BBBSA Hits The Road Again — This Time To Tampa
February 3, 2016 Mark Hrywna
It’s not often an established national nonprofit moves its headquarters. It’s even more unusual when it happens twice within only a few years. Big Brothers Big Sisters of America (BBBSA) left its Philadelphia, Pa., headquarters in 2013 for Irving, Texas, moving into a complex owned by one of its largest affiliates and which also housed BBBS International. BBBSA’s headquarters hit the road for Tampa just two years later.
“The move to Tampa was in large part so there could be a long-term continuation of leadership,” said President and CEO Pam Iorio, who served as Tampa’s mayor from 2003 to 2011.
Iorio was hired in the wake of a U.S. Department of Health and Human Services Office of Inspector General’s (OIG) audit that found BBBSA had not kept proper accounting records of federal grants. She made a commitment of two years to try to get the organization back on track but was not prepared to move to Texas, so she commuted from Tampa.
“We had a difficult time fundraising. There were challenges,” after the OIG audit, Iorio said, with employee layoffs to what she described as the “bare minimum.” In Philadelphia, there were some 65 employees compared with slightly more than 30 in Tampa.
Nonprofits and their constituents often evolve over the years, changing needs or demographics. It’s common for organizations to consider relocating after decades in one city or region. Sometimes it’s a matter of timing, especially around a new chief executive.
After some progress early in her tenure, Iorio said the board asked if she would consider staying longer if the headquarters moved to Tampa. The organization had not taken root to any great extent and had just finished layoffs. “If ever there was a time to move offices and not adversely affect employees, that was the moment,” she said. Iorio agreed to stay on until 2019. BBBSA is working to bring the OIG audit to closure and during the past 17 months completed audits for tax years 2011 through 2015, according to Iorio.
The organization is saving money in Tampa through a rent-free five-year lease, paying only expenses on the 6,900 square feet, almost half the size of its Irving, Texas space, according to Iorio.
In Irving, BBBSA entered into a five-year lease in October 2013 with minimum annual rent expenses of about $197,000, and minimum annual rent increases of 1.7 percent, according to its audited financial statements. BBBSA also entered into a $375,000 promissory note as part of a lease-purchase.
In a settlement agreement, BBBSA was required to pay $365,000 and monthly rental payments for 2015, totaling $101,037, according to financial statements.
Occupancy and maintenance reported in the statement of functional expenses were $356,098 for the fiscal year ending 2015 compared with $880,479 for 2012.
“The board was looking at continuity of leadership as much more important than the physical space,” Iorio said. “That’s why I think it’s got to be explained within the context of the issues the organization faced at the time. We started to make progress, continued to make progress and are ready to turn the page on that chapter.”
The move to Tampa has been received well by board members and staff, according to Iorio, with its accessible airport, affordable hotels and great weather.
Move To Texas
The move from Philadelphia to Irving also came soon after a new CEO was hired.
After Charles Pierson was tapped to be president and CEO of Big Brothers Big Sisters of America in June 2012, the board established a real estate task force to work with a company to analyze several cities as potential future headquarters. Pierson had spent the previous nine years as president/CEO of the organization’s Lone Star Chapter, one of its largest affiliates.
BBBSA eventually moved into a building owned by the Lone Star Chapter that also housed Big Brothers Big Sisters International.
The Philadelphia headquarters was in a very old building and while the location was great for the Northeast, Pierson said it was not so great for the rest of the country. In August 2013, a study by real estate firm Jones Long LaSalle recommended Irving, Texas, instead of other cities, including Philadelphia, Nashville, Atlanta, Chicago and Dallas-Fort Worth. BBBSA eventually sold its Philadelphia building for $1.6 million.
Pierson saw a great advantage to being headquartered in the central region of the country, with a low cost of living, great airport and a healthy presence of corporate headquarters, as well as charities. “All those things were taken into account,” he said, and for the health of the organization, government funding probably wanted to be de-emphasized, with more emphasis in other areas, so Washington, D.C. wasn’t a priority.
“It was a comfortable decision for me but I didn’t want it to be just about me,” said Pierson, who said he remained out of the process of the task force that studied options for a new headquarters. “We told the staff, from the beginning, it’s something we’d take a look at and figure out to do the right thing” for the organization.
Costs associated with the move were fairly modest, Pierson said, though there’s certainly churn from a human resources perspective. He estimated the cost of the move to be about a half-million dollars but added there were benefits and opportunities, including a $250,000 corporate donation as a direct result of the move.
Pierson resigned in February 2012 soon after the OIG audit came to light. “It took quite a while for the organization to work through it and it dominated my time,” he said of the OIG audit. “I didn’t know it’d be so difficult,” Pierson said. “With a new CEO coming in, the organization wanted and needed stability. It was that whole process that was a little overbearing for me, quite honestly. It was not healthy for my family. After working through that couple of year period of time, I said I can’t do this any longer,” he said.
Only three or four employees made the move from Philadelphia to Texas, according to Chief Financial Officer Tim Midkiff, who was hired after the move was completed. Only he and another employee relocated from Texas to Tampa. The organization maintains about 10 staff who work remotely, and 20 physically in Tampa. Even prior to the move, Midkiff said some staff members were spread out, anywhere from South Carolina to New York City.
About 17 of the 20 employees are new, and while some of the institutional knowledge was lost in the turnover, Midkiff said the importance depends on the job. About five employees in finance and accounting have experience in nonprofit accounting, which is not as difficult a change as, say, affiliate support, he said. “It’s just a matter of learning what your codes are,” he said. For positions that required more institutional knowledge, Midkiff said they reached out to BBBS affiliates and hired four people who were accustomed to the organization.
“It’s unusual for an organization to pick up and move for an individual. I won’t say it doesn’t happen but it’s a unique point in time for that organization that probably spurs that type of movement,” said Kimberly Archer, leader in the Nonprofit Practice at Russell Reynolds Associates, an executive search firm. “What you want to avoid is an organization relocating every time a new CEO comes along. You might have that level of flexibility if you’re a small, lean organization but it’s not typical in the sector,” she said.
What’s more likely is that boards consider bifurcating operations – moving parts of the organization to different regions. One small organization Archer works with was based in Florida and decided to keep back-office operations in the Sunshine State because of the cost of living and talent there. External-facing positions, such as the CEO and development, were moved to major markets like New York City or Washington, D.C. “We can see value being in a New York City or Washington but bifurcate, with the back office staying in Florida and re-establishing the front office in a major donor capital,” she said.
After almost a quarter century in Tucson, Ariz., the Muscular Dystrophy Association (MDA) announced in June 2013 that it would sell its building and move the headquarters to Chicago, Ill. The announcement came less than a year after Steve Derks was announced as the new president and CEO in September 2012. He had been CEO of the American Cancer Society’s Chicago-based Illinois Division but MDA’s move had been planned before he was hired, according to Roxan Triolo Olivas, national public relations manager. The organization had considered several cities for its new headquarters, including Dallas and Washington, D.C., and the plan was always to have a footprint in several major cities with key staff deployed there, she said.
MDA’s advocacy team naturally is located in Washington, D.C., while its chief of field operations is in Dallas, Texas. There also are key members of the research team in Atlanta, Baltimore and Boston.
The majority of Tucson-based employees continue to work at leased office space and about 15 to 20 employees relocated to other offices in New York, Los Angeles and Washington, D.C.
It wasn’t necessary or mandatory for staff to relocate to Chicago and in situations where staff members were offered a relocation package, the timeline for moves was described by Olivas as reasonable.
When the Chicago office opened, as many as 90 employees remained in Tucson. There still is a significant presence in Tucson, with many research and healthcare staff located there in the Operations Center, along with a few key leadership positions, Olivas said. About 30 staff, mostly upper management, are based in the new national office, along with staff from the Chicago district office. There also are about 100 offices around the country, made up mostly of family support and fundraising staff. MDA has more than 900 employees in all.
Tucson had been the primary home for MDA since 1991 when it relocated from New York City to build a new headquarters with the help of the city of Tucson and state of Arizona. The charity spent $10 million to construct the main building in 1991, with the help of a capital campaign, and built a $6-million addition in 2010, before selling the facility in 2014 for $9.1 million.
Organizations that are located in areas simply because that’s where the founder was located aren’t necessarily strategic, Archer said. A transition in CEO is a more appropriate time to think about whether to recruit someone who will move the organization.
The National Catholic Development Conference (NCDC) was based in Manhattan until 1984 when it built its headquarters 30 miles away in Hempstead, N.Y. In July, NCDC moved to Washington, D.C. The move was a logical one. President & CEO Sister Georgette Lehmuth found herself traveling to the capital almost 30 times a year and most of the Catholic leadership organizations are based there, along with a huge presence of nonprofits and postal-related organizations. NCDC will have a smaller footprint in the national capital and the plan is to sell the building in Hempstead, N.Y.
“I wouldn’t presume I’m indispensible,” said Lehmuth, who made the move with NCDC to the nation’s capital. Two of NCDC’s five staff members worked remotely before the move and will continue to do so. Three employees did not relocate with the organization and were given severance packages.
Working remotely is a sign of the times, Lehmuth said. When NCDC built its Hempstead headquarters, it was a different time. “The way member organizations were run was very different than they are today, a lot more clerical staff, less sophisticated database systems, things like that,” she said. “At the time, it was not even conceivable that a staff member would not work on-site. Now it’s considered actually good marketing when you can offer someone well qualified to stay home,” Lehmuth said.
NCDC’s board had talked about relocation more than once in recent years and finally when it came up the last time, the board looked at it a little differently, Lehmuth said. Discussions included the amount of space required, as well as how much time and money was spent on traveling to D.C. for Lehmuth. Among other locations considered were Alexandria and Arlington, Va., as well as Chicago because of its more central location nationally. “It has a large constituency of nonprofits but in the end, we felt some other issues outweighed that,” Lehmuth said. NPT