Mergers & Acquisitions and Human Services and Charities and Youth Development and Philanthropy

Shepherd lengthens its reach by merging with other charities

December 1, 2008
Shepherd Community Inc., a Christian-based organization serving the near-east side, is pulling other charities into its fold at a pace not often seen in the local not-for-profit sector.

Having completed two mergers in 2008, Shepherd plans to absorb two more small organizations in 2009. If all goes as planned, the headquarters and community center on East Washington Street will serve 3,600 children and adults by next fall.

Executive Director Jay Height said Shepherd is not looking to expand its reach beyond the three impoverished ZIP codes where it has worked since 1985.

"Even with this, it doesn't mean that we're the total answer for the neighborhood," he said.

The point of the mergers, Height said, is to broaden Shepherd's offerings and fill gaps in a "continuum of care" that stretches from pregnancy to adulthood.

He likened Shepherd's approach to that of the Louisville-based parent company of KFC, Taco Bell and Pizza Hut.

"We look at Yum Brand foods as a great model on how to market," he said.

The mergers also provide Shepherd economies of scale, a substantial benefit at a time the economic slump is pinching giving. Many local not-for-profit leaders have been encouraging more mergers among local charities.

"Our technical assistance is always available," hinted Milt Thompson, chairman of the Indianapolis Foundation and a longtime proponent of such deals.

Thompson, a lawyer and sports agent, has worked as a paid consultant to Shepherd in the past, and gave pro bono advice on its recent mergers.

At the Indianapolis Foundation, he said, "There's a lot of talk going on in philanthropic circles about organizational efficiency, and which ones are going to survive tough economic times."

In January of this year, Shepherd completed a merger with Jireh Sports, a Christian-based group that offers kids in the Martindale-Brightwood neighborhood gymnastics, tae kwon do and other non-traditional sports.

The deal brought 600 kids under Shepherd's umbrella, making them and their families eligible for after-school tutoring, job training, a free health clinic, and a food pantry, among other services. Jireh's director, Tim Streett, became Height's second-in-command.

Height and Streett already knew each other well, but completing the deal meant tackling a host of business and legal issues, including baseball fields owned by Jireh that had environmental contamination.

"It took us a year," Height said. "But it gave us a template to do others."

Over the course of this year, Shepherd has replicated social programs for teens and women that were dropped by Wheeler Mission Ministries, and absorbed Area Youth Ministry. The 30-year-old organization taught character development at Indianapolis Public Schools and had a drop-in center across from Arsenal Tech High School.

In January, Shepherd will merge with Down But Not Out Communications, a prison ministry started by east-side native and former boxer Alphonso Bailey. Then, in the spring, Shepherd plans to take over Seeds of Success, which employs eastside senior citizens as mentors to first-, second- and third-graders.

In each case, Height said, the other side's board made the first overture.

While each organization had reached a point where it struggled to grow, Height emphasized that none was on the brink of failure.

"We're not rescuing anyone," he said. "We're never going to compromise who we are, and we're not going to put at risk those we serve."

Managing growth

Before the first merger, Shepherd Community estimates that it reached 500 people a year with meals, a food pantry, and its education programs for pregnant women, children and adults. In 2006, it raised $3 million to renovate the community center and add a half-day health clinic on Saturdays.

In the fiscal year ending Aug. 31, 2007, Shepherd had 36 employees and a budget of $2.4 million.

The additions of Jireh and Area Youth Ministry, coupled with its own initiatives, bring Shepherd's client base to roughly 2,500 today. In 2008, the organization had 64 full- or part-time employees and a budget of $3.4 million.

Height said the growth is manageable because the cost of service has dropped from $1,700 per person to about $1,000. "Our staff has embraced the idea — we're just stewards of someone else's money."

Tara Seeley, a grants officer with the Central Indiana Community Foundation, said it's too early to call the mergers a success, but she praised Shepherd for its due diligence.

"The Shepherd board and the Shepherd staff are extremely strategic," she said. "They're extremely careful."

Shepherd also took a close look at each organization's donor base.

"In all of the mergers, we said we need to figure 25 percent of the money not continuing," Height said.

In the case of Down But Not Out Communications, the existing board agreed to continue raising money for Bailey's salary.

With two more mergers on its plate in 2009, Shepherd has a projected budget of $4.1 million. The bulk of that budget — nearly $3.5 million — will have to be met by raising cash or in-kind contributions.

Working in two worlds

The job falls primarily to Height, a 43-year-old father of three who began his career running Republican campaigns in his native Ohio.

"I probably was trained by some of the best fund-raisers in the world, folks like Lee Atwater," Height said. "I've been able to take those skills and apply it to work with the poor and less fortunate."

Height has been executive director of Shepherd Community for 10 years. With the organization growing behind him, Height spends 70 percent of his time fund raising.

"He's a 24-7 evangelist for that organization," said Gary McKay, treasurer of the board for Down But Not Out Communications.

As an example, McKay noted that Height agreed to meet personally with each of Grace Community Church's roughly 200 small, home-based groups. Grace is a congregation of several thousand in Noblesville.

"People just don't do that," McKay said. "The amount of time that takes, and energy that takes, to speak to life groups of 10 or 20 people, is huge."

Height lives six houses off Washington Street, and prefers to call Shepherd's clients "neighbors."

The center was started by an adjacent Nazarene church, also called Shepherd Community. Height is pastor of that church, which has about 170 members, but he said clients are not required to join.

"I'm not going to force you to embrace my faith," he said. "We have Muslims in our programs."

Shepherd Community taps volunteers and donations from the suburbs in huge numbers. Board President Dan Benson said it helps that leaders of churches such as Grace Community, where he's an elder, exhort their members to get involved with the city.

"Shepherd also is serving the suburbs by allowing people from the suburbs to engage and connect and serve the poor," he said.

One of Shepherd's major volunteer events is the delivery of hundreds of boxes of groceries to residents on the Sunday before Thanksgiving.

"When you get a person's heart, many times their pocketbook follows," Benson said. "Many of our donors have had this experience of, 'I can make a difference.'"

Shepherd also has attracted money from secular foundations and the federal government, which three years ago granted $750,000 for strategic planning.

"They've got plenty of name recognition," Thompson said. "And it does go beyond faith-based organizations."

A host of churches, most clustered around 10th Street, are trying to reach the area's residents. They work alongside not-for-profits, including the John H. Boner Community Center, which serves 7,500 people a year.

With so many organizations working in the neighborhood, Height said he sees no reason for Shepherd to stray from its "continuum of care" model into, say, renovating houses.

Instead of mergers, he's looking for strategic partnerships to help Shepherd get through a year of "overwhelming" demand.

"We're just trying to be a strong, healthy organization that brings systemic change to a neighborhood that badly needs it," he said.
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