The Steppingstone Foundatio

OCTOBER 2OO4

 

The Steppingstone Foundation Expanding to new geographies while maintaining high-quality results

Copyright ©2005 The Bridgespan Group, Inc. Bridgespan is a registered trademark of The Bridgespan Group, Inc. All rights reserved.

 

 

 

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Summary

The Steppingstone Foundation has generated impressive results with Boston-area

students, but it has had a difficult time exporting its model to another city.

Insufficient local fundraising, unclear leadership, and disappointing results plagued

the pilot expansion. The organization has scaled back its geographic expansion

ambitions, and is now working to saturate the Boston market and to stabilize its

expansion site.

Organizational Snapshot

Organization: The Steppingstone Foundation

Year founded: 1990

Headquarters: Boston, Massachusetts

Mission: “To prepare Scholars to get into, and succeed at, top independent and

public exam schools.”

Program: The services of the Steppingstone Academy are designed to identify

underserved 4th and 5th graders and to prepare them to enter and succeed at top

private and public exam schools in the 6th and 7th grades, respectively. The

teachers, curriculum, and standards of the Steppingstone Academy are as

demanding as those of any private or public exam school. The Academy offers 14

months of academic classes followed by a range of support services throughout

middle school, high school, and college. In addition, the Steppingstone Fellowship

is designed to attract recent college graduates to the teaching profession and to

give them an intensive, two-year, hands-on experience in the field. The size of

each new class of Steppingstone Scholars has grown from 10 Scholars in 1990 to

116 Scholars in 2003. Including both Scholars in the Academy and those receiving

post-Academy support services, Steppingstone served 572 youth in 2003 (116

Year 1 Scholars; 92 Year 2 Scholars; and 364 youth via support services).

 

 

 

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Size: 2.6 million in revenue; 25 employees (as of 2003).

Revenue growth rate: Compound annual growth rate (1999-2003): 17 percent;

highest annual growth rate (1999-2003): 27 percent in 2001.

Funding sources: The Steppingstone Foundation relies on individual donors and

supplements their support with foundation and corporate funders. In 2003,

individual donors made up 57 percent of all revenues, foundations 29 percent,

corporations 7 percent, and other revenues (such as interest on investments) 7

percent.

Organizational structure: Steppingstone is an independent 501(c)(3)

organization, with a branch in Philadelphia operating under the national office’s

501(c)(3).

Leadership: Michael Danziger, cofounder and president.

More information: www.tsf.org

Key Milestones

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1990: Founded in Boston

1998: Expanded to Philadelphia; established the Magnet Program

2002: Slowed geographic growth and focused on building out the Boston and

Philadelphia sites

Growth Story

Michael Danziger and John Simon started The Steppingstone Foundation with a

hypothesis that if children, regardless of their circumstances, are given the proper

academic preparation and support, they will succeed. They launched the Scholars

Program in 1990 to prepare inner-city 6th-graders, who would not otherwise have

the opportunity, to get into and succeed at Boston’s top private schools in the 7th

 

 

 

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grade. (Danziger is now Steppingstone’s president and Simon is on the board of

directors.)

Scholars participate in an intensive, 14-month academic program consisting of two

six-week summer sessions before and after 6th grade, as well as after-school and

Saturday classes during the 6th-grade school year. Once accepted to a school,

Steppingstone keeps in close contact with the Scholars, their families, and their

new schools to ensure a smooth academic and social transition.

From day one, Steppingstone expected to expand. It moved slowly, however,

starting with 10 kids and growing in increments of 15 to 30 students in the early

years. “In the beginning, we just wanted to get off the ground and give it a name,”

says Danziger.

Steppingstone grew based on its track record of success. By 1994, Steppingstone

had successfully placed into 7th grade more than 90 percent of the Scholars who

had completed its program. Currently, 88 percent of program participants graduate

from high school and 93 percent of these high-school graduates are admitted to

four-year colleges. These compelling results are even more impressive when

compared to Boston public schools, where 77 percent of the high-school class

entering in 1997 graduated in 2001 and only 42 percent of these high-school

graduates attended four-year colleges.

Steppingstone continued to see the need for its program in Boston, and received

positive feedback from the Boston community. Once the Scholars Program had

become established in the Boston community, Steppingstone looked for other ways

to provide opportunities to a greater number of children.

In 1998, Steppingstone established the Magnet Program, using the Scholars

Program as a model. In Boston, “public exam schools” offer educational

opportunities to students who score well on an entrance exam and who maintain

high GPAs in 5th and 6th grade. The Magnet Program prepares inner-city

schoolchildren to enter and succeed at Boston’s three public exam schools:

Boston Latin School, Boston Latin Academy, and John D. O’Bryant School.

Steppingstone continued to add programs such as the Steppingstone Fellowship,

to attract recent college graduates to the teaching profession, and the

 

 

 

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Steppingstone Prize, to encourage, recognize, reward, and replicate the best

curricular developments in Boston public middle schools. As it has grown,

however, Steppingstone has pulled back from the Prize program. “In order for

Steppingstone to take full advantage of its core competence, we had to narrow our

focus,” says Danziger. The Prize did not work out as planned, because of

difficulties reducing Steppingstone’s intense teaching style and innovative

curriculum to an off-the-shelf handbook and set of best practices.

Steppingstone’s management team and board brought in McKinsey consultants to

help them decide whether to export the Scholars Program to other cities. A

subsequent study described the benefits of a geographic expansion for

Steppingstone, and identified 10 cities that would be likely candidates for a

Scholars Program based on a market-sizing approach. It was an ambitious plan

that called for adding one city per year.

In 1998, Steppingstone expanded the Scholars Program to Philadelphia.

Philadelphia was chosen in part because a staff member moved there; though it

was not the top choice of the McKinsey study, it was in the top 10. The program

was tailored to local conditions: in Philadelphia, the program prepares 5th-graders

for 6th-grade placement. Steppingstone Philadelphia accepted its first class of

Scholars in 1999, with its Scholars going on to attend such private and charter

schools as the Episcopal Academy, Haverford School, William Penn Charter, and

the Philadelphia School. The Philadelphia site has served more than 60 Scholars

to date.

While Steppingstone’s initial intention was to pilot a program in Philadelphia and

grow from there, challenges with the Philadelphia program led the organization to

slow its geographic growth. The Philadelphia site struggled to raise funds, to clarify

leadership roles, and to match Boston’s outcomes. Graduation and placement

rates were significantly lower in Philadelphia. “When a Philadelphia graduate

referred to us as ‘Camp Steppingstone,’ we knew we had a problem with the

Academy’s behavioral and academic standard,” says Danziger.

Philadelphia was “too small to do its own curriculum,” says Danielle Heard,

executive vice president of programs. Boston staff were spending a

 

 

 

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disproportionate amount of their time managing the new site, and the site was

more expensive than Boston on a per-Scholar basis because of insufficient scale.

Key activities were implemented inconsistently in Philadelphia. For example,

candidates were not fully informed of the length and intensity of the program up

front, which contributed to the 40 percent dropout rate. Philadelphia Scholars also

had lower program exam scores than Boston Scholars, and their families were less

engaged in their children’s education.

Securing funding for Philadelphia also proved problematic. A development director

was not hired until two years after the program started. Philadelphia’s advisory

board was heavily weighted toward educators rather than those with access to

potential funders, and the board was not made responsible for raising a defined

level of funding. Further complicating matters, the site went through two program

directors. Leadership roles and responsibilities were unclear from the beginning,

leading to confusion over whose organization it was — Boston’s or Philadelphia’s.

Back in Boston, Steppingstone continued to grow. Between 1998 and 2001, the

Year 1 Scholar class size jumped from 55 to 116 Scholars, with staff serving nearly

600 Scholars yearly between its 14-month Academy and post-placement support

services.

To keep Boston’s quality high during growth, Steppingstone measured outcomes

from the beginning. It was committed to maintaining a high staff-to-child ratio and

to sustaining Academy graduation rates, high-school placement and graduation

rates, and four-year college matriculation rates. “Anecdotal evidence is not

compelling,” says Danziger. “You must be able to measure results.”

But as the Scholar growth rate slowed from 25 percent to 10 percent,

Steppingstone wondered if the Boston site’s growth was waning. (See Figure 1.) A

2002 Bridgespan study determined that almost 700 Boston-area fifth-graders per

year fit the criteria for Steppingstone Scholars, suggesting that there was additional

room for Steppingstone to penetrate the Boston area. Based partly on the

challenges in Philadelphia, and partly on the further need and capacity identified in

Boston, Steppingstone has slowed geographic growth since 2002 and has focused

on building out the Boston and Philadelphia programs.

 

 

 

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This information is confidential and was prepared by The Bridgespan Group solely for the use of our client; it is not to be relied on by any 3rd party without The Bridgespan Group’s prior written consent.

Figure 1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

10 25

49 82

111 139

173 207

252

307

388

524 498

572

0

200

400

600

Steppingstone Scholars served

Year 1 Scholars

Year 2 Scholars

Support Services

Source: Organization internal data

“The program works: the Scholars and teachers are engaged, and the focus is as

sharp as ever, even as we have grown,” Danziger said in a recent letter to

supporters. “Steppingstone is indeed a transportable model and it can, in some

form, be implemented in other cities so that countless children can have the

opportunities that accrue to those who go to college. While growth is fraught with

challenges — known and unknown — not growing is not an option. We are

proceeding prudently, but insistently.”

The challenge of sustaining growth is also related to marketing. “Teachers,

parents, and staff from community-based organizations all need to know that

Steppingstone offers life-transforming opportunities to children who are willing to

commit to the rigors and standards of the program,” says Danziger. “We want

every mother and father in Boston neighborhoods like Dorchester, Mattapan,

Charlestown, Roxbury, and Brighton to know who we are and what we do. This will

take a well planned and executed marketing effort, and I am confident we can pull

it off.”

 

 

 

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CONFIGURATION

Steppingstone is an independent 501(c)(3) organization, with a branch in

Philadelphia.

Steppingstone’s expansion to Philadelphia in 1997 was planned with the strategy

of giving the Steppingstone idea to local leaders, letting them fall in love with it, and

then having them secure funding to become self-sufficient. But with an unclear split

of roles and responsibilities early on between Boston and Philadelphia,

Philadelphia’s leadership never developed a feeling of ownership, and the branch

turned out to be more reliant (financially and managerially) on Boston than

planned. Steppingstone’s management team and board now believe that local

ownership is the key to success, and future geographic expansion will be

structured accordingly.

The current plan for Philadelphia involves a newly hired executive director, who

has been tasked with spinning off the site. If the site meets a set of performance

benchmarks by 2005, it will become its own 501(c)(3), with affiliate status, and can

continue to use the Steppingstone Foundation name as long as it maintains

specific performance standards.

CAPITAL

Steppingstone has always relied on individual donors. Danziger has long been

able to tap a strong donor base, drawing from his personal network of friends and

associates and a core of committed board members. “Focusing on individuals has

been a great source, because individuals don’t set all kinds of constraints,” says

Danziger. “However, individuals can be fickle.”

Almost half of all individual funding comes from special events; in 2003,

Steppingstone raised over $600,000 from events that included a black-tie gala and

a golf classic. “Events really grow the donor database,” says Danziger. “It’s a good

way to explain what we do.” (See Figure 2 for a breakdown of funding by

category.)

 

 

 

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This information is confidential and was prepared by The Bridgespan Group solely for the use of our client; it is not to be relied on by any 3rd party without The Bridgespan Group’s prior written consent.

Figure 2

Source: Organization internal data

1997 1998 1999 2000 2001 2002 2003

$0.9

$1.4 $1.4 $1.5

$2.0

$2.4 $2.6

0

1

2

$3M

Steppingstone revenue

Individual Foundation Corporate Other

Budget surplus (deficit) ($M)

Annual revenue growth

$0.3 $0.7

49%

$0.4

-2%

$0.3

13%

-$0.1

27%

$0.0

22%

$0.1

7%

Foundation support has been important in recent years. The Smith Family

Foundation made a $1 million capacity-building grant to support the 2002 strategic

plan and efforts to build up Steppingstone’s development operations. “Open,

honest communication with donors has helped,” says Kelly Glew, executive vice

president of development and operations. “Mike [Danziger] doesn’t only get in

touch with donors when we need money.”

To date, Steppingstone has not focused on government funding. The organization

has enjoyed the limited constraints individual donors place on it and is hesitant to

move into the more heavily restricted government funding arena.

Opening the Philadelphia site complicated Boston’s fund development efforts. In

2001, for instance, Philadelphia raised only $70,000 of its $420,000 budget;

Boston headquarters funded the remaining $350,000. Under the new plan,

Philadelphia is expected to reach financial independence by 2005. Part of

Philadelphia’s challenge was its identification as a “Boston” program; the shift to

more local autonomy is in part a recognition that a local identity and connections

are key to fundraising.

 

 

 

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CAPABILITIES

Almost all of the new positions added to the organization between 1993 and 2003

were program additions, with the exception of a few development support staff and

a part-time office manager who takes care of human resources functions.

One these few non-program additions was the director of development role in

1993. Starting in 1998, this position became the director of development and

communications. In 1999, the position added operations to its responsibilities.

Kelly Glew is now the executive vice president of development and operations,

having risen through the ranks after starting with the organization in the early

1990s.

The 2002 Bridgepsan study helped Steppingstone reorganize. Danziger and the

board realized they would need more strength at the senior management level to

support growth; the jobs currently being done by the small management team soon

would be getting much more time-consuming and complex. They’d need more

bodies and different skills to get the work done.

For example, finding kids to apply was Steppingstone’s biggest barrier to growth,

so it added a director of marketing in charge of devising creative ways to reach

more students. The first director of marketing the organization hired didn’t work

out, however. While her strength was in marketing, Steppingstone now realizes

that the role requires a community worker — someone with ties to the

neighborhoods, credibility, and persistence.

Danziger and the board also realized the organization would have to spend more

time tracking outcomes and identifying areas for improvement. In 2003,

Steppingstone added a director of organizational learning to perform internal

program evaluations. This person is responsible for making sure that

Steppingstone maintains its strong outcomes as the program grows.

And given that raising the money necessary to support Steppingstone’s larger

scale would take more time, the organization added a development assistant to

support its fund development efforts.

 

 

 

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Beyond these and other new hires, improving management capabilities would be

critical, as with rapid growth the complexity of managing the organization would

escalate dramatically. To foster an effective and stable management team,

Steppingstone increased professional development training, began provided clear

career tracks, and increased salaries to levels comparable to those at similar

organizations.

The board is evolving, as well. For its first 10 years, the board was comprised of

Danziger’s friends. The new chairman, Brian Conway, who comes from outside

Danziger’s circle, has taken on a stronger role. Danziger says it’s better for him

and for the organization if it is no longer “Mike-centric.” It had become clear to him

that the board needed to take a more active role as the organization matured.

Individuals are now joining the board with specific committees and specific roles in

mind. There are some challenges in this transition – finding sufficient time to meet

and to execute this more involved role is one of them. Going forward, the board will

meet quarterly, with specific committees meeting more frequently.

Key Insights

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Launching a successful site. Steppingstone has struggled to replicate its

Boston success. The early years of the expansion to Philadelphia floundered

with insufficient local fundraising, leadership that was unclear on its roles and

responsibilities, and disappointing results. The organization has decided to

spin off the Philadelphia branch as an independently funded affiliate in 2005,

if it meets certain performance goals.

Growing locally. The organization has pulled back on national expansion for

the time being, favoring local saturation where it already operates. A close

examination revealed that there was plenty of room to grow in Boston.

Depending on individual donors. Steppingstone’s individual donor base

gives it an enviable proportion of unrestricted funding, but expansion

produced new challenges of fundraising at escalating levels. Going forward,

the organization hopes to continue to develop its strong individual and event-

 

 

 

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oriented funding base. Steppingstone also is working to increase its funding

from foundation and corporate sources.