Social Justice - Pioneer Human Services

"We've got two bottom lines — the money and the mission."

Social Justice: Pioneer Human Services

Home Base: Seattle, Washington
Year Founded: 1962

Not many corporate vice presidents can tell the kinds of stories that Marla Gese can. Gese — a handsome woman with neatly bobbed brown hair, who is wearing a perfectly tailored pantsuit and tasteful diamond earrings — sits sipping coffee in a nondescript beige conference room. As she speaks, it's hard to imagine her living the kind of life that she describes as her past: freebasing enough cocaine to stay awake for 12 days straight, selling a kilo of drugs a day to support her habit, and hiding her stash in the floor of her Datsun. She was arrested five times during an 18-month period and eventually spent 5 years in prison on drug-related charges stemming from a police sting at her house. "It was terrifying," she recalls. "They busted down the doors and came in shouting." She leans across the table and presses two manicured fingernails to the temple of her listener. "Freeze, motherfucker!" she says in a whispered imitation of a cop's command. "That's really true. They really do say that. And you're thinking, 'Jesus, there's a gun pointed to my head!' It's scary stuff."

That's one story from Gese's past. Here's another: Gese, now 40, spent the past six years working her way up from receptionist to vice president of real-estate asset management at Pioneer Human Services, the company that hired her after she got out of jail. As a rent collector and a property manager, she managed to turn around several sites that were losing money in the company's real-estate division and then went on to found Pioneer's construction-services division. What began as a crew of 2 men who worked on 30 Pioneer-owned properties has grown into a team of 45 employees who spend about half of their time bidding for commercial work, such as plumbing and roofing jobs.

"There hasn't been a single challenge that she hasn't been able to meet," says Mike Burns, 57, president and CEO of Pioneer. "She is the perfect example of the amazing things that people can do when they're given a second chance."

Gese's work is also an example of the amazing things that Pioneer has accomplished by giving people like her a second chance. Pioneer is a Seattle-based nonprofit that brings in annual revenues of roughly $52 million. Its mission is to provide employment training, housing, and counseling services to ex-convicts and former drug abusers. Less than 1% of the company's funds comes from "charity." The remaining 99% is generated by the 12 divisions that the company runs (among them, sheet-metal factories, catering services, real-estate management, and product-distribution facilities) — the same divisions that provide jobs for ex-offenders and recovering addicts. Each of these individual businesses averages an annual return of 13%, which is reinvested in the company. Pioneer is one of the largest self-sustaining nonprofits in the country. But more mind-boggling than the company's financial success is the paradox that is fueling its growth: Pioneer has succeeded as a business by employing society's most marginalized people, many of whom have been deemed unemployable by other companies.

Pioneer measures its success in two ways. It is not enough to be the primary supplier of cargo liners for Boeing, or to run the swank Mezza Café inside the Seattle-based headquarters of Starbucks, or to be the distribution-repackaging center of choice for Hasbro. While serving its corporate customers, Pioneer also serves its internal customers — the more than 6,000 former criminal offenders and drug addicts who receive Pioneer's help each year, in the form of job training, employment, low-income housing, outpatient counseling, and inpatient treatment. "We've got two bottom lines — the money and the mission," Burns says. "We give the people who work here a chance to change their lives."

Before joining Pioneer in March 1999, Burns spent 20 years working as a CEO for such traditional companies as Sea Watch International Inc. and Dutch Boy Paints. His roots are not in social service but in the Marine Corps. (He still wears his shoes polished to a high gloss and his hair parted with military precision.) Given his career background and deceptively reserved demeanor, Burns's passion for his new work might surprise some folks. But perhaps it's his establishment-centered background that makes him appreciate what Pioneer accomplishes every day.

"When I first got a call from a headhunter about Pioneer, I wasn't interested," says Burns. "I thought that it was just a bunch of social workers trying to run a business." The headhunter persisted until Burns finally agreed to fly in and meet the management team. "I toured the facilities, and I was impressed," he says. "This was a real business that was putting out real products, and the management team was as good as any that I'd ever worked with.

"The level of professionalism at Pioneer is equal to — and in some cases, better than — that of the companies I've worked at," Burns continues. "Pioneer has a sincere desire for employees to learn new things. And employees are determined to make the company as good as it can be — in part, because of what the company has done for them."

By embracing its dual goals, Pioneer is creating a new agenda for the way that nonprofits fund their programs. It's a business agenda that eagerly embraces competition and free markets. The company is also forging a new social agenda: Every new account or contract that Pioneer wins gives the company an opportunity to showcase its employees in a new light — not as past offenders but as a productive, and largely untapped, workforce.

To Build the Business, Build the People

It took Schwanda Taylor about two years to work up the courage to operate the water-jet cutting machine in Pioneer's cargo-liner factory. The machine — a hulking, computerized monster that weighs more than 5 tons — is used for the precision cutting of metals, plastics, and fiberglass. It slices through any material (including six inches of titanium) without leaving any burrs, or rough edges. It works like this: Once a cutting pattern is programmed into the machine, jets of water as narrow as human hairs apply 60,000 pounds of pressure per square inch to cut through whatever substance is being fed into the machine. The device could easily slice off a finger or two in the process.

"At first, I didn't think that I could run the water jet," says Taylor, a soft-spoken woman who, at 34, could pass for a teenager. "But one day, I opened my eyes and thought, 'I've got to stop being scared. I've got to rise above my fears: That's what this place is about.' "

Taylor has conquered many fears since coming to Pioneer. She joined the company through a prerelease program at Washington Corrections Center for Women, at Gig Harbor, where she was serving a five-year sentence on drug-related charges. The pre-release program is one of Pioneer's most successful initiatives. Over a six-year period, it has cut the recidivism rate in half (it's now down to 11% for the women enrolled) . And of the 50 women who were released from prison over a two-year period, 100% are still employed. For six months, Taylor took a bus to the factory each morning and returned to the prison each night. Her earnings, after housing payments to the state, were set aside for her in a savings account.

Once released, she decided to continue with Pioneer by taking courses — on company time — that Pioneer offered. She completed the training and participated in one of the quarterly graduation ceremonies that have become legendary at Pioneer. During those events, the company shuts down the factory floor to honor employees' myriad achievements, from the completion of training programs to workplace promotions.

"It was awesome," Taylor says with a wide, genuine smile. "I still get tears in my eyes when I think about that day. I passed every single class on time, and I didn't have to go back and retake a single test. Before every test, I would go into the bathroom and pray. I'd say, 'Lord, you know that I've worked very hard for this. Please let me pass this test.' " Having mastered the water-jet cutter, Taylor now trains other workers on the proper way to use it and other machines as well. The skill has become one more toehold that keeps her from slipping back into her past life.

So that's what Pioneer did for Taylor, but what does a worker like Taylor contribute to Pioneer? For most of last year, she was part of a team that completely restructured Pioneer's cargo-liner factory. The processes, the floor layout, the documentation, the quality inspection — all of those things were reinvented by the workers themselves. "We could not have done it without them," says Dave Meisinger, 48, former vice president for manufacturing operations at Pioneer. A veteran of the electronics-manufacturing industry,

Meisinger has supervised many conversions to team-based production systems, which rely on suggestions from frontline workers to make operations more efficient and to raise output quality. He says that despite some of Pioneer's unique challenges, the company's successful conversion measures up to other efforts that he's supervised in the private sector.

"A lot of people who work here don't have the education or the experience that people at for-profits do," says Meisinger. "But the creativity level here is higher than that of any similar project team that I've worked with. People have come up with solutions to problems that are more advanced than those you might have gotten from for-profit employees. I think that is partly because the employees here truly love having the chance to think freely and to have their input matter. Instead of feeling like a number, they feel like part of a team."

And the results for Pioneer? Cycle time was cut in half. Quality increased by 40%. Even better, the reorganization has freed up space in the warehouse so that Pioneer can manage inventory for its customers. "We can now store finished inventory and spoon-feed it to customers on demand," Meisinger says. "Customers don't have to count inventory, inspect it, or move it around. It's always where they need it, when they need it."

Those improvements would be a great leap for any factory, let alone for a nonprofit operation. But historically, the performance level at Pioneer has always been high. The company was the first nonprofit in the country to become ISO-9002 certified, a quality rating that it has maintained since 1996. Such performance is particularly impressive given that the employee turnover rate has been as high as 50% — on purpose. Pioneer shoots for high turnover, because it means that the company is training employees well enough to snare higher-paying jobs in the private sector. Leaving is the pinnacle of recovery for Pioneer's clients, but it is also a thorny challenge for the company. "When someone leaves, you laugh and cry at the same time," Meisinger says. "But it's so rewarding to witness those transformations. You have people with checkered pasts and lots of problems. And then you see this change take place as they work through issues of sobriety and develop work skills. Self-esteem starts to rise, and eventually the employees say, 'I'm ready to try my wings.' Then they fly out of here."

Pioneer copes with its high turnover rate by using a structured and elaborate training system. "We've done a pretty good job of establishing a formal infrastructure for managing new clients to get them up and running quickly," Meisinger says. "We've documented everything that we do very carefully so that new employees can come in, receive clearly detailed work instructions, and then execute those job functions. And we have a supervisory staff that understands the unique issues — addiction, legal matters, child care, housing, and transportation — that these folks bring with them into the workplace. There is no such thing as a cookie-cutter program; everyone has different needs. But we can give employees the individualized support that they need to have a shot at turning their lives around."

That's exactly what Jack Dalton did for himself when he began Pioneer as a halfway house in 1962. A former attorney, Dalton had been released from prison after serving time for embezzlement. Disbarred and penniless, he had nowhere to go and nothing to lose. So he borrowed money from his friends (some of the same people whom he had stolen from) and started Pioneer, whose services grew from housing to employment. Norm Chamberlain, who had been executive director of Pioneer for 17 years, started the first work-release program in Washington State by inviting six parolees to live with him.

Larry Fehr, 47, a senior vice president who tracks the results of Pioneer's business and social efforts, says that the company's blend of a for-profit attitude toward business and a nonprofit attitude toward clients developed out of necessity. "We serve this very challenging client population that is not a warm-and-fuzzy cause," he says. "People aren't so inclined to have car washes for convicts. And so we have had to think of ways to earn money, rather than just asking people to give it to us. The ironic part, of course, is that we've done what nonprofits have forever been telling their clients to do — become more self-sufficient."

Rules for a Turnaround

Cheryl Hodges used to wake up every morning and plan how she would get the money to buy the crystal meth that she craved. How did the 41-year-old grandmother end up in such a desperate situation? After spending years raising four children and enduring a messy second divorce, Hodges decided that she'd missed out on her wild and fun-filled teenage years and made some changes to her life. A few months into her new party-all-night lifestyle, she tried methamphetamine — and got hooked. Then she started delivering the drug to earn money for her own stash. She got caught in the spring of 1997 and was sentenced to two years in prison.

Through Pioneer, Hodges was able to get into a work-release program. The new arrangement may not be as confining as prison, but it's not complete freedom either. The Department of Corrections controls her money. Hodges has a small monthly allowance; the rest goes into a savings account. She lives in the Helen B. Ratcliff House, a women's work-release facility that Pioneer owns and operates. Rooms in the facility are spartan. Hodges rises at 4 AM, waits her turn for a shower, and then wakes up her roommate so that they both will be ready when the early-morning bus arrives. Most outings are supervised, and residents can host only preapproved visitors.

At Pioneer, the rules are tough for non-work-release employees as well. Drug tests are administered regularly. Anyone who tests positive is out — period. But if employees acknowledge a problem (chemical or otherwise) , then they are referred to counseling services. Only 2.4% of Pioneer workers test positive, compared with a national average of 7.3%.

The rules provide the structure that those in recovery need to take small steps forward. Still two months from the end of her sentence, Hodges is anxious about how she will fare after she is released. She knows that once the safety net of the work-release program is removed, her risk of returning to a life on drugs will increase. "My family and I are kind of nervous about it," she admits. "They see how far I've come, and they see the changes in me as a person. It would just devastate all of us if I were to relapse. But no one can say that it will never happen. It may not be what I want, but I'm scared because I'm an addict."

For those who are former offenders or recovering addicts (at least 75% of Pioneer's workforce), their ability to be open about their past mistakes makes following the rules easier. "Part of what I like about being at Pioneer is that I don't have to hide my past," says Marla Gese. "I don't flaunt it, but I don't have to hide it either. When I first got out of prison, I applied for jobs outside of Pioneer. But I learned that if you tell the truth about your past on a traditional company's application, then nobody calls you."

For people who don't want to change, Pioneer's open and understanding environment can be the worst thing about the company. For employees who are just coasting through the system or are falling into old habits, supervisors are tough to fool. They've had personal experience with crime and addiction and are unlikely to miss the subtle signs of an addict's relapse that another employer might not immediately recognize.

Gese believes that she is a much more effective manager at Pioneer because of her own experience. "It's very easy for me to recognize many of the things that people in recovery do, such as blaming others and refusing to take responsibility," she says. "In their mind, everything is someone else's fault: 'The world owes me.' When they start in on their pitch or manipulation, I just start laughing. I say, 'Wait a minute. I've been where you are. I've probably been through more than you have. I know what you're doing. You may not recognize it, but this is what I see.' "

Not all of Pioneer's employees make it. Nearly 11% leave after 30 days. About half of those drop out on their own; the rest are asked to go. Longer-term success is more difficult to track because former employees are not obligated to stay in touch. But, thanks to a grant from the Ford Foundation, the company is trying. The results are encouraging: Based on a sample of 402 former clients, Pioneer found that 96.6% of them were still employed a year after leaving the company or completing the training.

The Pioneer route gives taxpayers a break as well. Sending an offender through a Pioneer work-release program costs $18,359 per offender annually; a traditional prison sentence costs $23, 525 — a figure that is misleadingly low, given that these days, Washington State prisons are at 153% capacity. Cost is certainly not an insignificant issue: Many states, including California, Maryland, and New York, now spend more on prison systems than they spend on colleges and universities. And more than 1,000 new prisons have been built in the United States since 1970.

Mission Matters

It's a predictably rainy afternoon in Seattle, but Jim Ray's grin brightens the 120,000-square-foot warehouse that he supervises. Ray, Pioneer's vice president of distribution services, is beaming about a recent shipment from Hasbro. The boxes represent a big, new opportunity for work. The toy maker has 275,000 double-sided light sabers (each designed to look like the one in "Star Wars Episode I: The Phantom Menace") that are waiting to be shipped to retailers from Seattle's port. The problem is, they're defective: The engineers who designed them didn't include a protector for the battery coil in the handle. So whenever the light saber glows for more than a few minutes, the handle becomes hot. Retailers, many of which have run ads promoting the toy to whet the appetites of "Star Wars"-crazed kids, are up in arms. So Hasbro has hired Pioneer to unpack each light saber, to insert a coil protector in it, and then to repack the toy for shipment.

It is perfect entry-level work: Little training is required; the most complex part of the job is showing up on time. "We don't care where people come from," Ray says. "We want to give them a fresh start and an opportunity to take responsibility for their behavior — by showing up on time, by doing the work that's given to them, and by being cooperative. Those are the baseline skills that they're going to need in order to work anywhere else."

Ray, 49, left an impressive job as head of distribution for Starbucks to start a distribution center for Pioneer. Running the coffee company's domestic and international distribution was challenging, but Ray wanted more. His effect on Pioneer has been huge. In less than a year, the new distribution center broke even and was supplying jobs to hundreds of people, both Pioneer clients and local immigrants. "I wanted to be in an environment where I could give back," Ray explains. "Taking profits and reinvesting in people has more long-term value than being at a company that just takes from society and reaps profits. I'm a capitalist, but I'm a socially responsible capitalist."

When Ray talks about giving back, he isn't talking just about Pioneer's efforts. He sees the company not only as a business or a social service but also as a test case: If these ideas work at Pioneer, then maybe they can work everywhere. "You could go to every port city and you could do the kind of value-added distribution that we do here," Ray says. "That's the bigger picture for me: How can this become an opportunity for a community to help those who are at risk? We need to create a model here — and then duplicate it."

Ray isn't the only one who thinks that Pioneer could be a role model for other businesses. The company has several ideas for expansion, including assembling a $4.4 million venture fund with such investors as InterWest Bank, the Rockefeller Foundation, and Wells Fargo & Co., which will help Pioneer purchase businesses to add to its portfolio. Pioneer feels real pressure to grow. "Fifteen years ago, the company had revenues of $4 million," says president and CEO Burns. "Today, we have about $52 million. But we measure our worth not just in terms of dollars but also in terms of making a difference: How many more lives can we touch if we add more businesses?

"It's customary for us to invite employees to tell their stories at our annual and monthly board meetings," Burns continues. "At my first annual meeting, the woman who gave her testimonial was incredible. She brought members of the audience — including some executives from Boeing — to tears. One thing that she emphasized was the need to 'keep the company strong so that it can grow and help more people. The world needs places like Pioneer.' For us as a management team, that is exactly what it's all about."

Cheryl Dahle (cdahle@fastcompany.com) is a Fast Company senior writer. Contact Mike Burns (mike.burns@p-h-s.com) by email.

Sidebar: The Social Justice Agenda

Pioneer Human Services is pioneering a new model for social change — and, in the process, is setting a new agenda for nonprofit organizations everywhere. In an interview with Fast Company, Pioneer president and CEO Mike Burns outlined the key points of a nonprofit agenda that emphasizes performance as well as people.

1. Untapped potential exists where you least expect it.

"Many companies evaluate workers based on only their experience and education," says Burns. "We employ some people who, at age 25 or 27, have never had a job before. They take more training, but they come up to speed and blossom incredibly quickly. We've succeeded by purposefully taking risks on people."

2. We ignore those on the margins at our peril.

"Whether you think that prison is about punishment or rehabilitation, it doesn't make sense to release people who've been locked away for years onto the streets with no job, no money, and no guidance," Burns says. "Work-release programs are a great way to help people prepare to take on responsibilities in the community. There is no evidence that crime increases when work-release programs come into a neighborhood, but we have a hard time getting sites for these programs approved."

3. If you save an individual, then you save a community.

"Once people become taxpaying, contributing citizens," says Burns, "we've helped not only them, but also their entire family. The effect is multiplied many times over. If we can reduce recidivism by chipping away at crime and drug and alcohol addictions, then we're helping reknit the social fabric."

4. Keep your charity.

"Directors of nonprofits have to realize that 'profit' is not a dirty word," Burns says. "It strengthens your organization. The nice thing about our services is that we're not looking toward every July first — the deadline for government budgets — wondering, 'Are we going to get refunded? Is the government going to eliminate this program? And if so, what do we do with our personnel?' Our programs are funded by our own resources, which gives us the freedom to base those programs on our clients' needs, not on the availability of funds."

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