To Understand IDEO’s Vision, Read the Fine Print

by Dana Woldow on September 23, 2013

Design firm IDEO’s vision for the future of school meals in San Francisco was unveiled at a recent Board of Education meeting. Although only an abbreviated PowerPoint version was presented, the Board received copies of the full-color, 206-page book IDEO produced for the project. It looks like a corporate annual report on steroids – the heavy paper, the wealth of dazzling full color photos – and, as in an annual report, the size of the type is in inverse relation to the importance of the information. While readers are drawn to the photos and headlines, they might skip the fine print, but that’s where most of the good stuff is buried.

The full book is available online at the SFUSD website. Open it up and follow along; I’ve provided page numbers for quotes from the book.

SFUSD made it clear from the start of this project that, with Student Nutrition Services (SNS) facing an ongoing budget deficit of well over $2 million annually, any new plans would have to pay for themselves. Thus, there is much talk about the “robust” data sets used in the financial analysis, and how IDEO’s “financial projections are confident starting points for understanding the magnitude of the impact” (page 132), and while I do not question IDEO’s ability to wield a calculator and add up the numbers, I do wonder about the accuracy of the numbers they used.

For example, one of IDEO’s concepts to drive more revenue for SNS is to sell Take Home Dinner Kits to families at school. The government does not offer a subsidy for take home family meals, as they do for suppers eaten at school by low income children, so families would be expected to pay $10 for a kit serving 4 people.

The book refers several times (pp.49 and 169) to SNS having “access to over 55,000 families” to whom they can try to sell the Dinner Kits. This figure is apparently based on the enrollment of SFUSD, which is about 55,000 students; however, it fails to take into account the fact that an estimated 35-40% of those students are siblings. The number of SFUSD families, who are the real targets of these meal kits, is closer to 35,000 than 55,000.

In other words, this particular bit of “robust” data providing the “confident starting point” for understanding the financials is inflated by about 1/3, because no one at IDEO (nor the SFUSD staff who worked on the report) seems to realize that enrolling 55,000 students does not provide “access to over 55,000 families”, unless every single student is an only child.

This discrepancy becomes more than just a simple oversight when IDEO tries to forecast potential revenue from the sale of the Dinner Kits. They are estimated to bring in annual profits of between (conservatively) $418,000 and (optimistically) $1 million (page 169), making them the single highest revenue driver out of the ten concepts proposed by IDEO (pp.134-5). But because the population number on which the calculations are based is 1/3 higher than it should be, these revenue projections are also1/3 higher than they should be.

I also have to wonder what exactly is going to be in that Dinner Kit that is supposed to produce a meal to feed a family of 4 for just $10. SFUSD’s lack of facilities necessitates relying on an outside vendor to produce the kits, at a price which SNS would then have to mark up considerably to cover the full cost of the Dinner Kit program and still make that 10% (conservative) or 25% (optimistic) profit margin. That full cost must include not just the kit itself, but all labor, equipment and supplies necessary to obtain, market, and sell the kits, and all related record keeping.

That’s because the entire Dinner Kit program would have to exist independent of SNS’ regular operations. USDA regulations prohibit using for any other purpose the government money schools receive to run their meal programs, and “other purpose” includes running a for-profit catering business, even if that business is generating revenue for SNS. Any SNS staff involved in the manufacture, purchase, or sale of Dinner Kits would need to be paid from a separate account, not the cafeteria fund that pays all other SNS costs, and clear records would need to be kept to document same, for the next regularly scheduled SNS audit.

The Dinner Kit numbers are far from the only ones that are questionable. Another IDEO concept (one that has been kicking around SFUSD for years) is to renovate a couple of middle or high school kitchens, and then centralize production at those regional kitchens of some additional lunch choices for middle and high school students. In the future the kitchens might also be used to do catering, including food for staff meetings or even school parties.

Additional revenue from this concept is projected, in bold type, to be between $121,000 and $908,000 depending on volume of catering and how many more SFUSD-produced meals are served (page 147).

One of the “key assumption” in that pesky fine print (page 147) is “assuming 10% of staff will participate in catering per day (based on survey data)”. But looking at the actual survey data (page 149), 10% of staff members surveyed did not say they would use catering for their meetings or class parties daily.

In reality, 25% of the 79 staff surveyed said they might use it once a week – that’s an average of 5% per day – with another 45% saying they might use it once a month – that’s an average of 2% per day over 22 school days per month. In other words, only about 7% of the staff members surveyed could be expected to use catering on any given day. That’s 30% less than the IDEO “assumption” of 10% per day, and another set of revenue projections which are nearly 1/3 higher than they should be.

More questions about the financial projections for the regional production kitchens come into focus after squinting at the fine print. MPLH (meals per labor hour) is one measure used to determine whether cafeterias are properly staffed. In the fine print called “Additional assumptions”, we are told both “By centralizing prep in production kitchens and by separating prep and serve we will see an increase in MPLH” and also “”Centralizing production and dividing prep and serve may not increase MPLH” (page 148, emphasis mine).

Huh? Call me picky, but that kind of equivocation does not inspire my confidence in the financial projections based upon these assumptions.

SNS does not have a central warehouse, relying instead on space at a middle school. In the section on the central warehouse and local sourcing concept, the bold type financial projections show additional revenue between $291,000 and $593,000, again depending on the number of meals. In the fine print of the “Key assumptions”, it is stated that “Local sourcing would cause a shift in daily demand from 34% SFUSD produced food to 50% SFUSD produced food (vs. Revolution Foods)” (page 143).

On the next page, however, the fine print cautions “It may not be cheaper to source food directly; it may, in fact, add cost to the overall model because of the increased complexity of procuring from multiple suppliers. Higher quality ingredients in the SFUSD produced (beanery) meal may not result in increased participation” (page 144).

In other words, while IDEO believes that changing the choices of entrees available to middle and high school students could be more profitable, if those entrees could be produced in a way that was both more appealing and also less costly than the Revolution Foods entrees, they really aren’t sure if this can be made to pencil out financially, nor are they sure if kids would really want to eat these new offerings.

So again, those rosy scenarios of hundreds of thousands of new dollars resulting from this concept might happen – or they might just be pie in the sky.

Even the communal eating at elementary schools, which is many parents’ favorite IDEO concept, seems financially ominous after reading the fine print, which cautions “Revolution Foods may not be able to deliver family-style food at a discount due to potential changes in the operating model that may not result in a cost saving. Community-style may not be feasible from a compliance point of view and/or may not be feasible without the help of extra labor in order to meet the requirements of an adult at each table. The benefits of family style dining may not be worth the time and cost necessary to implement them” (page 152).

If you think this sounds like nitpicking, ask yourself this: In a report that cost well up into 6 figures (paid for with private money), should there be even a single nit to pick? And is overestimating by 1/3 the potential market for the Dinner Kits, projected to be the most lucrative of the ten IDEO concepts, really just a “nit”?

When IDEO presented to the Board of Education, Sup Carranza advised everyone:

“Where we could spend considerable time picking apart the vision as to ‘How are we going to pay for that, how are we going to get around that regulation, this rule doesn’t permit this or that’, I am going to ask us to go with the process tonight…What’s important is that we have a vision that we can all get behind, and then we can start working towards making that vision a reality.”

Essentially, he was saying “The Emperor may have no clothes, but it would be rude to point that out, so let’s just keep smiling and later maybe we can get him to put on his robe.”

I understand why he would take that attitude – the project is being paid for by a deep pockets funder; if the funder is happy with the effort SFUSD puts into trying to making this vision a reality, who knows what other projects they might be willing to fund? Maybe it would even attract other deep pockets funders to SFUSD.

Everyone wants the project to be successful; I want the project to be successful. But I am not willing to stick my fingers in my ears and chant “Lalalalala” to drown out the sound of reality, and that is exactly what Superintendent Carranza asked the Board of Education, and everyone else, to do.

So what comes next? That’s what the Board of Education needs to decide, and to do so, they need to adopt a more rational frame of mind that what Superintendent Carranza urged when he told them to suspend their disbelief and just embrace the vision.

Rather than approaching IDEO’s recommendations trusting that they will all be profitable and help reduce SNS’ ongoing $2+ million deficit, the Board instead needs to be smart. Consider all of the fine print as well as the dazzling photos and rosy scenarios. Look past all that talk about “robust data” and “confident” financial projections, read the fine print, and see what that 206 page book is really saying.

It’s this:

Here are some things that might improve the school meal experience. We think they could possibly cover their own costs; some of them might even bring in some extra money.

But the truth is, at this point, we don’t know for sure. You can’t expect us to know what people will do just based on how they answered a survey, or what they told an interviewer. We only talked to people who were interested enough in school food to fill out our survey or come to one of our events; we didn’t have a chance to hear from people who don’t care one way or the other.

Your insistence that all of our concepts be financially sustainable is a real buzzkill. Did we mention that we have no frickin’ idea how any of these ideas will play out financially, and we won’t until much farther along in the process? We hope you will look at the boldfaced projections and think, “Aha – this is a moneymaker”, but we are covering our butts by putting disclaimers in tiny type saying that things could go the other way, and that maybe these ideas won’t really be cost effective after all.

Some ideas, like using more commodity food in the middle and high school lunches, might actually result in less students choosing school meals (oops!); we have not provided projections for that.

But isn’t our vision pretty?

SFUSD and IDEO need to start piloting these ideas and gathering data on whether they get more students to eat the meals, and whether they bring in more money. These pilots must run for more than just a few months, because kids (parents too) always like shiny new stuff, but sometimes they lose interest over time. Every school is different, and just because a pilot works well at one school doesn’t guarantee it will work the same way at another school.

Embrace the spirit of the vision, but keep a sharp eye on the bottom line, and always read the fine print.

Dana Woldow has been a school food advocate since 2002 and shares what she has learned at Follow her on Twitter @nestwife.

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