CASE: SI-86 DATE: 5/16/06 (REV’D 02/13/07) ROBIN HOOD In 1988, Paul Jones, a 32-year old money manager, started the philanthropic foundation Robin Hood with $3 million and the objective to fight poverty in New York. He invited two of his close friends, Peter Borish and Glenn Dubin, both of whom had backgrounds in investing, to serve as cofounders. They each donated an additional amount in the six-figure range. All three recruited David Saltzman, the executive director of Robin Hood as of 2006, to join the staff. Saltzman had previously served as special assistant to the president of New York City’s Board of Education and had extensive experience in the areas of education and social services. From its inception, Robin Hood applied the investment orientation of its founders to focus on poverty prevention by “funding…the best community-based groups and partnering with them to maximize results.”1 As an early innovator of venture philanthropy, Robin Hood emphasized rigorous due diligence, direct engagement with grantees, and social outcomes assessment. Believing in the connection between strong internal operations and high-performing organizations, Robin Hood provided grantees with both financial contributions and management and technical assistance. If additional skill sets were needed beyond staff expertise, Robin Hood tapped an external network of individuals and firms to offer pro bono services. While Robin Hood aspired to sustain long-term funding relationships with its grantees, organizations that repeatedly failed to meet mutually determined performance goals risked a funding reduction or loss. Robin Hood’s board members demonstrated their commitment to high engagement philanthropy by contributing their own time and money to supporting Robin Hood’s grantmaking and internal administration. Board members included prominent investors from various hedge funds; well- known New Yorkers such as Gwyneth Paltrow and Diane Sawyer; and corporate leaders such as 1 Robin Hood, Home, http://www.robinhood.org/home/home.cfm (August 9, 2006). Lecturer Laura Arrillaga-Andreessen and Victoria Chang prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The Stanford Graduate School of Business gratefully acknowledges the assistance of Giving 2.0 (giving2.com) in the development of this case. Copyright © 2007 by the Board of Trustees of the Leland Stanford Junior University. Publically available free cases are distributed through ecch.com. 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Robin Hood did not have an endowment, but did maintain a reserve fund that could cover the organization’s existing grantee costs for a year to a year and a half. At the end of 1988, Robin Hood reported assets of $3.2 million, with grants of $63,000 distributed and contributions from external sources (excluding board member support) of $3.1 million. In 2000, Robin Hood reported assets of $66 million, grants of $13 million, and external contributions of $25 million. By 2005, assets had increased to $210 million, grants to $63 million, and external contributions to $102 million. Robin Hood had become the largest private poverty-fighting organization in New York City, and its venture philanthropy model had inspired various foundations and funding intermediaries nationwide. As Saltzman noted, “We were pioneers in applying due diligence and measuring outcomes of our grantees.”2 In the future, Saltzman and his staff were committed to having an even greater impact on the fight against poverty in New York. At the organizational and strategic level, Robin Hood’s management team hoped to improve the identification and application of best practices and metrics to aid in its grantmaking decisions, as well as its internal operational and organizational decisions. Members of the group also saw opportunities to share their knowledge and grantmaking experience within the greater philanthropic community, as they sought to improve Robin Hood’s programs and expand its funding. CORE PROGRAM AREAS Robin Hood focused on four core program areas: (1) early childhood and youth (17.7 percent in 2005), (2) education (28 percent), (3) jobs and economic security (27.3 percent), and (4) survival (27 percent). In the area of early childhood and youth, Robin Hood supported organizations working on parenting education, early intervention, juvenile justice, and foster care. According to the Robin Hood Web site, “For too many New York City children, the absence of informed parents, inadequate health care and poor preparation for school hampers their development, putting them years behind their peers before they even begin the first grade.”3 Robin Hood’s programs aimed to ameliorate these conditions by contributing to the elimination of “abuse, neglect, and avoidable foster-care placement” and the provision of “counseling, education, medical, and other services to at-risk children and adolescents.”4 Believing that education served as one of the best means of poverty prevention, Robin Hood funded public, charter, private, and parochial schools in the city’s poorest neighborhoods. Robin Hood supported schools with strong leaders and a focus on academics, as well as organizations that helped students remain at grade level. It also worked to reinvigorate teaching and provided 2 Michele Orecklin, “Princes of the City,” Time, November 5, 2001, p. 84. 3 Robin Hood, Programs, Early Childhood and Youth, http://www.robinhood.org/programs/grant.cfm?portfolioId=11 (August 9, 2006). 4 Ibid. Robin Hood SI-86 p. 3 students with mental and social services. Recognizing the importance of libraries in supporting positive educational outcomes, in 2001, Robin Hood launched the “L!brary” Initiative in collaboration with the City’s Department of Education to “create libraries that are vibrant centers of teaching and learning.”5 Through its program on jobs and economic security, Robin Hood funded organizations that provided low-income people with employment opportunities, loans and grants, financial literacy and free banking services, as well as assistance in starting businesses. Robin Hood also helped poor working families gain access to public benefits and tax credits. Finally, Robin Hood’s program on survival highlighted its awareness of the need for charitable relief as well as poverty prevention. Through its work on survival and homelessness, Robin Hood provided food for the hungry, housing for the homeless, healthcare to the uninsured, shelter to victims of domestic abuse, and services and shelter for those living with HIV/AIDS. Beyond its core program areas, Robin Hood’s dedication to the city of New York had guided its decision to establish a September 11th relief fund to help meet the immediate and long-term needs of low-income victims. Relief fund focus areas consisted of: (1) employment, (2) low- income victims’ services and relief, (3) mental health services, and (4) other grants. The relief fund was overseen by a special board committee that met weekly for the first nine months after the attack and then on a biweekly and monthly basis thereafter. As with Robin Hood’s other programs, all overhead expenses were underwritten by the board to ensure that 100 percent of donations went directly to relief fund activities. As of September 2004, Robin Hood’s relief fund had donated $64.5 millionmaking it one of the 10 largest September 11th fundsbefore concluding its active grantmaking at that time. GENERAL STRATEGY/APPROACH 100 Percent Donation Rate Robin Hood articulated four tenets to its approach for combating poverty in New York City. The first aspect of Robin Hood’s approach, as referenced above, was its 100 percent donation rate. According to the organization’s Web site: Robin Hood’s board of directors underwrites [pays for] all of our fundraising and administrative expenses. From the rent to staff salaries to the website you’re browsing right now, it’s all paid for so your money goes to help others. We believe the urgent need in New York’s poor communities requires us to put every dollar out on the streets helping people and not in an endowment.6 Although the organization did not have a traditional endowment, it did have a small reserve fund comprised of board member donations. “Our philosophy has always been, ‘why wait for a rainy 5 Robin Hood, Programs, Education, http://www.robinhood.org/programs/grant.cfm?portfolioId=6 (August 9, 2006). 6 Robin Hood, Approach, 100%, http://www.robinhood.org/approach/100percent.cfm (August 9, 2006). Robin Hood SI-86 p. 4 day when it’s pouring?’” said Saltzman.7 “We don’t know of any other foundation in New York that has our funding philosophy. New York is arguably the wealthiest city in the history of the world and yet 1.7 million of our friends and neighbors live in poverty. We can’t go collecting money for an endowment; we’ve got to save lives right now.” Attack the Source The second tenet of Robin Hood’s approachcalled attack the sourcewas to focus on a problem’s root causes through poverty prevention (programs in early childhood and youth, jobs and economic security, and education).