MONDAY*

Issue #9 | January–February 2016

WIN-WIN-WIN: CROSS-SECTOR COLLABORATION DONE RIGHT

EXECUTIVE
BRIEFING

Each sector has a distinct role. “A government demands compliance. A business sells goods or services. The social sector institutions aim at changing a human being,” Peter Drucker observed. Yet he also discerned over the years the growing “interdependence of organizations” and an “intertwining of functions.” Indeed, scholars and organizational leaders have come to identify cross-sector collaboration as a big key to solving complicated social problems. A particularly clear example can be found on Maryland’s Delmarva Peninsula, where government, business and nonprofits have developed a Sustainable Forest Management Plan that includes provisions for the state to make money from logging, habitat protection and recreational activities for the public spread across tens of thousands of acres.

WIN-WIN-WIN: CROSS-SECTOR COLLABORATION DONE RIGHT

Most days, forest manager Mike Schofield finds himself walking the woods of Maryland’s Delmarva Peninsula, trying to squeeze more money out of the pine trees that tower overhead.

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“The most enjoyable part of the job is being in the field looking for timber sales,” he says.

But Schofield is not some rapacious landowner, angling to turn a quick buck at the expense of the environment. In fact, Schofield works for the state of Maryland, and his job is to help steward the pine forests of the peninsula in partnership with a private company called Parker Forestry Services.

Together—in an unusual arrangement that was crafted with the help of the nonprofit community—Parker Forestry Services is putting into practice a Sustainable Forest Management Plan approved by the state. It includes provisions for habitat protection, hunting, horseback riding and other activities across tens of thousands of acres of what are known as the Chesapeake Forest Lands.

The plan also sets a fee—the amount is fixed per acre so as to negate any incentive for over-logging—paid by Maryland to Parker Forestry Services. In return, the company plants, thins and harvests trees for sales by the government to paper mills and other purchasers of wood. Maryland makes about $1 million a year from the venture; Parker Forestry Services brings in about $200,000 or so annually for its work.

It is an arrangement that has existed for nearly a decade and a half, and it runs remarkably smoothly, thanks to the foundation laid by players from all three sectors. It was difficult and ambitious work. And it has become an exemplar of collaboration among government, business and nonprofits.

Each sector, of course, has a distinct role. “A government demands compliance. A business sells goods or services. The social sector institutions aim at changing a human being,” Peter Drucker observed, while stressing that every organization needs to stick to what it does best. Yet, that said, Drucker also discerned over the years the growing “interdependence of organizations,” an “intertwining of functions” and “the blurring of lines” between public and private.

“What used to be simple relationships in which major institutions rarely met each other, and even more rarely had much to do with each other, is becoming an increasingly complex … and crowded living together,” Drucker wrote in The Age of Discontinuity.

Since that book was published in 1968, both scholars and organizational leaders have identified cross-sector collaboration as a big key to solving very complicated social problems. Writing in the Stanford Social Innovation Review, consultants John Kania and Mark Kramer have called this “collective impact.”

Of course, all of this is well and good as a concept; pulling it off is another matter. If you are looking for announcements of grand collaborations among government, business and nonprofits, you won’t have much trouble finding them. If you are looking for persuasive metrics of long-term success, however, you’re going to have a much tougher search. That’s not because joint efforts are necessarily failing. Rather, it’s because most of them are relatively new, and many have not yet involved rigorous assessments of outcomes.

What makes the case of the Chesapeake Forest unusual is that the collaborators had a clear goal, and they achieved it. The results have paid off in ways that are plain to see and easy to quantify.

FRAME WORK

The Drucker Institute’s Phalana Tiller visits the Boston offices of Root Cause to learn three rules for successful cross-sector collaboration.

GREEN SPACE

As officials from the government, corporate and nonprofit sectors came together, they looked for ways to conserve parts of Maryland’s Delmarva Peninsula (shown here) while still supporting the local wood products industry. Photo: Chesapeake Bay Program CC BY 2.0

LUMBER LIQUIDATORS

The Delmarva Peninsula, 170 miles north to south and 70 miles at its widest, is bounded by the Atlantic Ocean to the east and the Chesapeake Bay to the west. Its name is an amalgam of Delaware, Maryland and Virginia, all of which occupy sections of its land. The topography is low and flat, and the soil is sandy, making it less hospitable to hardwoods such as oak or hickory and more receptive to varieties of pine.

In the 1990s, the largest property holder in the area was Chesapeake Forest Products Co., which had logged the land for a long time. But its profit margins were thin, and Wall Street was pressuring the company to branch out into more lucrative things. Now, it was looking to sell.

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Among the first to hear the news was Don Baugh, who at the time was vice president of the Chesapeake Bay Foundation, one of Maryland’s most respected environmental nonprofits. Baugh had known the folks at Chesapeake Forest Products for a long time. Years before, the foundation had acquired an old hunting lodge near company land, converting it to an education center, and foresters from the company regularly paid visits there to speak to students.

Upon learning that Chesapeake Forest Products might divest itself of its land holdings, Baugh reached out to John Griffin, who was secretary of the state’s Department of Natural Resources. “I went to John and said, ‘We will never in our lives have such an opportunity. We’ve got to put this in the public domain,’” Baugh recalls.

Griffin needed little persuasion. He knew that a sale of land this large would be unlikely to reoccur, and he passed word on to Maryland’s then-governor, Parris Glendening, who had a deep interest in environmental conservation. “The response was immediate,” says Glendening, a Democrat. Without the state stepping in, a good chunk of the land “would have ended up in development.”

From the get-go, it was obvious that this would be a tough deal, involving more than 278,000 acres spread across all three states. One nonprofit, however, was especially well positioned to navigate the difficult terrain. The Conservation Fund, founded in 1985 with the mission of preserving the environment while fostering economic development, had recently helped to broker the sale of 296,000 acres of timberland in Vermont, New York and New Hampshire by Champion International. The transaction was structured to keep most of the land in use commercially, but it also prohibited further development and put sustainable forestry plans in place.

Pat Noonan, founder and then-leader of the fund, started getting in touch with the many parties that might be involved in Maryland.

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A WOOD-BE BUYER

By this point, Chesapeake Forest Products already had one buyer lined up: a timber subsidiary of John Hancock Mutual Life Insurance. But Hancock wasn’t interested in the entire piece of property. It was focused on those forests lying on the western shore, which were productive and close to the timber mills. The Conservation Fund, by contrast, saw particular ecological fragility and value on the other side of the bay.

“We said, ‘We want as much as we can get on the Eastern Shore,’” remembers Evan Smith, who was on staff at the Conservation Fund. “And they said, ‘Great, because that’s the stuff we don’t want.’”

The land on the Eastern Shore amounted to 58,000 acres across the Maryland portion of the Delmarva Peninsula. In theory, then, the stage was set. Hancock was willing to give up that piece of property, and Maryland was willing to buy it.

Yet those involved in the deal still had a lot of challenges to work through. For one, the price tag for Maryland’s share of the land was $33 million—more than the state had at the ready. The holdings, meanwhile, were made up of more than 200 separate noncontiguous parcels spread over five counties, few of which cared to part with thousands of acres worth of property-tax revenue. On top of that, local businesses connected to the timber industry depended upon these forests for their survival.

At the same time, many environmental groups opposed any logging on public lands, while voices on the other side objected to taking so much land out of private circulation. Finally, the deal had to happen in a matter of months—not years—requiring a pace that state government rarely, if ever, runs on.

VOX BOX

STATE ACTOR

Maryland Gov. Parris Glendening, an ardent conservationist, didn’t hesitate when given the opportunity for the state to buy a giant piece of timberland on the Delmarva Peninsula. “The response was immediate,” he says. Photo: Baltimore Sun

A THICKET OF CHALLENGES

Overcoming all of these challenges would require exceptional discipline and coordination. “There was a prize here,” says Michael Nelson, who was assistant secretary of DNR. “There was an unbelievably precious resource to be had if everybody could become a player on a team.”

On the money front, Maryland had some funds dedicated to conservation, thanks to a 1969 initiative called Program Open Space, which directed that one half of one percent of the state’s transfer tax be put toward land acquisitions. Nonetheless, the state could not quickly rustle up more than half the purchase price.

“I said, ‘We don’t have access to all this funding right now,’” Nelson recounts. “So Pat Noonan, in his own inimitable way, took the head of the Chesapeake Bay Foundation and John Griffin and went a-calling on the Richard King Mellon Foundation.”

The Richard King Mellon Foundation, based in Pittsburgh, makes grants in human services, economic development and conservation. The hope was that it might help bridge the financial gap.

The decision makers at the Mellon Foundation were interested in the idea but wary of any negative impacts on local industry. So Noonan reached out to a consultant named Neil Sampson, veteran of both the government and nonprofit sectors, to ask him to write a report on the economic effect of retiring 58,000 acres on the Delmarva Peninsula. After a few months, Sampson had an answer.

“The forest products industry on the Eastern Shore was fragile, and if they took that land out and retired it, they’d kill the industry,” he says. “If they continued to operate it as forest land, they might not save the industry, but at least it would have a chance.”

To those involved with the deal, it was becoming increasingly apparent that the way to make things work was to allow timber harvesting and other forestry to continue on much of the land, even if it was owned by the state of Maryland. In the end, the Mellon Foundation made this an explicit condition of its proposal: It would put up $16.5 million for one half of the forest, 29,000 acres, and donate the land to the state of Maryland—but only if the state were to operate the land according to a forestry management plan that the foundation would commission.

“The next thing I got was another call to ask, ‘Can we hire you to do a sustainable management plan?’” says Sampson. “You always say yes, and then you wonder how you’re going to do that.”

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BEERS OVER A BONFIRE

Sampson had about six months to put together a blueprint, and that meant getting in touch with scientists, environmentalists and industry leaders. He assembled a 10-person planning team, and his efforts were overseen by a steering committee made up of Mike Nelson of DNR, Don Baugh of the Chesapeake Bay Foundation and Larry Walton of Chesapeake Forest Products. Chairing the group was David Sutherland, a senior vice president of the Conservation Fund.

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Baugh had an additional responsibility, unofficially, and that was to bring onboard detractors from the environmental community. “I approached one of the officials of the Maryland Conservation Council and brought her together in a very informal setting with the forester Larry Walton, who is a great environmentalist,” Baugh says. “Over a bonfire, and probably a couple beers, I told her we had an unbelievable deal, and she agreed to support it.”

By lending the credibility of the Chesapeake Bay Foundation, Baugh and his colleagues were able to win over most other skeptics, too. “You don’t find a lot of environmental groups willing to stick their necks out like that,” says the Conservation Fund’s Smith.

All the while, Governor Glendening’s office and the Department of Natural Resources were also keeping busy. “The pressure I had was to get it through the process,” Glendening says. That meant, in part, securing buy-in from the five different counties, some of which wanted to allow residential development on the land. Glendening found this pressure reasonably easy to resist. “It was balanced off by people who didn’t want their forest turned into a subdivision,” he says.

Griffin also worked to make sure that the tax revenues lost by the counties would be made up by the state. And Nelson, Griffin’s second in command, kept everything on the government side on track. “I was just the mechanic,” Nelson says, modestly. “I was the one who had to get the appraisals done, take the project to the board of public works and structure the ‘Mother-may-I’ with the legislature.”

 

REACHING CRITICAL MASS

In any project of such scope, there are tense moments and near misses. Resolving them tends to require setting aside self-interest, even to the point of costing one’s career.

One such moment came in the summer of 1999, when the deal reached a sudden point of urgency and required the governor’s approval. “Pat Noonan called me,” says John Griffin. “He said, ‘John, this has reached critical mass. Mellon and Hancock need an answer by Monday, or they’re going to walk.’”

Griffin, in his capacity as secretary of Natural Resources, requested a last-minute meeting with the governor on the Friday before the Monday. Told that his approval was required immediately, Glendening felt he was being backed into a corner. He was angry. He approved the deal, but Griffin was fired a month later.

“John was the kind of guy who would fall on his sword,” says Smith. Griffin simply says, “All of us in our professional careers need to make those decisions from time to time.”

‘Partnership’ is an abused word, but that was a partnership. We had trust in each other. We respected each other.

DAVID SUTHERLAND
Senior Vice President, The Conservation Fund

OUT OF THE WOODS

The Delmarva fox squirrel, once classified as an endangered species, is now off any such list and thriving. Photo: Chesapeake Bay Program CC BY 2.0

Another close call came right before the deal was supposed to close. As Smith tells it, Chesapeake Forest Products brought over 100 banker boxes of unorganized legal documents that related to deeds and rights of way. Faced with this eleventh-hour paper dump, the attorneys for John Hancock flipped out. But “Chesapeake said, ‘No, it’s gotta happen. We told Wall Street it was going to happen this quarter!’” Smith says. “So the lawyers pulled a series of all-nighters the week before closing and got everything in order and made it happen.

“They really snatched victory from the jaws of defeat,” he adds, “because it would have been easy to throw up their hands and say, ‘This isn’t going to work,’ and the whole deal would have cratered.”

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THE ROOTS OF SUCCESS

On September 10, 1999, the deal was finalized. Maryland had its 29,000 acres, and the Conservation Fund—with financing from the Mellon Foundation—had its 29,000 acres.

The following year, the Conservation Fund transferred its land to the state—land managed by a new company, Vision Forestry, which was led by consultant Neil Sampson and Larry Walton, formerly of Chesapeake Forest Products. In the meantime, the Conservation Fund had established the management contract with its fixed per-acre fee and all net income from the sale of wood products going to the state of Maryland.

Vision Forestry won two more successive contracts, before losing out in 2011 to a lower bid from Parker Forestry Services.

According to Kip Powers, regional forester of Maryland’s DNR, the Chesapeake Forest has paid for itself, taking into account both its original purchase price and ongoing operating costs. Logging continues to take place on some of the lands. Recreational activities are made available to the public on other sections. The Delmarva fox squirrel, once classified as an endangered species, is now off any such list and thriving.

So why did the deal work? What made this effort succeed when others do not?

What comes up again and again when you ask those involved are the terms “trust” and “respect” and variations of “goodwill.” Nearly everyone wanted the deal to happen, and they trusted one another to disagree on matters of principle, not narrow self-interest.

“‘Partnership’ is an abused word, but that was a partnership,” Sutherland says. “We had trust in each other. We respected each other.”

Sampson notes that the end goal—the mission—was always clear enough that it could motivate everyone even absent a designated whip hand. “There was no coercion or legalism involved with any of this,” he says. “I suppose everyone was operating on a platform of mutual objectives.”

This also made for good-faith discussions, which, Glendening stresses, included as many people as possible. “Even if you have complete authority and all the money in the world, you should never undertake a project of this magnitude without involving the other stakeholders … from the beginning,” he says.

If trust and open communication were essential, so was competence. Everyone involved with the deal managed his or her part properly. Leaders from different organizations came to count on one another to deliver—and they hardly ever disappointed. “You had this collection of individuals who were very skilled in what they did,” Nelson says.

In other words, everyone fulfilled what Peter Drucker saw as a basic responsibility—that is, to be “accountable for the performance of their institutions,” something that requires leaders to be “concentrated, focused limited.”

“They are responsible also, however, for the community as a whole,” Drucker wrote. “This requires commitment. It requires willingness to accept that other institutions have different values, respect for these values and willingness to learn what these values are. It requires hard work. But above all, it requires, commitment, conviction, dedication to the common good.”

It requires seeing the forest as well as the trees. *

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Monday Mandate*

What will you do on Monday that’s different?

REACH BEYOND YOUR OWN WALLS

Gather your team and discuss how you can, in Peter Drucker’s words, “take community responsibility beyond the walls” of your own institution without compromising “the single-minded concentration” that you need to be effective.

FIND ROLE MODELS

Seek out and talk to organizations that have successfully engaged in cross-sector partnerships. The consulting firm FSG is among those that can provide leads for where to look.

SWAP PERSONNEL

Set up an executive exchange with a high-performing organization from a different sector. Everyone is sure to learn a lot by spending time—and making a contribution—in each other’s world.