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Applying Business Logic to Philanthropy: Adream Foundation

This case study was written by Cui Huanping and Zhu Yunhai under the guidance of Professor Zhu Rui, and was originally published as part of CKGSB’s China in Transition (2019).

Structured like a business and operated on commercial lines, the Adream Foundation is powered by the language of efficiency, and the use of business matrixes and financial models.

It may not have been the goal of Adream Foundation’s founders, Pan Jiangxue and Wu Chong, to rework the philanthropic relationship between donors and recipients, but that is what they ended up doing. Their basic aim was to improve educational quality in China’s countryside and inner cities, but given their backgrounds, it was perhaps inevitable that these two financiers would look to inject a dose of efficiency that was sorely missing in China’s charity sector when they started in 2007.

Adream found a way to make a mark, not just by scaling up nationwide efforts toward an admirable cause, but also by repositioning philanthropy as a successful and trustworthy financial proposition in a country full of civic potholes. They inherited a linear charity model and invented an integrated resource platform, turning donors, local governments, schools and teachers into impassioned “dream partners.”

In many ways the Adream charity operates like a regular company. It offers a range of products, including custom-designed classrooms known as “Adream Centers,” lesson plans that form the “Adream Curriculum,” a training program for teachers called the “Adream Guide,” and “Adream Box,” an online support platform for teachers. In the years since its founding in 2007, the foundation has set up 2,973 Adream Centers around China, serving 3 million plus students and teachers.

Chart: The Adream Foundation organizational structure

How Adream started

Before founding Adream, founders Pan Jiangxue and Wu Chong both served as senior executives in the world of finance. In 2007, they resigned from their posts to establish a charity based on their core belief that educational quality was more important than educational hardware. They wanted to enhance the student learning experience and upgrade the students’ abilities, attitudes and knowledge in order to enhance the young people’s prospects beyond the school gates.

In October 2007, Pan and Wu incorporated the Cherished Dream China Education Fund in Hong Kong, and initially worked with the Shanghai office of Project Hope, a state-backed public service organization, but it proved a mismatch. Project Hope provided funds to local foundations to set up Hope schools and stayed away from construction and operations themselves. The model favored by Pan and Wu involved close monitoring how the money was spent and heavy involvement in project operations.

The Adream Foundation had three guiding principles: Helping people help themselves; using management and financial models, and building effective, professional and sustainable charitable operations.

Building a standardized process

Having decided to provide quality education to marginalized parts of China, the Adreamers then considered the “products” to be offered. They originally wanted to set up libraries, but found that remote libraries were hardly being used while classrooms were in strong demand. So, to maximize their value, the basic units of Adream’s quality education plan was to build centers equipped with the internet, computers, books and multimedia devices.

These first Adream Centers proved hard to set up in remote areas. The Foundation sent designers to each site to design each center individually, and the centers were then constructed with the help of local education bureaus. But bidding irregularities and problems with the delivery of customized furniture to remote villages made them think again.

In 2010, a more effective construction process was created by which centers have a standardized design and construction, with installation tendered out. School leaders fill in an online application form and provide a floor plan and photographs from three specified angles, and the system generates procurement lists according to a standard template. The central logistics system transports ready-to assemble furniture to the school and the school finds and pays for a construction team to assemble everything using Adream Foundation’s construction manual. Teachers and students all get involved, and the Foundation only rarely has to step in to chase suppliers.

Standardization of the procedures created operational efficiency, cost optimization and economies of scale. From 2007 to 2016, the average construction period for an Adream Center fell from 180 days to 27 days. Costs were cut from RMB 110,000 ($15,800) to RMB 57,000 per center. By 2016, 448 centers could be built every year. In 2007, the number had been only two.

Starting in 2009, Adream also partnered with third parties to develop its curriculum. This included East China Normal University’s Institute of Curriculum and Instruction and the Hong Kong Jockey Club.

By 2010, the Adream Curriculum had been significantly upgraded, but teachers were still not devoting enough time to teaching Adream courses, and a points-based incentive system was adopted. Teachers could submit reports and comments on the Adream courses and earn credits based on the number of classes they held and the quality of course materials. National rankings were made public, with accumulated credits exchangeable for cash, training, travel and other rewards.

To provide social incentives for teachers too, the Adream Foundation developed Adream Box in 2012 to allow teachers to post pictures of their classes, as well as upload and download course materials. The platform also lets teachers contact each other for advice and assistance. The more active teachers are on the platform, the more points they accumulate. In this way, hundreds of classes across the country can be monitored on a daily basis and course data can be collected and analyzed.

With its network of schools and partnerships with 600 education bureaus nationwide, Adream had succeeded in scaling up, thereby cutting the costs of replication and making the project more attractive to large donors.

Creating partnerships for change

Initially, donors would identify a region they wished to contribute to, Adream Foundation would ask the local education bureau to recommend a school and Adream would work with the school’s principal to get the center established. At no stage was there any real screening or evaluation process, and the charity decided to see what would happen if they made this an “organization-to-organization” model. Today, education bureaus make a list of local schools most in need of support. Adream Foundation evaluates them in terms of facilities, teaching philosophy and willingness to dedicate time to the Adream Curriculum.

Adream Foundation then turns its attention to its main source of donations: companies. For partnerships to work, donor companies needed to participate fully. “We want the companies we cooperate with to identify with our philosophy and be able to promote Adream Centers in a sustainable way, rather than just pick donation targets according to poverty indices,” said Hu Bin, Adream Foundation board director and former secretary-general. They also have to be ready to commit. “We need each donation to cover the construction of five to 10 Adream Centers to reach economies of scale.”

The charity also had to become more flexible about funding models. In addition to the direct funding model, some Adream Centers have been jointly funded by education bureaus and schools, and some by just the schools alone, with Adream coming into provide follow-up services. In 2016, of the RMB 94.75 million ($13.6 million) raised by Adream, government contributions accounted for as much as 24%.

Adream Foundation is no longer a one-way supply channel. It has become a resource integration platform and a decentralized ecosystem, allowing donors, education bureaus, schools, teachers and volunteers to become “Dream Partners” and work together to offer competency-based schooling.

Business innovation grounded in corporate governance

“Adream is driven by a strong sense of mission and values, and we operate in a professional way that revolves around the value of quality education,” said co-founder Wu Chong. “As a result, we have formed a governance structure similar to that of an enterprise, using corporate vision and tools to resolve allocation problems in the face of limited resources and unlimited demand.”

At Adream Foundation, a board of trustees sets strategic objectives, establishes policy and makes investment decisions. The chairman and the secretary-general direct the Secretariat to manage day-to-day affairs. The board of trustees oversees three committees, for Audit & Compliance, Fundraising and Strategy. As Pan Jiangxue said, “Only open, transparent, professional and efficient operations can secure the trust and sustained support of donors and the public. This is the same as the fiduciary duties of financial institutions.”

The Foundation developed a functional organizational structure to support Adream Centers, curriculum development, teacher training and post-maintenance.

Adream also set up a multi-level authorization process, with clearly defined levels and periods of authorization. Proposals are submitted by the management team for the Board’s approval. In practice, most proposals are implemented only if there has been a unanimous vote in their favor. Corporate governance structures took shape as Adream developed, with ongoing adjustments along the way.

Adream Foundation’s impact

The Foundation set out to run a transparent charitable organization, an ambitious yet timely idea in a country where the level of trust in civil society organizations was low. It has become the first charity in China to publish annual reports using the same transparency standards as publicly-traded companies.

Adream has attempted to implement quality education offerings across China using an operational model that was borrowed from the business world. The charity raised RMB 570 million between 2008 and 2017. It built 2,973 Adream classrooms, and brought more than 3 million teachers and students in under its umbrella.

Like a business, Adream has developed internal appraisal standards that measure two sets of KPIs: those followed by each department, and those developed to evaluate the virtual teams operating across China. The latter are evaluated by class opening rates, fundraising targets and student attendance.

In November 2013, Adream launched the Adream Center evaluation project. As part of this, it hired a team of assessors from the Center for Chinese Agricultural Policy, Chinese Academy of Sciences, Center for Chinese Agricultural Policy, Peking University, Center for Experimental Economics in Education, Shaanxi Normal University, and the Rural Education Action Plan 13 team from Stanford University to conduct a third-party independent report into the impact of Adream Centers on students and teachers. The team selected 166 primary, junior high and comprehensive schools from 13 districts and counties of Shanxi, Shaanxi, Hubei, Guizhou and Fujian. Among these, 85 were participant schools and 81 were selected as a control group. The assessment team also conducted a three-year follow-up survey.

The results showed that Adream Courses have had a positive impact in the following ways: First, Adream participants have scored higher than those in the control group schools. Second, attitudes toward the function and value of money were found to have improved due to participation in Adream Wealth Management courses, through which students learned and practiced personal financing. There was also a significant improvement in attitudes with regard to the role and value placed on rights. The Adream Curriculum and life skills learned during the courses have allowed the students to experience the function of rights and change their way of thinking about them.

Despite its successes and praise-worthy expansion, the Foundation has been hampered by various shortcomings and external challenges. As a pioneer, this was perhaps inevitable. Importantly, though, Adream Foundation is well aware of its issues, and is actively seeking solutions to them in line with the vision of its founders using its increasingly responsive and evolving corporate governance system.

 

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