From Watchdog to Watched

June 28, 2007       Paul Clolery      

The first thing that a long-time observer of the American Red Cross (ARC) notices when it comes to the organization’s new chief executive is the lack of an entourage. It was standard procedure for several of Mark Everson’s predecessors to travel with four or five staff in tow. Everson has been making the rounds nearly solo during his first days on the job.

In his first interview with the nonprofit media since taking the job in late May, Everson sat down exclusively with The NonProfit Times for a candid talk. At the time of the interview, the former commissioner of the Internal Revenue Service (IRS) had been on the job 22 days. It was clear that he understood the gravity of being the 12th person in that chair in just eight years. It was also evident that he’s aware of some of the entrenched problems that have plagued the organization and with a lack of fanfare is in the process of establishing a team to deal with those issues.

Items at the top of Everson’s list: Repairing a tarnished image; fiscal trouble; an operational debt despite periods of significant cash flow; too much in designated donor funds not yet spent, such as millions for September 11 programs; and, a Food and Drug Administration (FDA) consent decree on the nation’s largest blood program.

For the sake of analogy, it’s not a big deal if a new IRS commissioner starts on April 15 since most of the work is just a flood of paper. Everson started his new job on the eve of hurricane season, which promises to result in both real and figurative floods.

“I came on the 29th (May) and the hurricane season officially starts June lst. Of course everybody knows it sort of ramps up over a period of time,” said Everson. He said that he has spent time with staff to better understand what the organization does, its capabilities and the linkages to other relief players, such as the Federal Emergency Management Agency (FEMA) and the Department of Homeland Security.

Being unable to communicate those actual capabilities to the public has been one of the blemishes on the organization’s image. The public criticized, for example, the speed of ARC’s Katrina response because it didn’t deploy helicopters into the Gulf Coast region to get supplies in and people out. “Well, we don’t have that capability,” said Everson. “That’s not what we do so there can be confusion. We need to do better than what we’re doing and keep working on that. We also do need to communicate what our role is in the system. That’s a bit of a challenge.”

ARC’s role in the system previously had been as a sole player that didn’t mix very well with local and national organizations involved in relief efforts.

“We have made it a priority,” he said of trying to work more harmoniously with other stakeholders. “The trick here is that because we are a national organization and we bring people from around the country, and some of our chapters in other places to respond to an accident, we do want to have the advantage of standardization and procedures. That gives you a faster capability. By the same time, communities are unique and you want to make sure you have people and processes that respect the uniqueness of situations in communities.”

Another communication issue is that many people believe that the American Red Cross is an arm of the federal government, not a separate nonprofit organization.

“I think a lot of that is something you have to manage at the local level and it depends on the nature of events. One of the challenges we have is obviously in true disasters, like Katrina or the tsunami, Americans are very generous with their funding. And the combination of responding to the big events and this perception, as you indicated, on the part of some that it’s government or might be government-funded … we do have a real challenge.”

Said Everson: “It’s very clear to me that there are very different kinds of events. There are not only hurricanes we’re talking about but a lot of preparedness does come down to what are the challenges in a local circumstance, and has the group of people that sort of has that responsibility, – have they prepared adequately? So, it’s a complicated system.”

Another part of the communication is getting Americans ready to fend for themselves during storms and other emergencies. “America as a whole doesn’t prepare as well as they should for catastrophic events,” Everson said. “We have something we call ‘Red Cross ready,’ where we want everybody, every family, to have a kit that can carry them through three days without any external support. We want them to have a plan as to what they would do in the event of an approaching storm or if an event takes place. Then, we want them to have thought ahead of time of what it is that they’ll do to stand firm during a difficult period.”

ARC’s problems do not start and end with miscommunication. Management and governance issues have plagued the organization. And, the board and former ARC chief executives Beradine Healy and Marty Evans had very public spats.

Everson, who will earn an annual base salary of $500,000 but would not disclose length of contract, knew of many of the challenges, particularly the governance issues, before taking the job. The ARC is chartered by Congress and must get approval for major governance changes, such as the size and make-up of the board.

“I think that the organization went through what was the necessary process and it was a thoughtful process to address those issues. They surfaced over a period of time when you had both 9/11 and Katrina,” said Everson. “In my point of view, if those steps (recent governance changes) hadn’t been taken the job wouldn’t have been attractive no matter how great an organization it was. I think the board is acting very responsibly and Congress acted very responsibly in the changes it made, so it clears the deck and enables the organization to go forward in a positive way.”

The terror attacks of September 11, 2001 and Hurricane Katrina are shadows that continue to follow the organization. A particularly sticky issue is that millions of dollars of donor money, designated by donors for relief for victims of those two events, remains unspent.

“We do certainly need to look at this issue of how do you respect donor intent but make sure you are creating a capability that is needed on an on-going basis. It’s not efficient to surge totally. You have to have certain core capabilities that enable you to respond very quickly,” said Everson. But if the funds are designated, generally they can’t be moved so messaging becomes key, he said.

“We respect donor intent and one of the things we do is try to continue to use the monies in a sound way. I was just down at the Gulf. We still have monies that we’re spending down there, particularly for mental health and other issues. Some of these issues surface and get particularly important with time. And, they’re tougher with time,” said Everson. “If you look at issues in terms of almost two years out with Katrina, we do have a certain amount of caseload. Our folks were telling me the challenges were greatest two, three, four years later for the responders who were working like the devil to do the right things and then sometime later the real wall hits them.”

He said the case is the same in New York City and in Washington, D.C. area regarding the September 11 donations. For the fiscal year that ended June 30, 2006, there was still $46.4 million unspent in the Liberty disaster relief fund for September 11 response, down from $117 million as of June 30, 2005. There was $243.7 million of unspent Katrina designated gifts. Everson said that both of those continue to be spent down.

Audits for the fiscal year that ended June 30, 2007 won’t be completed until the fall, according to Devorah Goldburg, a senior officer in the ARC’s communications department. Everson said there will be an operational deficit, although the amount won’t be known until the audit is complete.

“We’re looking at what economies and efficiencies we can bring to the normal operation on the cost side. We’re also looking at the revenue side,” said Everson. “I don’t have any conclusions right now, but … there’s a real recognition that we need to do more there.” One of his first moves was to hire a senior vice president and chief audit executive.

Revenue declined for the fiscal year, as major donors held back until a permanent executive was hired. “I think the timing is good. If we clearly show we’re serious about stepping up and making improvements, I think we’ll be able to find support,” he said. “Now, there’s a broader challenge here. Donation patterns or giving patterns are changing in the country. People are … they’re interested in supporting specific projects or deliverables … than a traditional relationship with an organization. We need to be conscious of that and we need to demonstrate very clearly what we’re doing now that translates into specific outcomes. That’s a challenge in communications and really making sure we’re talking to the right people as we do try to get that support.”

According to Everson, reaching out to those deep-pocketed corporate donors, logistic support partners and community leaders will now be a priority for the organization, which has been seen by some as not reflective of the communities in which it serves.

“We started to strengthen our stakeholder relationships with business and other groups. It extends outreach to groups that will help us in the important point of diversity, which is really very significant. If you’re going to communicate on preparedness and have different communities be ready to cope with disaster, or you want to get more donations of blood or effectively support military families or others, you need to make sure your linkages are very good to those communities,” said Everson. “Then you need to have an appropriate diversity in your work force and your volunteer base so that when you do go into the community everybody is comfortable. That’s an important element, too, so we’re working on that.”

In years when there isn’t a big spike in revenue due to donor response to an event, the organization’s largest single revenue stream is its biomedical division. Better known as blood services, it generated $2.16 billion in the year ended June 30, 2006, a year that had $5.7 billion in total revenue. It has been under a consent decree with the FDA since 1993 and has been fined millions of dollars because of the way it handles blood collection and for botched record-keeping and screening. Everson was asked if the organization should even be in the blood business or if it should concentrate solely on human services and response to disasters.

“It’s a historic mission. I think it’s an important one,” said Everson. “I do think that’s consistent with our mission now. We want to make sure we’re doing all we can there. A blood donor is a volunteer and that’s a part of our heritage. So yes, when I talk about our missions I mention that first because the work we do there is so important.”

Everson said he is in the early stages of assessing personnel and the procedures system-wide and was “impressed by what I see in that unit in terms of determination to improve and properly manage that end of our responsibilities.”

He said the blood team is working to standardize processes for blood collection and sorting, and is developing a new technology for better results and better problem management and resolution. “As we do those things, we will have even better quality and we will demonstrate that to the FDA so that we can exit that (consent decree) status. I don’t think it’s acceptable to be in that category, as the however you want to say, the industry leader. I’ve communicated that squarely and I think our people understand that,” he said.

Everson likes to say that in this new job, “very few people get the honor of running two of America’s finest institutions, the IRS and the American Red Cross.” There is one similarity, of course. In both cases Everson was out for blood, one figuratively and one actually.

“I used to end a lot of my public addresses with just three simple words – ‘Pay your taxes.’ Now I can boil it down to two ‘Give blood.'”