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Apr 10 2018

From Struggling to Thriving:Effective Management with Harold Rice CEDA

CEDAJamie and Harold sit down in CEDAs office in the top of the 567 W Lake St building in Chicago.  With a backdrop of a ton of natural sunlight and possibly the best office lighting in Chicago, Harold discusses his effective management and turn around experience at CEDA.  At the time that Harold took over the organization, it was clear that one of the largest private, non-profit Community Action Agencies in the country was struggling.  

Harold took on the challenge, and has since turned CEDA to a forward thinking organization with real impact in Chicago.  He believes in empowering and supporting employees, and it shows.

Speaker 1 Welcome back to Episode 11 of the Verde Podcast. Every week we talk to local business leaders and entrepreneurs to understand the real story that doesn’t make it to the spot light, but is how actual businesses are actually built here in Chicago.

Toady we’ve got a fun twist on our normal interview. We’ve got Harold Rice, who is the President and CEO of CEDA, which is a very large, nonprofit here in Chicago that does some good work.

Welcome, Harold.

Harold Rice Thank you. Thank you.

Speaker 1 Well, Harold. If you don’t mind, start by giving us a little background about CEDA itself. How it was started and kind of the history of the organization.

Harold Rice CEDA is part of the Community Action Agency Network, nationwide. Community Action was born out of the document that was signed by President Johnson back in 1964, which was his War on Poverty. Our sole purpose is to stamp out or alleviate poverty for families and individuals. In the birth of that, the level of funding or the type of funding was what they called, “CSBG”: Community Service Block Grant Fund, that kind of kicked us off.  

All we do is look at ways to bring people out of their impoverish situation and bring them to a point of self-sufficiency.

Speaker 1 You joined the organization about three and a half years ago. Tell me about what you came into, and how big was the organization, and some of the challenges, and also, where it is today and what’s happened since then.

Harold Rice Well now you’re bringing back some nightmares. CEDA was my challenge, my charge. When I took the assignment, Mr. Phelps, was to shut CEDA down. At that time, we were 206 million dollars in size, private, non-profit. The board wanted me to shut it down or reduce it from a 206 million to an eight or 10 million dollar agency, because of the dept, about 40 million dollars of dept. We had a federal investigation. We had net assets of -3.5 million.

Speaker 1 Wow.

Harold Rice And about over two million dollars of lawsuits. And violations up the wazoo.

Speaker 1 Yeah.

Harold Rice The challenge was insurmountable. They brought in a number of consulting firms. Everyone pretty much said, “Shut it down. Change the name. Make it go away.” That was the push. I’m a little hard headed. I decided to hold on to, what I thought were, the best parts, the core, of what made this organization be what it used to be. It really boils down to people.

At any organization that I take over or run, I do what I call a “one on one getting to know you.” Get to know my staff, their goals, their aspirations, their dreams, and so forth. How do we integrate that, or does it integrate?

If I find a commonality, a common ground, then I have something to work with. If I don’t, then yeah, shut it down. I found that I had a committed group of about 400 people that really believed in the mission. They were beaten down, you know, beaten up a lot, but they really believed in what they did. I figured I’d run with that.

Speaker 1 When you came in there was about 400 employees, or was there more that you had to shed some loose?

Harold Rice We had 800, and when I came in, we were about 400-500. We had to continue … You know, typically, in most organizations, your largest expense is payroll. I think I cut the number of people down to about 200. I kept cutting back in areas that we didn’t have a good handle on and we had to improve.

Speaker 1 Right.

Harold Rice I think we got down to about 200 people.

Speaker 1 How about today? Are you staying around that level or you guys trying to grow?

Harold Rice We’re about back up to 400.

Speaker 1 Oh, wow.

Harold Rice Yes.

Speaker 1 You really found a core group to build around and then you went after it?

Harold Rice Right. Right.

Speaker 1 Cool.

Harold Rice Yeah.

Speaker 1 What’s the annual budget now, compared to … ?

Harold Rice Annual budget now is about 150 million. We lost a 30 million dollar Headstart Program because of violations. We’ve solved all of the violations. We’ve cleared all of that up. It’s just a matter of, now, is this a good time to go back for Headstart? We have a couple of other initiatives that I want to focus on. My officer group and I, just yesterday, talked about, if and when to go back for Headstart.

Speaker 1 Many people, at least kind of in my circle, that may or may not be listening to this, know you through the weatherization work that CEDA does. Do you mind talking a little bit about that, and how big that is of your portfolio, and describe it a little bit?

Harold Rice Sure. Our Weatherization Group, which was the group that had the federal investigation, at that time, when I first came on board, they were about 21 million in size. The largest in the US. We were losing over about a million to a million and a half a year. I came in to bring in the right leadership, of which John Patty, my Director, is one of them. Retained the talent that had institutional knowledge and the desire. The majority of them were trying to jump ship. Again, we had the one on one conversations. They took a chance on my leadership. I didn’t beg them to stay. They wanted to make a difference.

We purposely and planfully went from about 21 million, cut back to about 10 million in size, to really make sure that we knew what we were doing and to fix the areas that were broken. Now, we’re about 17 million now. We’re growing back at a pretty rapid rate.

The Weatherization Group, out of the total budget for this organization, is the third largest department. Our first largest is the, and they’re all considered the Energy Department, which is LIHEAP. A lot of folks know us from LIHEAP. That is about 120 million, in volume. The next largest area would be our WIC, Women, Infant, and Children.

Speaker 1 Okay. LIHEAP is Low Income … ?

Harold Rice Low Income Home Energy Assistance Program.

Speaker 1 Okay.

Harold Rice We will go in, all of this is income based, for low income individuals, seniors that are low income, we will provide utility supplemental payments for them.

Speaker 1 Okay. People when they’re getting hit by their heat bills, and they think, people’s gas or [inaudible 00:07:27] is helping them out, usually it’s funneled through you guys?

Harold Rice Yes. Oh, yes.

Speaker 1 Okay.

Harold Rice It’s kind of an interesting relationship with the utility companies. There’s the federal funds, that come out of Washington. That comes directly to CEDA and then to the individuals.  Then, there’s the supplemental funds, which every time someone pays their utility bill, if you look at your bill, about 47 cents comes out of that to replenish the supplemental fund. About half of that comes to CEDA.

Speaker 1 That’s a line item tax that just goes directly to this program?

Harold Rice Yes. That’s about 20% of our volume.

Speaker 1 Man. I cannot stop thinking about three and half years, you’re in Illinois. We’ve got problem after problem with state funding support, the federal government is shrunk, and you’re still growing. You took on a challenge.

Harold Rice It wasn’t easy. I appreciate that observation. Actually, the first year of my tenure here, I had the 40 million dollars of dept and the net assets of -3.5 million, and two million of lawsuit. Within that first year, 95% of that 40 million was gone. Net assets reversed. We had about an eight million dollar swing. Our net assets, which is kind of where it’s floating around now, a little bit higher, 5.1 million. All of the HR lawsuits, the two million dollars of lawsuits, were settled for a fraction of the cost.

Speaker 1 Yeah.

Harold Rice After that first year, we were being kicked out of where our other location, because we were 1.1 million in arrears. We negotiated a different rate that we could afford. That was done. We had to sign an agreement, a contract, stating that we would be out by a certain date, with the agreement that we had somewhere to land. That’s how we wound up here, built this whole place out. It was a story behind how we got in here, for a fraction of the cost, because we were broke. We did not have any unrestricted, or any reserves, built up over time.

After that first year, I was breathing a sigh of relief. Our new governor doesn’t sign the bill. He vetoes the first bill. I had to lay off all of my employees. I think we were about two weeks away from shutting the doors.

Speaker 1 Wow.

Harold Rice We had about a handful of people, about 10 people, running the organization. Including self, in two weeks, that would be it. I called some friends that I knew worked for the governor, I didn’t know the governor personally, to have a meeting with them. I was, from what I was told, the only person he granted an interview. It was to talk to him about the impact of that decision. These were federal pass through funds, which he couldn’t use to fill the budget gap anyway.

Speaker 1 Right.

Harold Rice To restrict that, was harming a lot of the individuals that were already harmed. You were taking poverty and driving them deeper into poverty. With that conversation, got to know Governor Rauner pretty well. He signed the Bill: SB 2042, which was to continue, or to allow, the flow of federal pass through dollars. The state portion supplemental funds was still tied up to the state budget, and about three months later, through legislative action and support, we got that released. That restored us to full board.

Speaker 1 In my business, which is about eight years old, there’s been a couple times where … It’s never been like a Governor Rauner decision, but there’s decisions that are made higher up in the state, and it just immediately trickles down and effects everyone in my company. It’s humbling to realize, no matter how much you think you’re in control, you’re not.

Harold Rice No.

Speaker 1 I would love to of been a fly on that wall of that conversation you had with him, to hear the realization that something they probably were doing for political reasons, which was probably felt righteous on their part, to see the effects it had on real people.

Harold Rice There’s an old African proverb that espouse today and that is: “When two elephants fight, the grass gets trampled.” It was Madigan and Rauner battle.

Speaker 1 Yeah.

Harold Rice Individuals who are voiceless and powerless were getting caught up in that battle. Along with the fact that I had an employee who was, prior to the budget impasse, came to me and said, Mark said, “I have stage four cancer. I’ve been given a year to live, and I just want to let you know.” I was like, wow. I have another employee who is still with me. She has an autoimmune disease, a very serious one, where it attacks her internal organs. Her medication, with insurance, was 700 to 1000 dollars a month. I had to lay both of them off. That just tore me apart.

Speaker 1 Yeah.

Harold Rice Mark lived for an additional year, but even when I had CBS interview him, he made the statement that he’s the only sole income provider for his family. He now has to make a decision, either chemo treatments or feed his family. I’ve made the decision to feed my family. I was happy to get those funds restored for him. I was happy to get the funds restored for my other employee, who went without her medication because she was laid off. That was really a driving force to talk to Governor Rauner. I shared those stories with him.

Speaker 1 One thing I keep thinking about as you describe your … I’ve never been very strong on the financials within my own company. I’m starting to get better. I started learning every day. Every year I learn a new term and how it helps. It sounds like you’ve had years of experience being comfortable with these terms and how you run. Tell me about some of your background, where you were before CEDA.

Harold Rice Prior to CEDA, I had a couple of small businesses. The largest one that really kick started, or really spurred my financial awareness, was owning and operating a number of McDonald’s restaurants. I had the dubious honor of being given stores that were being shut down to do turn arounds. Out of the seven restaurants, six of them were turn around situations.

Speaker 1 Cool.

Harold Rice You better know finances and numbers real quick. I always say, “Figures don’t lie, but liars do figure.” The answer is somewhere in the weeds. Understanding, not only what the numbers say, but how did you get to that decision. I always say, “Your PNL, your balance sheet, is nothing more than a report card on management decisions.” Once you understand what went into that number, whether it was nice number or a bad number, there was a decision behind it. It forced some other things.

As I shared with Governor Rauner, when I had that meeting with him, he asked a similar question. When I do turnarounds, what do I look at? I said, “I look at three things. Fiscal, operational, and the last, which is the toughest, culture.”

You can get the numbers right, you can get the operational piece right, but if you don’t get people working together, it all falls apart. Starts the dominoes.

McDonald’s in my early years, it was turning around organizations like that, and having to know the numbers part. After that, it was … Let’s see, I left McDonald’s, well, I was Chief Development Officer, but I had another business that I was part owner of. It was a nutraceutical firm, out of Salt Lake City, Utah, called Thorough’s Laboratory. They were in a fairly similar situation. They were a young, start-up business and had bad leadership. I came in and, initially as an investor, once I saw my investment dwindling, the board asked me to come in and help turn it around, which I did, and then got out of it.

Speaker 1 That’s cool. You and I were talking a little bit before the podcast about McDonald’s, who my company now works a lot with, and we’ve got some common friends that we’ve bumped into a few times. Yesterday, in fact, I got a call from one of the franchise owners that we’ve worked with for a couple years. He said, “I bought two stores. Go take a look at them. I want you to do these three things that we did together.” He had kind of a playbook in mind.

It was interesting. I had the thought yesterday that all these employees probably just got a new boss. Right. They don’t fire everyone and then hire all new people. Right. It felt like there was a little bit of transition going on, in the culture. I remember thinking, the communication wasn’t there, things weren’t there. I could see how that … I would of loved to of been a fry guy, I guess, at one of your restaurants, during the turnover. Who drives the culture in a restaurant like that?

Harold Rice I always say, you look at any organization, if it runs like crap, it’s leadership. It is the person at the top. They are the ones, the shot callers.

Speaker 1 Yeah.

Harold Rice You can’t blame it on the employee that doesn’t show up. You can’t blame it on a piece of equipment that doesn’t work real well. It’s the leadership. It gets back to that person who bears the title, President, or CEO, or COO. That’s where it all starts.

Speaker 1 Yeah.

Harold Rice That’s where the buck stops. It’s a tough job, because you have to set a culture. My culture, when I turned over the McDonald’s, it was different from the previous owner. I had a very involved family culture. Some owners were very dictatorial and autocratic. Some were successful with that leadership style. That was not a culture that worked for me. I’m a very engaging individual. Even now, I believe in management by wandering around, getting to know my employees, making sure that they understand. I believe you inspect what you expect. If they don’t know what you want, if it’s left up to them to come up with how the place should run, you’re going to get a hodgepodge. Like Forrest Gump would say, “It’s like a box of chocolates.” Just never know what you’re going to get day in and day out.

Speaker 1 Yeah. That’s one of the things I struggle with personally, a lot, is, you know, I was a firefighter before this. I didn’t get an MBA. I don’t have a lot of management experience. I struggle with letting people know what my expectations are and what I want, because I’m very hands off. I just don’t have the attention span to really describe everything I want and how it should be done. I become a very hands off boss, which is good in some ways.

Harold Rice Yep.

Speaker 1 Whenever I interview employees, I always ask, “What do you look for in a boss?” Everyone says the same thing. “We want someone who lets you have space and doesn’t micromanage.” Which I think, I flirt on the edge of just not paying attention, which isn’t good either. I appreciate where you’re coming from.

Harold Rice I’ll tell you, every employee, whether they say it or not say it, they want direction. They want to know what are they do to.

Speaker 1 Yeah.

Harold Rice If not, they’ll make something up.

Speaker 1 Yeah. It’s tough. It’s a fine line to walk.

Harold Rice Right.

Speaker 1 I find doing these podcasts. I think we were talking about why I do this. Part of it’s just talking to people like you so I can be better. That’s something I’ll take away from this. I appreciate that.

Harold Rice Great.

Speaker 1 We kind of already talked a little bit about the most challenging time. I think we’ve got that covered. What would you say your favorite parts are of being the CEO or President of an organization like this?

Harold Rice I’ll tell you, first and foremost, is watching people grow. It’s taking a dysfunctional organization and the folks that work within it, struggle within it, and then watching them become more than what they thought they could be, and watching them aspire to be more. Sometimes you just, I think it was Steve Jobs that said, “You hire the right people, and you get out of their way.” To watch individuals take charge and find out that they got this. Not only do they have it, they can do more. I get really pumped, because the residual of that is that the organization grows and benefits from it.

That’s probably my biggest charge, outside of making sure that the organization is sustainable to do what the mission says you want to do. You don’t get any of that done without the person doing the job.

Speaker 1 Yeah.

Harold Rice I came out of engineering. I remember years ago when I did R&D work in solar energy. I remember at 3M, we had the press out there. We had everybody looking at this great home, it was a sample home, that we had built. Air condition and heated off of solar energy. The engineers, we were kind of left out of it. Marketing took over. They were ready to kick it off. Lights, camera, then no action. No one could figure out what was going wrong, what happened. Turned out the one guy just didn’t flip the switch. He wasn’t motivated to flip the switch, because he wasn’t a part of the process. His answer was, “They didn’t talk to me. They didn’t tell me …” He wasn’t being malicious about it, but he wasn’t included.

Speaker 1 Yeah.

Harold Rice Again, it gets back to, that one person that has to flip the switch.

Speaker 1 Yeah. I just read this book by a Navy captain of a ship. I’m blanking on his name. It’s about … “Turn The Ship Around”, I think, is the name of the book. It’s about a Navy Submarine Captain who comes in and does a turnaround like you talk about. He’s got one specific example of during some changeover, I think it was of the nuclear weapons, I can’t remember. It was some pretty important change over. One of the guys hit the wrong switch. He talks a lot about employees feeling engaged, how to engage them, and also, to feel empowered, to be conscious in thought about what they’re doing.

It sounds like you got to hit a lot of different check marks on someone to make them engaged, do the right thing, and also participate, fully, in what they’re doing. Be able to set up and say, “Hey guys, I got to hit the switch tomorrow, or we’re not gonna-

Harold Rice Right! Right!

Speaker 1 You know? It’s easier said than done. I’ve been in my own professional career, I’ve definitely been, at times, where I was checked out. You say it enough times, “Hey guys, I got to hit the switch tomorrow.” Enough people tell you to not worry about it, you stop worrying about it.

Harold Rice Yeah. Yeah. It borderlines on micromanaging. I’m not a micro-manager, but I want folks to understand, here’s the plan. It’s an overall plan for the organization, but this is where you fit in. Your part is a very important part, because if you don’t do your part, the plan doesn’t really work that well. I believe in making sure that my maintenance guy, even though he cannot articulate the whole strategic plan, but if you sat down with him, he could tell you, to boredom, what his role is. Day in and day out. That fits in with another piece.

Again, I’m there to … I believe in, you can support negative behavior or you can support positive behavior. The choice is yours as leader. I used, even in my McDonald’s, when I would walk around, I would tell people, “Come into my office.” I’d have to talk to them. Of course, they’re all jittery. They say, “Well, what did I do wrong?”  I say, “What makes you think you did something wrong? I’m here to tell you what you did right.” They walk out of there on fire. Of course, they’re telling other employees. It’s contagious. I believe in catching people in doing something right, to reinforce that positive behavior.

Speaker 1 Cool. Last question I always like to ask people is, you’ve known me, and this is just my personal passion and sustainability. It’s what I’ve been doing, on the side, for 30 years, and what I’m doing professionally for the last 10. How do you make sustainability a priority at CEDA? Not just, ’cause you guys do obviously important weatherization work, and other initiatives I know that you’ve guys got externally. How do you make it a priority within your internal organization?

Harold Rice First of all, again, it gets back to, making sure that everyone understands the plan and how they fit in. I always say the foundation to any organization are the folks, your people. You have to invest in them, in some form or fashion. If you’re not, someone else will, and they leave. They may have that institutional knowledge. The overall goal, like in our particular situation, being the third largest private, non-profit in the United States, we’re here to stamp out poverty. We’re also here to not sit on our laurels. We’re here to come up with creative ways to eliminate poverty and engage people and help people to a point of self-sufficiency.

I mentioned earlier that we’re engaged in solar energy for low income individuals. That includes a lot of things. One, it helps lower the energy costs of wherever they’re living, in an apartment or a home.  We’re using it also as a job creation piece, as well. We want to hire individuals from the neighborhood. First train them, and then hire them, to make sure that they have a livable income.

Sustainability is more than just bringing in the money. That’s part of my job, is to be in Washington, DC and Springfield, and make sure the funds are still flowing. The other part of sustainability is having … In McDonald’s we call it, aces in their places. Making sure we have the right people in the right place. They know what they’re supposed to do. They understand the plan. If we fail, we fail quickly. We celebrate that and move forward.

Sustainability has a lot of different pieces. It’s not always being successful. It’s learning from the failures, as well, to be successful. I was telling my son’s wrestling coach, “Practice doesn’t make perfect.” He looked at me, and I said, “Practice makes progress and consistent progress makes perfect.”

Speaker 1 It’s been a pleasure. I was at your offices, must of been about three years ago, it’s like a transformed space. The light in the space. The feeling about it. Congrats on the first three and half years. Here’s to another 10.

Harold Rice Thank you, man. Likewise to you. Thank you, very much.

Speaker 1 Thanks for catching up. We’ll look forward to again soon, Harold.

Harold Rice Okay. Looking forward to it.

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