus but there could still be a need for a place of operations, e.g., to park the bus when not in use, and for coordination. 

A Territory Manager was set 40% higher than the main workers. We placed the general operating costs under this category. The cost of buses and refrigerators and their depreciation was researched from the web as was the lease for commercial property in Portland, Oregon.  Other costs were based on rough estimates or percentage factors. 

The need for a head office became greater with a greater number of buses but we were also able to lower the cost per Operational Unit or cost per meal package while increasing the number of transactions. Scaling up from one operational unit with three people to three operational units and nine people and proportional support staff did make a difference. The estimated cost per meal was $3.88 for 3 trucks, $4.63 for 2 trucks and $8.29 for one truck. It was still presumed that the food was free and we inevitably missed costs so this was still an abstract model. It was felt to be a good beginning.

The next step involved going even further into abstract and speculative calculations. An entrepreneur who creates a new business that has the capacity to grow into multiple outlets must not only generate enough demand for their product or service so as to maintain the current level of operations but also generate enough to invest for future growth. Some growth might come from new investors or loans but there will still be new revenue to demonstrate internally generated growth to justify it. External sources are likely to be doled out based on performance.

The nonprofit has to ask for such investment in advance and then prove that it is a worthwhile risk for future investment. This may not seem logical as how does one determine the level of risk the enterprise entails? While concerns of profit may not come into play, any money lost or wasted could have been used for other beneficial purposes. The risk premium for our enterprise was set at a total of 95% reflecting a Required Rate of Return/Rate of Investment that was, in reality, being covered by the donors. How this risk could be spread out could be determined by the length of the investment period, 36 months or 60 months or time before sought after results were obtained and the type of bus that was to be purchased, long or short. We ran scenarios using all of the combined criteria.   

The final calculation was to determine a price point for our product, the meal package. We did not make a final decision on what the meal package would be or what it would consist of. Jo leaned towards providing healthy burritos as it could be carried, easy to distribute and minimal need for clean up. I stayed with free food from the pantries though did not fully consider what that might involve. Whichever, there would though be associated costs we had not added in yet.                                                                            

Financial modeling is again done iteratively, finding the sweet spot matching up product and price with consumers needs at a cost allowing the venture to be financially sustainable. This is true even when the product is being provided for free because of other life costs are borne by recipients such as the homeless. If they don’t believe that they can depend upon delivery of the product or feel diminished by it for some reason then they will not use it. Also if the monetary cost is too high then donors may look for lower hanging fruit to put their money towards. 

This means non-profits often encounter a large gap between the price required for profitability, or in the case of non-profits the level of supportable financing required to sustain and scale up a social enterprise, and the price they believe consumers (the course says or, I am going to say and) donors will pay for the product. This is a natural tension inherent within the challenges that social issues present. 

Ask yourself what you think would be the absolute maximum a customer would pay for the product or service you have in mind, and what would be the ideal price (i.e., the lowest) that you think would easily attract customers. Then pick a few prices that fall within this range. 

Social entrepreneurs inevitably have to experiment then with different models or scenarios making tradeoffs to bring the equation into balance. 

Transactions at steady were lowered to that used in the other modules to reflect limited capacity and desire to focus help rather than maximize output. So the only change in variables is the type of buses being used and the loan period. 

The lowest price point chosen for each scenario was that which covered Single Transaction Costs and Operational Unit Whole Costs. There was not practical reason to go higher than this as clients are not making reimbursements and donors want the greatest efficiencies.  

Next Part 6