Here's what I thought I'd do. I know that this is on social finance, and I thought I'd just take you through our story and the elements of social finance that we've used in our story, and how that might apply to public safety, if we link that to it.
We have been about employment opportunities for disadvantaged populations. Social Capital Partners was formed in 2001.
I'm one of these lucky people who happened to be in the right place at the right time. In the private sector, the wheel of fortune spun awfully well for me. It sure doesn't spin well for everyone, and I thought, how do I take my business experience and leverage it to do good?
The thinking behind Social Capital Partners was this notion. Why have we separated the world into what business does, what non-profits do, and what government does, when a lot of the innovative solutions are probably somewhere in the intersection of those things? Social Capital Partners said, “Well, why don't we actually try to see if we can't make some of these new approaches effective and why don't we take a particular social challenge?”
The one we took was this one: how do you find, in new and innovative ways, meaningful employment opportunities for people who face employment barriers? We've been through three phases of that work. I'll just describe quickly—obviously, quickly—those three phases. Maybe somewhere in there we'll generate some questions.
In our first phase we asked ourselves, why not start up businesses that do this as part of their DNA, the social enterprises? Again, to make a long story short, we played the role of social venture capitalists, whereby we provided funding, sometimes in the way of loans and sometimes in grants, but only to organizations where at least 50% of their employees come from disadvantaged populations.
I'll give you an idea of the types of things we did. There's a property management company in Vancouver today that's owned by a charity that helps women who were victims of violence. It employs 200 people. There's a renovation company in Winnipeg today that employs urban aboriginals from the inner-city neighbourhoods of Winnipeg. It employs 45 people and today is still profitable.
By the way, and just as relevant to this committee, approximately half of those people had criminal records before they were employed.
There's also a bicycle courier company in Toronto that hires directly from youth shelters. There are 12 thrift stores in Montreal that are hiring directly off the provincial social assistance rolls.
Those are the types of organizations we work with. Each of them has an interesting story, but just to get through this, I'll say that at the end of five or six years we stepped back and asked ourselves, where are we? We said that on the one hand we had proven one of the things we wanted to prove, which is that you can make these double-bottom-line companies work. They can work financially—they can be profitable and sustainable—and they can work socially, in that they can transform lives.
On the other hand, it had taken us five or six years to provide 300 or 400 jobs, and what's that in the global scheme of things? We got into this change of the landscape to try to make this more the way we as a society think about generating some of our economic and social returns, and frankly, what we are is an interesting magazine article. We're seen as an anomaly.
We asked ourselves what we had to do to change the landscape. We said that if we were going to change the landscape, we would have to do two things. One, we would have to engage the private sector in what we're doing, because otherwise we were going to be seen as an anomaly. Two, we would have to make it more of a cookie cutter, because start-ups are hard, and start-ups are arguably even harder with this model, and we can only do one deal a year because we have to drop everything we're doing to figure out how to get a business to work.
With that, we thought, private sector, cookie cutter; what about franchising? Why not go to established successful franchise operations with our value proposition? That proposition was that we would provide start-up capital to a business person who wants to buy one of the franchise locations. We would make it subordinate to their bank debt and do it at attractive rates. In fact, our rates are actually tied to what our social mission is.
Our condition for our loan was that they had to implement a community hiring program. They had to agree to a fixed number of their employees being hired through the community service agencies that were helping people who face employment barriers. Our promise back to that business owner was that we would get them a competitive pool of candidates to choose from, and that if we did not deliver on that promise, they did not have to deliver on their promise to hire the fixed number. We said that they would be the sole judge of whether or not we delivered on that promise.
We effectively de-risked it for the private sector. We thought that was the way to get them to buy in. We tie our interest rates to the number of community hires, so as they hire more, their interest rates come down. We link our financial return to our social mission.
Again, to make a long story short, we've done almost 60 of those, mainly in the car service area. We like the car service model. Mr. Lube and Active Green and Ross are our biggest ones.
We like the car service model because you don't need that many skills to change oil—although as I always joke, it eliminates me—and you can work your way to being a licensed mechanic. We liked those ones where there was a good socio-economic outcome assured for people who are ready to turn their lives around.
We thought that was the idea, that we would do hundreds of franchises, thousands of jobs. The model is working the way we hoped in the sense that we can now do two or three deals a year, because we don't have to figure out the price of an oil change or what to sell a winter tire for, all the things we did have to figure out in phase one.
A couple of things happened which I probably won't go into the details of, but they made us realize the idea was much bigger. It was really when Active Green and Ross came to us and said, “Okay, we want to use your community hiring program in our company owned stores. We don't need your financing.”
We thought, wait a second; we thought the financing is the carrot and stick to make this whole thing happen. We offer a carrot of attractive financing. We have the stick we call your loan, if you don't do this. They said, “No, you found us access to a labour pool we never would have had access to. They're working out. It's the right thing to do for the community. Why wouldn't we do it?” We thought, yes, why wouldn't you do it. Why wouldn't everybody do this, if someone made this easy for them?
After doing this for about 50 and 60 franchise locations, we learned two things. One, employers would do this if someone made this easy for them. Two, it's very difficult for them. The reason it's very difficult for them, and this might be the subject for more questions in terms of the details, in simple terms is the system at large has never considered the employer as important a customer as the person for whom we're trying to find an employment opportunity.
So, product gets to market: product being a job-ready individual who faces an employment barrier; market being an entry level job in a company that has a good career path. Product gets to market in Canada to literally thousands of community service agencies whose training and background is primarily as social workers. They don't speak the language of business. They naturally think their customer is the person they're trying to find an employment opportunity for which makes sense.
They don't think of the employer as strategic. They think they're in a transaction relationship with those employers where they send their job candidates out to all the various job postings out there, not in a strategic relationship with that employer, where they say to that employer, “What makes for a successful lube tech at Active Green and Ross? What are the characteristics of that? Where are your pain points? We are going to solve your pain points.”
We realized we were playing a band-aid in the system. We call ourselves bilingual, not because we speak English and French, sadly. It's because we speak the language of business and we speak the language of community service organizations. We get that we have to make the employer as important a customer in the equation as the person we're trying to find an employment opportunity for in order to provide as many employment opportunities as possible for the people we're trying to help.
In a system this large, we spend billions of dollars on employment, training, and social assistance. For the most part, employers aren't involved in the design for that training. That training isn't linked to our future workforce development shortages, and very little of the funding is actually tied to successful employment outcomes.
A successful employment outcome is what the supply side of this equation wants. The people we're trying to find jobs for want to find jobs they can stay at and progress at. It's also what the demand side of the equation wants. Employers want to find people that can stay and progress.
At the heart of what we believe now is that we should be working at the systems level and trying to make the system a much more of what we call a demand-led system where both customers are recognized as important. We think it's the single biggest lever that exists out there to provide way more job opportunities for people who face employment barriers. If I link it to a public safety issue, etc., I think this demand-led lens could and should have a big impact on the design of a kind of a way that any system would be thought of.
We believe that the key for all of us in many ways is that employment is as important a thing that we can do for not only our economic outcomes but for our self-esteem and confidence. I think that lends very much to a public safety or recidivism issue as well.
At the heart of what we are now trying to do is work with employers, governments, community service agencies, and existing recruiting agencies to think about how to implement a more demand-led system.
We've released a white paper on what a demand-led system would look like, in conjunction with Deloitte. We are doing a couple of demonstration projects for a couple of provincial governments. Our approach is to demonstrate what it would look like on paper if you were designing a system which starts on the demand side and works backwards. Where do we know there is going to be meaningful employment opportunities in the future? What sectors will those opportunities be in?
In our demonstration, we said we would get employers from those sectors to commit to 10 community hires a year for five years. It's not a big number, but it would give us a cohort of 100 per year. We would get those employers to track the employment outcomes of those 100 versus the employment outcomes they are getting hiring those same people from other channels.
Every year, using the data and with feedback from the employers, we will iterate every step of the value chain on the supply side, from the intake to the assessment, pre-employment training, placement, post-employment support provided for the people we are trying to find jobs for, to determine what is missing and where we should intervene. This is so that we can deliver two things to the governments in five years' time. One is a business case for employers to hire through this channel, by providing data on the employment outcomes and by having 10 CEOs out on the conference circuit with us talking to their peers on why they should do it. The second thing is, we could tell governments exactly where we think they should spend their money to leverage exactly...where we think the system should be measured, managed, and funded.
