Serving People on the Margins

Pioneer Human Services

Offers a New Model for Social Entrepreneurship

By John David Mann

Michael J. Burns once specialized in working with ailing companies, helping them get their feet under them. Today, he does something a little different: he runs a company that works with individual people to help them get their feet under them.

Seattle-based Pioneer Human Services is an unusual operation by any definition. With a mission of serving those at the margins of society, Pioneer's services reach over 6500 people annually, including alcoholics, drug addicts, troubled families, runaways and ex-offenders, including individuals on probation or in work release. Pioneer's training, counseling, employment and other services successfully help a large percentage of these people to put their lives back on track, working their way in from the "margins" into the functional mainstream.

The company's strategies for pursuing that mission include a food division that supplies three-quarters of a million meals annually, two manufacturing plants that supply parts to dozens of industrial customers (including Boeing), construction and distribution companies, and numerous housing, counseling, correctional and other rehabilitation-oriented programs. Pioneer owns and operates four restaurants, including the classy Mezza Café at Starbucks headquarters.

But what's so unusual about Pioneer is not the scope of their social programs nor the diversity of their enterprises, but their financial structure: out of a $60 million annual operating budget, less than one percent comes from donations, grants or fund-raising.

Where does the other 99 percent come from? They earn it.

Recently celebrating its 40th anniversary, Pioneer Human Services was the brainchild of a brilliant but troubled man named Jack Dalton. A successful lawyer and prominent Seattle citizen by day, Jack was also a career alcoholic who secretly stole nearly $50,000 to keep his life patched together. He was eventually caught, convicted and incarcerated; while in prison, he had an epiphany--an idea that became Pioneer Human Services.


Doing Good By Doing Well

Network marketers have a strong leaning towards philanthropy: we tend to see business and philanthropy as two sides of one coin, not as separate domains. (Hence the relevance to networkers of Networking Times' mission statement, "Moving the Heart of Business.") That description seems apt for Pioneer as well, an observation we point out in a conversation with Mike Burns, Pioneer's CEO.

"That's exactly right," Mike agrees; "we operate by a kind of double bottom line. The people who run all our programs--our behavioral health group, community corrections group, counseling group and treatment group--these folks have to think like businesspeople, in addition to thinking within the specific disciplines they bring to the job."

Like any successful for-profit corporation, Pioneer is run by strict adherence to a system of budgets, whose focus is on achieving a surplus: the classic "bottom line." What's different is this system's driving force. A conventional operation focuses on surplus to feed growth and stockholders' return on investment.

"The reason we produce surplus, on the other hand," explains Mike, "is to serve more people. If you went out onto our manufacturing floor and talked to one of our supervisors or managers and asked them, 'What is the purpose of your job? Why are you here?' you'd get a very different answer than you would in most manufacturing facilities."

Take Dutch Boy Paints, where Mike once served as president. There, that question would have elicited the answer, "To make the best can of paint we can." Put that question to any employee on the Pioneer floor, says Mike, and you'd probably hear: "To serve people on the margins of society."

"This is a little different, especially for someone coming from another nonprofit," says Mike--an observation which is decidedly autobio- graphical. With no background or history in the nonprofit world, Mike himself experienced this shift (call it "corporate culture shock") as an unexpected career move, to say the least.


Corporate Culture Shock

Having served as CEO of a number of different companies for several decades, Burns had built a reputation as a turnaround expert. In the closing years of the 90s, he was employed as president and CEO of Sea Watch International, Inc., a seafood company on Maryland's eastern shore. The Japanese economy was going through difficult times; the company's Japanese owners were debating whether or not to withdraw from US operations. Burns was pondering his next move.

"It was a time in my career when I was starting to take stock of what I'd done and consider about what else I might do." Approaching 60, Mike's thoughts turned toward finding a new kind of position--one where, as he puts it, he could "really make a difference."

Though he had never worked in the nonprofit world, Mike was no stranger to philanthropy and human service. He had employed people in a work-release arrangement at Sea Watch, and had a long history of volunteer work on his own time.

"Most of my experience in service had been in volunteer work through my church. Wherever we'd lived, I was always very active in my church. But I'd done other volunteer work over the years, too; in my days as a practicing lawyer, I spent some time working as a volunteer probation officer."

Just then, Mike happened to receive what he describes as "kind of an unusual call," from a corporate headhunter Mike had talked to once when a friend and former employee, Don Riffle, had given Mike's name as a reference. The man had happened to mention to Don that he was trying to fill an unusual position: CEO for an entrepreneurial nonprofit in the northwest.

"Don knew my background, and almost as a lark, he said, 'You know, you ought to talk to Mike Burns.'"

The man called and told him about the job; Burns was less than enthusiastic.

"When I first heard Pioneer described, I wasn't even slightly interested. My perception was that Executive Directors spend their time mostly doing a lot of fund raising--something which is definitely not my skill set. I told the man, this just didn't sound right for me."

The headhunter persisted. "He said, 'You really ought to look at it; the board is looking specifically for someone who has run businesses and has also been involved in community work, and that sounds like you.'"

Mike still resisted the idea. "Finally, the recruiter said, 'How about just sending me your résumé, so I can keep it in my files here? I don't have any information on you...and you never know what's going to come up down the road.' So I did--and about a week later he called back and said, 'Hey, I took your résumé to the board, they love you.'"

Mike was a bit taken aback. "I said, 'Wait a second! I told you, I wasn't interested!'"

But they kept talking; eventually, Mike flew out to Seattle to take a look.

"When I walked through their plants, I was blown away. It wasn't what I was expecting; their operations were really impressive." Mike toured their facilities, breakfasted with senior management, and gave the entire operation a careful looking over. The more he saw, the more his reluctance turned to excitement.

In March, 1999, he signed a contract to serve as CEO for three years. When those three years were up, he signed on for another three. As he prepared for this second stint, he and Pioneer encountered challenges they were not expecting.


New Century, New Challenges

On February 28, 2001, the area suffered a major earthquake. Of the 40 properties Pioneer owns, ten buildings were severely damaged; only four were adequately insured. It took until August, 2003--two and a half years later--to finally settle their insurance claims.

Then came September 11. While industries throughout the country reeled from the aftermath of the terrorist attacks, the northwest felt a particularly severe impact.

"Boeing was hit really hard," explains Mike, "and Boeing was one of our major customers."

Pioneer Human Services manufactures the Kevlar liners that line the cargo bays of every Boeing aircraft: their work is directly related to the number of planes produced. As the number of planes produced plummeted, so did their work--and a good portion of their training program was dependent on that work.

Says Mike, "Boeing's volume is less than half of what it was when I first arrived. We've had to do what we can to replace a lot of that business with other ventures. With the earthquake losses and the business losses, the last few years have been kind of a whirlwind."

They managed, as any good business would, by adapting. "We expanded our cafés; we expanded our behavioral health group, adding a chemical dependency treatment center out in Spokane; we added a work release program down in Tacoma. We haven't been standing still."

Through it all, Pioneer has managed to stay in the black.

"Pulling through all this has really been a tribute to the folks who are here and believe in the mission," Mike adds. As always, the conversation returns to the mission--the "other bottom line."


The Future of Social Entrepreneurs

The Pioneer model (which Newsweek dubbed "an inventive hybrid for the 21st century") is so brilliantly effective, it seems to beg the question, why aren't there more companies like this? The answer is felicitous: there are more companies like this...sort of.

"Pioneer Human Services is not entirely unique," says Mike. "There's a social entrepreneurial movement among nonprofits; we even have a national organization." Called the Social Enterprise Alliance, the group holds its fifth annual meeting this March in San Francisco.

Writing about Pioneer Human Services in their November 4, 1999 edition, the Wall Street Journal described this movement: "There are stirrings of a real revolution in the nonprofit arena. More willing to take risks, they...embrace a more entrepreneurial, less traditional approach."

Indeed, the company's name has taken on a new (or more accurately, a newly recognized) significance in the past several years, as the enterprise has been increasingly hailed as the flagship of that movement. In 2000, the National Journal wrote, "If there is a model entrepreneurial nonprofit, it's Pioneer. The organization most responsible for the surge in social entrepreneurship was singled President George H. Bush as one of the nation's Points of Light [Pioneer Human Services was designated #30 out of Bush's famous "thousand points of light"], and it still is."

Still, the amount of earned income for these nonprofits who style themselves "social entrepreneurs" tends to range anywhere from 15 percent to 50 or even 60 percent. Admits Burns, "we're a little unusual in that for us, that number is 99 percent. Tell you the truth," he adds, "I wouldn't mind at all if we got a huge grant from somebody that made that figure drop to only 98 percent! We're not turning money down because of any kind of pride; that's just the way it developed. Whatever it takes to accomplish our mission!"