Women Are Now Driving Nonprofit Direct Response Marketing

As director of direct response marketing for the American Diabetes Association and a veteran fundraiser, Joanne Del Giorno hasn’t battled alone to gain respect and acceptance from the historically male-driven arena of direct response marketing. With a little help from many female mentors throughout her career she has worked to forge a multi-million dollar fundraising program while becoming one of the most prominent nonprofit marketers of either gender.

Del Giorno is quick to mention that she has been surrounded by a number of talented women during her career — an occurrence none too common in the days of direct response prior to the 1990s. What she does share is an unhesitating willingness to describe the most significant change in women’s authority from the perspective of someone who has influenced how women are perceived and what they can accomplish within the business.

"I can run a $35 million campaign — and do it out of my house," she explained over the sounds of her dog yapping at a Fed Ex delivery person in the background. "I’ve been around for 10 years — which isn’t the longest of the group — but I’ve had a lot of great mentors who are women."

The direct marketing business, particularly the fundraising portion of the industry, has always been more open to women than the for-profit world. Yet, it’s only been during the last decade that women have taken control of the of sector.

Within that group, there are industry leaders who stand above the crowd. The editors of The NonProfit Times selected 12 women who are truly the industry’s leaders.

The women were chosen for a combination of reasons. While all are first-rate direct marketers, some have raised the bar of excellence which others copy, others are constantly teaching and mentoring, and while others were the first in their field and continue setting industry standards.

The selected are: Aggie Alexander, senior vice president, national direct marketing, St. Jude Children’s Research Hospital; Eilene M. (Dodee) Black

president and CEO, Atlantic List Company; Joanne DelGiorno, director, direct response marketing, American Diabetes Association; R. Rebecca Donatelli, chairman, Hockaday Donatelli Campaign Solutions; Lynn S. Edmonds executive vice president, L.W. Robbins; Phyllis Freedman, senior vice president, managing director, Epsilon; Margaret Guellich director, direct marketing, Catholic Relief Services, Lindy Litrides, senior vice president, relationship marketing Arthritis Foundation; Judith A. Maneval, president Sanky Perlowin Associates/Sanky Net; Jillaine Smith, senior associate, Benton Foundation; Carol Sue Sword, vice president of direct response and gifts in kind, Christian Appalachian Project, Joan Wheatley, senior director, donor development, Special Olympics.

"When you look at the people The NonProfit Times has selected, and what they are doing in the marketing area, you can see right there the power of women," said Margaret Guellich, director, direct marketing, Catholic Relief Services. "And we can’t say that for a lot of other industries."

As you look at the accompanying biographies of these 12 women, you’ll see their numerous accomplishments and learn how they have shaped the industry. While they are driving nonprofit direct response activity today, it’s important to note that women holding such prominent positions in the world of direct response fundraising has not always been commonplace.

A look to the past

Max Hart, director of fundraising for Disabled American Veterans in Cincinnati, harkened back 30 years ago when he attended his first Direct Marketing Association conference. The annual event attracts upper management executives, and can be used as one benchmark for women’s role in the industry. Hart recollected that women accounted for about 25 percent of attendees. On the other hand, he pointed to what he calls an "entrepreneurial spirit" in fundraising, and notes that while the percentage of women was low, many of the females in the industry held positions of importance, and many owned their own businesses.

"There probably was a glass ceiling at that time in the commercial world, but fundraising is somewhat of an entrepreneurial industry and females could start their own companies or could rise to levels of leadership within organizations. I don’t think these organizations were very progressive in their thinking as far as what females could achieve and therefore allowed women to progress to the maximum limits of their abilities and didn’t hold them back," said Hart.

The number of women in direct response fundraising has increased right along with their prominence and stature, said Hart, who is a former chair of the Direct Marketing Association’s (DMA) Nonprofit Council, now called the Nonprofit Federation.

Today, females constitute half or more of DMA conference attendees. More importantly, many have moved from attendee status to the podiums as respected speakers who share their expertise with their colleagues, both male and female.

Claude Grizzard Sr., chairman emeritus, Grizzard Agency in Atlanta, pointed to the recent DMA’s 11th Annual Nonprofit Washington Conference where 40 percent of speakers were women.

Hart and Grizzard both stressed that women probably wouldn’t have achieved such high levels of prominence in direct response fundraising if it weren’t for some of the earlier female leaders. "If the women who preceded those being honored by The NonProfit Times and others who are doing great things today hadn’t performed so well and achieved the levels of success that they had maybe many opportunities would not have been presented to others, except maybe the entrepreneurs," said Hart.

Yes, business in general, and even direct response fundraising, was primarily a "men’s club" for quite some time. Things began to change in the 1970s with the feminist movement, and continued to evolve as more women paid their dues, and attained leadership positions, said Phyllis Freedman, senior vice president, Epsilon. "A whole culture changed as women were being seen as professionals in ways that they never had before."

Like most people, R. Rebecca Donatelli, chairman, Hockaday Donatelli Campaign Solutions, in Alexandria, Va. had a career outside of the direct marketing world at one time. She founded a successful real estate and management business, and a bank. Being an entrepreneur, Donatelli explained, has helped her to control and shape her own destiny.

While all of the women selected as leaders by The NonProfit Times work in very different areas of the direct response fundraising industry, they share some common characteristics.

Being female is a surprising advantage

Many believe that women have an advantage and, ironically, that is their gender.

"Marketing generally, direct marketing specifically and fundraising particularly, is an art and a science," said Freedman. "But it’s probably a little more of an art than a science and requires a strong intuitive component. I think that women are better at that than men. And because the general audience for nonprofits tend to be women, they might have a little bit of an edge in being able to relate to their donors."

These women also seem to share a love of their professions, and retain a strong commitment to the core values of their organizations.

To be successful, said Guellich, director, direct marketing, Catholic Relief Services, "you need to be passionate about the mission of the organization you work for. Not just because it’s a job and you are making money, but because you care about the organization and what you are raising money for. You’ll find not just a great deal of satisfaction, but you’ll also wind up being extremely successful because [your passion] is going to come through all of your decisions."

For most, like Jillaine Smith, senior associate, Benton Foundation, their work has become truly personal. "I can’t imagine going to work for a corporate entity. [Working in the nonprofit sector] is too much a part of my life and who I am as a person. I am in it for the long haul."

The other big force for advancement for has been mentoring and networking. Many of these women clearly remember and appreciate people — male and female alike — who took the time to help them along their career path. And many of them continue mentoring others, whether it is in the workplace, on the academic level, or through organizations such as the Direct Marketing Education Foundation, or the DMA’s Nonprofit Federation.

"Mentoring, educating and being a resource for any marketer, male or female, doesn’t matter, is something all leaders who have been successful in the marketing arena need to commit to," said Guellich

Mentoring is not just a means of "repaying" those who have helped these women, and cultivating new direct response fundraisers, it is also a way to gather fresh insight.

"Young people today have more opportunities to study nonprofit management in both the undergraduate and graduate level, so individuals today with 10 to 15 years of experience are much younger than they ever were before," said Guellich. "Someone who is only 30 years old might have a wealth of experience versus older people who started working in fundraising later in their careers. You can’t be deceived by youth."

The real key to advancement in any industry, regardless of gender, is performance. Because success in direct marketing is often based on measurable actions, many women believe they have been able to progress to such high levels because they have demonstrated their abilities with concrete results for acquisition and retention programs, return on investment and the like.

Joanne DelGiorno, director, direct response marketing, American Diabetes Association, concurs with the concept. "As you grow in your career and gain more knowledge people see how you work and what you bring to the table-then you eliminate the whole gender issue. I essentially run a $35 million business, and that’s how I view my job."

Passing the Plate

Financial research on Christian groups is the focus of a new nonprofit Web site designed to serve donors. Created by a former portfolio manager for Templeton Investment Counsel, MinistryWatch has built a database of more than 400 U.S.-based Christian charities that raise roughly $6 billion a year.

The site, at www.ministrywatch.com, rates a charity based on how it acquires and spends its financial resources, and how it manages those resources and its need for cash.

On the site, charities are organized by categories, such as leadership training, overseas missions, publishing, radio and television, and relief and development.

Expected to be added in February — after The NonProfit Times went to press — were MyMinistries, a portfolio-management service that will let users sign up to receive reports on ministries they select, and an education center that will include materials on issues involving giving.

The site soon will include ratings of individual ministries, comments by MinistryWatch analysts, and the ministries’ responses to those comments.

MinistryWatch is a program of Wall Watchers, which was created with an investment of about $500,000 from Rusty Leonard, a former Templeton portfolio manager who had been based in Charlotte, and his wife, Carol, an accountant. The organization is not affiliated with Templeton Investments.

The site, with a staff of seven, including four analysts, is modeled on financial research groups such as Morningstar and ValueLine, said Mark Long, president of Wall Watchers and former director of research for IPAC Securities in Auckland, New Zealand.

While income on Leonard’s investment has sustained the organization, Long said, Wall Watchers’ strategy is to co-brand its services with other sites, including Christian portals. He said Wall Watchers is an evangelical ministry but does not base its evaluation of other organizations on their theology.

Foundation tools

A one-stop Web site designed to help community foundations serve donors, donor-advisers, nonprofits and the public will be the main product offered by a new membership group created by some of the largest U.S. community foundations.

Members of Community Foundations of America (CFA), based in Louisville, Ky., will be able to customize the site by adding their own features. Standard features to be included initially will be designed to help individuals and organizations learn how to get involved as donors; create charitable funds; and find out about currently funded nonprofits.

The initial site, which CEO Carla Dearing said would be available during the second quarter, also will provide resources for donor advisers such as lawyers, accountants and financial consultants; offer tax-saving tips; and deliver news and information.

Future features will let donors track investment performance and grant activity of their funds, and will help nonprofits apply for grants and review other grants.

The Web site will have access to resources collected by CFA, including a tool to help community foundations handle gifts of securities from donors who may be restricted in their sale of those securities; national research that community foundations may want to share with donors; and shared technology such as Webcasts examining issues involving planned giving and taxes.

CFA, which was formed last year to develop and offer products and services to the roughly 600 community foundations in the U.S., also offers or is developing several other products, including a Web-based system to help community foundations administer donor and endowment assets; a Web-based tool to survey donors; and a governance seminar co-hosted by the Center for Effective Philanthropy in Boston.

The donor-administration system will include a feature designed to defray record-keeping costs — ranging from $9,600 to $120,000, depending on total assets — through the use of certain mutual funds that agree to offset some of those costs.

That feature, akin to incentives widely offered by mutual funds to third-party administrators of 401(k) plans, is designed to help community foundations better integrate the cost of administering assets with the way those assets are invested, said Dearing, who said she worked in the financial services industry before joining CFA.

The first two foundations to sign up for the donor-administration system are the Greater Kansas City Community Foundation and the Luzerne Foundation in Pennsylvania.

New site for idealist

Action Without Borders has launched a new Web site at www.idealist.com that is at designed to make it easier for readers to get information about charities and to volunteer. The site is a portal that lets users find information submitted by nonprofits.

The site — with a new look that underscores its use as an "idea list" — lets readers identify their interests and sign up for free daily email messages reporting new information submitted to the site about jobs, events, internships, volunteers opportunities and resources.

Users also can post information about their interests in volunteering for nonprofits, which can then search the site to find volunteers.

Idealist reports more than 48,000 subscribers throughout the world and visits by more than 10,000 people a day.

Helping hand

Helping.org, the philanthropic Web site of the AOL Time Warner Foundation, helped raise more than $1.1 million online in November and December, according to the organization. That brought to nearly $2.4 million the total contributed through the site since it was launched in October, 1999.

The average donation during the holidays grew to $207, up from $158 throughout 2000.

The holidays also saw a $50,000 donation to a charity, the biggest ever given through the Web site, which has handled three separate contributions of $20,000 each.

The site also matched more than 14,400 volunteers with activities and events in their communities during the holidays. That brought to more than 60,000 people the number of volunteers reportedly matched with charities since helping.org was launched.

Verizon fund

Verizon Communications has paid $2.5 million as the first installment of what will be a $25 million fund to support community and educational programs serving poor, minority, ethnic and other underserved communities in California. The new Community Collaborative Fund, which GTE and Bell Atlantic agreed to create when they merged last year to become Verizon, will be administered by the California Consumer Protection Foundation. For information, call (707) 829-5626.

Tech notes

A survey of more than 1,300 religious congregations by the Pew Internet & American Life Project found that congregations increasingly are using the Internet to publicize and conduct worship services, teach, recruit members, raising money and handle a broad range of other tasks…

Bay Area nonprofits CompassPoint Nonprofit Services and HandsNet have launched the NetPoint Center for Nonprofits and Technology to help nonprofits make better use of technology…

The New Hampshire Charitable Foundation has teamed with state government and high-tech firms to launch e-cares, a new venture philanthropy group…

The Association of Cancer Online Resources, an online community of cancer patients, has launched Cancer-Pain.org to provide information and resources to help cancer patients find relief from pain…

TechSoup.org, a Web site that focuses on nonprofit technology, has launched an online forum for nonprofit staff to talk about tech issues…

A Web site has been launched at www.advocacynet.org to support human rights and nonprofit initiatives throughout the world…

Programs to narrow the digital divide are the focus of a new list-serve. To subscribe, send an email message to: join-digitalconnections@lists.etr.org…

 

Tech people

Pat Lewis has resigned as executive director of the Communications Network in Washington, D.C., to become communications director for the New Israel Fund in Washington, which raises and contributes money to promote equality, fairness and justice for Israeli citizens…

GuideStar, the Williamsburg, Va.-based online publisher of nonprofit tax and financial data, has appointed Tinsley Goad, former vice president and chief financial officer of the College and University Computers, its vice president of finance and planning; 30-year information-technology veteran Ken Birlin as vice president of technology; and 25-year fundraising veteran Brock Field as vice president of capital and program resources.

Todd Cohen is editor and publisher of Nonprofitxpress, an online newspaper at www.npxpress.com. He can be reached at tcohen@ajf.org.

Trying to Define Charity

The idea of bringing nonprofits into the 21st century has become more than just a common name for conference sessions. Largely spurred by the viewpoint that government can’t do everything, several countries are examining how they can help their nonprofit sectors do more.

And, it has nothing to do with American efforts at helping faith-based organizations.

Efforts are underway in Australia, New Zealand, and Scotland to examine the definition of "charity," which is based on English Common Law from 1601. And Canada, while not currently looking at the definition question, has established seven "tables" (similar to task forces) examining how to improve the relationship between the nonprofit sector and the government – with (Can.)$94.6 million already committed to a five-year effort.

John Howard, Australia’s prime minister, established the Charities Definition Inquiry (CDI) in September, a three-person committee that has been collecting comments from the country’s nonprofit sector about the difficulties associated with the current definition of "charity." The CDI accepted comments through Jan. 19 of this year, and an official recommendation is expected this month.

The CDI is charged with examining and reporting on the existing definitions of charitable, religious and community service nonprofits. The committee is examining current definitions in Australia’s state and federal legislation, including the continuing relevance of the "public benevolent institution" (PBI) definition. It will also examine the current uses of the concepts for social, economic, legal, regulatory, and statistical purposes, as well as look at the definitions in overseas jurisdictions.

Common law charities

To be a "common law charity" in Australia, and throughout much of the British Commonwealth, organizations must meet three criteria to be considered fully tax-exempt charities: be a nonprofit; provide a direct public benefit or poverty relief to limited beneficiaries, and have a sole or dominant purpose that is "charitable in a technical legal sense, that is the relief of poverty, the needs of the aged and the relief or sickness or distress."

Most nonprofits in these countries meet two criteria. It’s the direct public benefit required to be a PBI that can leave organizations reeling. Moreover, organizations complain that the decisions about who receives exemption and become PBIs are inconsistent.

Elizabeth Cham, executive director of Sydney-based Philanthropy Australia, a sister organization to the Council on Foundations in Washington, D.C., said her organization recommends that the country needs a process by which consistent decisions are made. "Prevention, economic development (could be added), information and advocacy are important, but we really feel what’s needed is a process," she said.

She recommended the country establish an entity "with expertise, with consistent advice and clarity. … This entity may even be an entity within the tax office. … And this entity must be given the authority to make definitions and make clear definitions. … You may not, in fact, want a new definition that’s as unworkable as the old in five, 10, 15 years time."

Cham said her sense of the debate is "those that have tax deductibility don’t want it changed." There’s also concern that within the treasury department there’s building resistance "because of the revenues foregone," she said. "That’s the nature of treasury."

According to Amanda Steele, policy and research officer with the Community Business Partnership, there are no exact figures on the Australian nonprofit sector. A study in 1998 placed the sector’s size at approximately 114,000 organizations. Of that figure, 9,479 are designated as PBIs, which allows them to receive full tax concessions, and 15,242 that receive partial tax concessions. The rest are primarily sports associations, Steele added, which receive no tax breaks in Australia.

In the field and Outback

Nonprofits have generally been supportive of the steps to amend the system, said Steele, of the Sydney-based precursor organization to the official government inquiry group. There were nearly 100 public submissions of comment on the topic through January.

From the comments included online at the Charities Definition Inquiry Web site, many of the ideas may sound somewhat familiar to American ears. For example, the Anti-Cancer Foundation of South Australia, which is a community funded PBI, reported that it has been concerned "about the plethora of organizations who have cancer in their name and raise funds using a wide range of methods, some of which are to the detriment of ethical organizations."

While many of the comments go on for several pages, the Valentine Community Service Organization, in Valentine, New South Wales, wrote a simple three paragraph letter. In essence it preferred the status quo. "We are concerned that compliance criteria may be built into the definitions," the organization wrote. "Such compliance tends to be so expensive that organizations like ours reduce good works to get under the legislation, and it has come to the point where people are about ready to give up."

While Cham is in favor of the re-examination, she expects the Australian government’s ultimate decision to be driven by politics. "Government can put it on a shelf and say ‘that was interesting.’ Or alternatively, it will have to — if they change the definition — go through the parliament," she said. "I think as in all things, there’s a process (and) what happens is a political decision."

She also noted that 2001 is an election year in Australia, and whether politicians move on the issue or let it die in committee is hard to predict. "It’s important for the sector to say this is really important. And with an election coming up, it can be an opportunity to make it a real issue."

People in New Zealand were not quite as responsive to emailed requests for information. Steve Maharey, the NZ minister responsible for the "community and voluntary sector" may have offered a telling reason for the general reluctance to comment. In a speech before Philanthropy New Zealand, as listed on the organization’s Web site, Maharey said, "Unfortunately, in the past the relationship between the government and community and voluntary organizations has been characterized by mistrust and insecurity. I know that it takes time to gain the confidence of a sector disillusioned and jaded by past experiences where their views were often not taken into account in the development of policies that would affect their communities."

According to his comments, there are no tax incentives to establish philanthropic trusts in New Zealand, currently, though they do not pay tax as long as they come within the Charitable Trusts Act definition of charities and meet the requirements of the Inland Revenue Department (analogous to the Internal Revenue Service).

A governmental tax review of New Zealand’s sector of approximately 66,000 charities has begun in response to the requests from organizations. Maharey’s comments note that the review is not intended to raise additional revenue. "Consequently, if the review results in some tightening of the definition of charity for tax purposes, this will probably be offset by an increase in assistance for those organizations that continue to be considered charitable for tax purposes under the new definition."

David Robinson, director of the Social and Civic Policy Institute and convenor of the Voluntary Sector Program at the Victoria University Institute of Policy Studies, said via email that the major concerns around the definition of charity include the position of Maori Trust Boards and iwi (tribal) social services; local governments setting up "false" charitable trusts, such as Wellington Stadium; governance of museums, art galleries and sporting facilities. "That is making use of the charitable trust structure to operate a local council facility," he explained.

North of the border

Canada has taken a different route, currently skirting the definition debate and moving toward redefining the relationship between the sector and government. The Voluntary Sector Roundtable has evolved into the Voluntary Sector Initiative (VSI), which will look at issues of capacity, volunteerism, legislative and regulatory framework, research and information management, public awareness, public policy, and federal government/voluntary sector relations.

Susan Carter, executive director of the Ottawa-based VSI secretariat, said the bulk of the five-year process would take place in the first two years. A first-year progress report is expected in June, though the seven joint tables were not constituted until the fall of 2000. There are also working groups, made up of sector people only, looking at advocacy and finance. "Both of these were issues that the government was not prepared to be the subject of joint work at this point," she said.

The definition of charity is not formally in the terms of reference for the tables currently making up the VSI. Gordon Floyd, vice president for public affairs at the Toronto-based Canadian Centre for Philanthropy (CCP), said, "There is some discussion that the table looking at regulatory issues will have to get into this area because part of the subject matter they have to tackle is who should be covered by federal regulation. … At the moment, federal regulation covers essentially charities. The jurisdiction over charities is provincial, not federal. The federal government is involved solely because of their taxing power."

Floyd said, Canada is behind its colleagues Down Under. "They seem to be moving more directly on the issue of the definition of charity than we are here," he said. "Here we’re looking at who the federal regulations should apply to … indirectly getting at the issue of definition."

He added that Canadians are content to let the definition of charity stand, though he’d say it’s only a starting point. It probably is the only practical avenue for Canada, however, he noted. Since jurisdiction is at the provincial levels, getting all 10 Canadian provinces to move in the same direction is probably as difficult as getting the 50 American states to move in unison. Though the population is notably smaller than the United States, approximately one-third is culturally French-Canadian, and the sector operates differently in Quebec.

Carter said the question of how much a change in the definition of charity might affect the country’s treasury has no clear answer at this time.

Researchers can be found arguing that the overall size of contributions "is fairly inelastic," she said, "and if the number of organizations increases, it will translate to more organizations dividing a finite pie." And there are also researchers who claim the pie’s size depends on the level of tax treatment rather than the number of organizations. "It’s difficult often to know (which is the best view)," she said, "because there are more things that are changing than the number of charitable organizations."

With changes in the United Kingdom as well as the Canadian roundtable and the definitional questions Down Under, "It’s a huge economic moment for the world," Cham said.

Bush Plan

Faith-based nonprofits across the country may soon find themselves with a conflicting choice – take federal money and risk restrictions, or turn the money down and see the organization across the street take the cash.

The other issue is how to suggest that a tax cut, especially eliminating the estate tax, is not the best thing for nonprofits without alienating donors.

Although details are still very sketchy, there are four main points to President George W. Bush’s nonprofit and faith-based initiative: allowing non-itemizers to take a tax deduction for donations, allowing donations from tax-deferred retirement savings without penalty, increasing tax deductions from 10 to 15 percent; and the opening of the White House Office of Faith-Based and Community Initiatives.

The repeal of the estate tax would be gradually phased in through 2009, under the Bush plan.

The application for funds and terms and conditions for transfer have not yet been released. Details are expected within six months, Bush has said.

Many nonprofits warn that the Bush administration’s plan to fund faith-based institutions poses a danger to both the church and the state. The American Civil Liberties Union (ACLU) explained part of the problem.

"Provided that they use their own funds, religious organizations are exempt from many civil rights laws and courts have allowed them to discriminate on the basis of their religious beliefs and teachings about race, religion, sexual orientation, gender and pregnancy," according to a statement released by the ACLU. "But that equation must change once religions begin to use tax dollars."

Conversely, many nonprofits support the Bush administration’s plan to allow taxpayers who do not itemize to deduct charitable contributions.

In a survey of 30 nonprofit leaders, Washington, D.C.-based OMB Watch found that many organizations shared this view on the tax change.

Independent Sector, also in Washington, D.C., commissioned a study on the tax change from the accounting firm PriceWaterhouseCoopers LLP, which found that the deduction could net charities an additional $14 billion a year. (See related story, page 4).

Fr. Robert Siricco, who heads the Acton Institute in Grand Rapids, Mich., visibly met with President Bush when the latter sought feedback on his plan. The Catholic priest has long criticized religious groups, particularly those that share his faith, who depend on federal funding. But, now he supports the exemption for non-itemizers.

"I think the tax dimension of the proposal holds great promise for enabling these private, often religiously inspired charities to assume a normative role in society for meeting the needs of the poor," Fr. Siricco said.

"When combined with overall tax relief, we would have the possibility of a philanthropic renaissance, because philanthropic giving rises with the increase of disposable income," he said.

While Fr. Siricco and the Acton Institute champion broad-based tax cuts as more of a boon to charities than federal spending, many other nonprofits do not.

A look at charitable contributions during the past two decades compiled by the AAFRC Trust for Philanthropy in its publication Giving USA shows a clear trend. Increased giving follows a tax cut, compared to the slower pace of donations that follow an increase in federal levies.

Charitable contributions doubled during the 1980s. In the 1990s, charitable contributions grew by 50 percent.

No government agency has calculated the cost of the Bush program, which establishes a new office to work with faith-based charities. In addition to the White House office, the Bush proposal pushes grant applications through five separate agencies.

First, given the scope of the plan, at least half a dozen congressional committees will look at it. On top of all this attention, at least a dozen members of Congress have projects they want to help. For example, Rep. Mark Souder (R-Ind.) has several ministries in his home state that need assistance, as does Sen. Sam Brownback (R-Kan.).

The federal government permitted religious groups access to federal funds for social services in the Welfare Reform Act President Clinton signed in 1995, pending state approval. Most states, 40 in all, do not grant such approval, making the provision little-used, said Kenneth Wolfe, a staffer with the House Republican Conference.

Because of this scarce use, Wolfe said, the provision has had little effect on federal, state and local welfare spending.

When President Bush unveiled his faith-based initiative, nonprofit groups expressed concern that the program would compromise the missions of both secular and religious charities.

"Under this program, you can have worship services at lunchtime and the close of business," argued Mark Rosenman of the Union Institute in Washington, D.C. At the other end of the ideological divide, Michael Tanner, a policy analyst with the libertarian Cato Institute, also in Washington, D.C., worried that "Officials of these charities may end up spending more time reading the Federal Register than the Bible."

The chairman of the House Republican Conference dismissed the concern regarding the separation of church and state. "I’m amazed that this never comes up when we give federal funds to Baptist hospitals and Catholic colleges," said Rep. J. C. Watts, (R-Okla.). "It’s only when we try to help the needy in inner cities that I hear it."

Rosenman pointed out that religious groups have received federal funding for years. The Bush plan, he said, opens federal funding to local congregations whose religious orientation may sway them to discriminate in employment of social workers, as well as in the services provided.

Other critics such as Tanner, see more of a secular influence on federally funded congregational efforts than they do the reverse bias. "Many of our largest charities, such as Catholic Charities, Lutheran Social Services and the Jewish Federations, already receive more money from the government than from private donations," Tanner wrote in a policy analysis paper.

At a press conference promoting the President’s initiative, Joanne Negstad, president of Lutheran Social Services pointed out that her group already has "a seat at the table." What Lutheran Social Services was concerned about, she said, was that government spending on social services would go down as a result of the initiative.

When asked if funding would make religious charities arms of federal agencies and its workers de facto government employees, Rosenman said, "No more than the secular nonprofits."

 

Malcolm A. Kline is editor at the National Journalism Center in Washington, D.C.

WBAI is Latest Pacifica Storm

Recent firings and the questionable barring of some people at WBAI radio in New York City leave the staff once more at odds with the Pacifica Foundation which owns the station.

The firing of the station manager along with a program director and a producer by Pacifica management right before Christmas spawned a series of rallies and teach-in shows to garner listener support. Further, the staff sees board actions as censoring of the popular Democracy Now! show run by host Amy Goodman.

The Pacifica Foundation is the parent of Pacifica Radio Network, comprised of KPFA, KPFK, KPFT, WBAI & WPFW in Berkeley, Los Angeles, Houston, New York and Washington, D.C., respectively, with nearly 60 affiliates in 27 states. The foundation was established in 1949 as the world’s first listener-sponsored radio.

As Pacifica strives to broaden its audience base, changes to add more arts and culture programming has met with resistance from local staff. Program content at stations, like KPFK, now feature less political content. Meanwhile, KPFT is a country music station and WPFW plays mostly jazz.

That shift is at the heart of a 1991 strategy for national programming by Pacifica that would create a national public radio (NPR)-like programming service. The move also aims to pick up donations from foundations, such as Pew and Ford.

To WBAI staff members at the nonprofit progressive radio station, the action comes on the heels of the foundation’s board locking out the KPFA affiliate in Berkeley during July, 1999. That event was accompanied by arrests of listener demonstrators who supported the local station.

The current crisis is not a lockout, according to Jim Freund, producer at WBAI for 33 years. "Bessie Wash, the board director, gave the keys to a WBAI staff member," he said. "How could it be a lockout?"

December’s crisis erupted when Wash traveled to New York to offer WBAI manager Valerie Van Isler a job at the national level based in Washington, D.C., according to Freund. However, Van Isler refused to turn over the keys indicating she would not leave without force.

"Bessie Wash then ordered the program director, Bernard White, fired because he had declared teach-ins on the air in support of Van Isler, despite programs not being informed of the events," Freund said.

The biggest fears focus on a loss of direction by the Pacifica board to corporate interests. "The language they’re using is more corporate," said R. Paul Martin, WBAI’s union shop steward. "The board has made it clear that they want to use the Arbitrons to decide audience strength, but the Arbitrons are made for commercial stations and are not really useful for non-commercial stations."

Further reasons for concern center on Pacifica hiring firms like the American Consulting Group, a management and labor relations consulting firm, known for tough negotiations with unions. "They made up what was called the ‘Contract From Hell’ and tried to push it down the throats of all five stations," Martin said.

Such comments represent dissident local advisory board (LAB) members who want to control Pacifica’s programming and business decisions, according to Pacifica’s Web site. Pacifica did not return repeated telephone calls seeking a response.

Also from its Web site, Pacifica contends that the LAB members, if successful, would splinter Pacifica into a group of isolated stations and diminish its critical role as a nationally-relevant alternative voice.

Changes in Pacifica’s bylaws clarify that, while LABs may recommend individuals to serve on Pacifica’s national board, it is the board – not the LABs – that have the final responsibility for electing board members.

"The foundation must continue to move forward and stay focused," said board member David Acosta in a posting to the Web site. "The shift toward national programming is a powerful way for Pacifica to move into the 21st century while preserving the local flavor and attention to local issues its audience values."

The audience issue is a red herring to Andrea Buffa, of Media Alliance, a nonprofit watchdog in San Francisco that serves as a research center to support diversity in the media.

"It’s a corporate takeover of a progressive station," she said. "When you attack the most popular national program you have and fire the most popular morning show, that’s not what you do when you try to increase your audience."

As the only progressive radio network in the country, Pacifica fails to have significant board representation tied to the progressive part of society like the American Civil Liberties Union or labor, according to Buffa.

She pointed to Michael Thomas, Pacifica’s treasurer who works for CB Richard Ellis, an international real estate firm and alleged author of an email describing a proposal to sell either KPFA or WBAI. Pacifica board member John Murdoch is a lawyer at a firm that specializes in maintaining a union-free workplace, according to Buffa. Board member Bertram M. Lee has a business history of buying and selling radio and television stations.

Turmoil is nothing new for WBAI. "I came to WBAI during a similar crisis in 1977," said Leonard Lopate, of the New York & Company show of WNYC, also a nonprofit and part of the National Public Radio network. Lopate worked at WBAI for eight years.

"Pacifica has been going through this for nearly 20 years now, and every once in a while it flares up when a new board sees a drop in audience," he said.

However, Lopate sees the concerns from people who want to offer news beyond mainstream. "I’m glad they cover more stories than the commercial station, and I wish NPR would play it a little less safe at times," he said.

Lopate doesn’t share concerns about a Pacifica sellout. "That is unlikely because people who work for Pacifica on the local level are anti-establishment," he said. "On the other hand, I would not want WBAI to become a slightly-to-the-left version of NPR."

The shift doesn’t mean catering to corporate interests, according to Lopate. "Everything I did at WBAI is happening at NPR," he said. "I discovered I could do the same show here as long as I did it in terms of a devil’s advocate instead of just an advocate. WBAI often chases away as many people as it brings by sounding so didactic."

Staff reaction to Pacifica focuses on a believed censorship concerning topics such as East Timor, as discussed on Amy Goodman’s show. Yet the corporate level of NPR doesn’t prevent Lopate from dealing with the news. "I had Amy Goodman on my show so I don’t know what corporate pressures mean. My boss has said the show is an opinion show and there is no reason to tell Leonard to change."

Pacifica stations have always been about making a difference, according to union leader Martin. "I’m sure that some nonprofits could profit from becoming more corporate, but Pacifica is supposed to mean something – we shouldn’t take this lazy way towards getting more listeners by watering down what we do."

Producer Freund sees no general trend increasing the degree of corporatization. "Pacifica is capable of messing things up, but a certain amount of corporatization has already been there," he said. "Some of the charges of buying and selling radio stations happened in the 1960s and the 1970s."

The fact that a person comes from a corporation doesn’t strike Freund as being negative. "That’s guilt by association," he said. "Our studios on 62nd Street were built (donated) by one of New York’s construction companies and the president was on our board, so I don’t think that means the people are bad."

The audience issue is very real to Freund. "We have half the subscribers we had 20 years ago, and we are the strongest of the Pacifica stations," he said. "Today we have 17,000 subscribers, while we had 34,000 in 1980 – these are hard cold numbers."

The problem with the station just could be the narrow casting the foundation worries about. WBAI’s golden days offered a programming of 70 percent arts, 20 percent public affairs with 10 percent news.

"Now we are around 80 percent public affairs, and for the last 20 years the policy has been if you are doing arts you are not taking care of business," Freund said.

Major changes by Pacifica could help as long as they don’t take over too much air time, he warned. Currently, changes appear to affect five hours a day with some shows becoming national, like Democracy Now!

"No one is talking about 24 hours of changes," Freund said. "Most people are objecting to more arts and science programming."

Could Pacifica have handled the changes better? For a sector that prides itself on being open-minded and inclusive, the management of a progressive station strikes out as repressive as their opponents, according to Freund.

"Pacifica took a person off the air in mid-sentence," he said. "In the past we took someone off after being told he had a couple of shows left – he ranted and raved and then it was over with."

The lack of a tone of cooperation filters down to the staff. Guards at WBAI are deemed by the staff as repressive, but Freud welcomes the security. His feelings were echoed by Lopate. "Politics at WBAI is always shocking – producers are volunteers, but people are constantly jealous of others," he said. "The tone comes off as didactic – the show you are about to hear is one of the most important shows you will ever hear – it makes people turn the channel off."

Recent turmoil can be blamed at both sides. "I don’t trust Pacifica – I was in the forefront of the 1977 crisis, but they were trying to sell the station then and this is not the case today," Freud said. "What happened in the 1970s was a revolution and what’s going on now is a civil war."

Freund still keeps a wary eye on how the foundation will proceed. "Pacifica wants the station to become more fundable, and I hope that funding is going to be through listener sponsorship and not through grants – if they are going after government money, then it would be against Pacifica’s heritage."

 

Tom Pope is a New York City-based journalist who writes about management issues.

Special Report: Some Benefits Rub Employees the Right Way

Trying to raise money or run a program can be stressful. But, the folks at Alaska Assets, Inc. in Anchorage have a solution. Massage therapy.

"An employee, about once a month," explained Executive Director Diana Strzok, "can sign up for up to 30 minutes for a chair massage (kneeling into a special chair) that is similar to those at malls and airports. It can be wonderful in terms of stress reduction and it is invigorating."

The concept came from the staff retention committee that meets quarterly to identify and build on the things that will help keep the staff.

While nonprofit executives may not be able to command the $252 million contract recently signed by baseball slugger Alex Rodriguez, packed with dollars and fringe benefits, nonprofits still compete for executives. Because salaries are getting very comparable to each other, the edge may go to the organization that is more creative with its benefits package.

Long-term bonuses, deferred payment plans, substantial health insurance coverage, and extra vacation time are commonplace. However, certain novel compensation deals are attracting top-level executives to nonprofits.

The type of benefit package depends on what part of the nonprofit industry you’re in, said John M. Isaacson, president and founder of Boston-based Isaacson Miller, an executive recruitment firm.

According to Isaacson, there are some unique "core payment" strategies being used by various organizations. For example, higher-end academic and health care executives are establishing long-term bonuses where money is earned in 3-to 5-year increments based on hitting targets. "It’s meant to mimic stock plans," he added.

Christopher P. Bryant, president and chief executive officer, AST/BRYANT in Santa Monica, Calif., said executives are getting release time, which is new to the sector. Release time is when a couple days a month are given to an executive to do consulting work for another organization. This is used when salary demands can not be met, Bryant explained. "It helps augment salary through outside consulting work."

Lump sum signing bonuses ranging from $5,000 to $25,000 are trendy, too, according to Bryant. The signing bonuses are given upon acceptance of the job and all money is in addition to standard relocation benefits.

In the higher education side of the sector, Bryant said additional sabbatical time beyond vacation is becoming more and more prevalent. For example, an executive receives four weeks vacation and eight weeks on top of that for successful completion of a capital campaign – an "At-A-Boy" after a long and grueling effort on a capital campaign.

Length of service incentives can also attract higher education personnel, said Bryant."Put X-thousands of dollars away each year (for example: $10,000/year for five years), plus all accrued interest, and pay a $50,000 bonus when the five years is up," said Bryant. "If four-and-a-half years are up and termination occurs, no bonus is remitted."

Bryant cited specific examples of executive benefits packages:

• A vice president for advancement at a liberal arts college in the West was given a three-month sabbatical following a successful capital campaign;

• A vice president for advancement at a small Western institution provided a $25,000 lump sum incentive bonus for a woman upon her 5th anniversary at the institution;

• A Mid-Western institution gave an executive 20 percent of base pay as a signing bonus – the salary was $105,000/year; and a Mid-Western executive received a $5,000 signing bonus and an additional $5,000 upon first anniversary with the organization.

According to Roanne L. Barnes, executive vice president at Nequon, Wis.-based Barnes Development Group, LLC, benefits packages are all over the board.

Some benefit packages at smaller nonprofits are often times very liberal with vacation days because they may not be able to compete with larger organizations salary-wise, Barnes noted. But the perk of more vacation time may sway an executive’s decision.

"Some of the smaller nonprofits have a difficult time competing for executives’ because they cannot pay the same. But offering more health care coverage or more vacation and sick days is the only bargaining chip they have," said Barnes.

A unique benefit at The Student Conservation Association, Inc. in Charlestown, N.H., called a short-term disability pool, allows employees to carry over all vacation, sick-day, personal day, and holiday time into an account pool from which they can choose throughout their time at the organization.

"It’s something I’ve never seen anywhere else," said SCA Director of Human Resources Kim Henning. "There is no cap and some people have six months worth of time in their pool." One father took paternity leave and he used his pool, said Henning. "He didn’t have to use any of his vacation."

Henning said the pool was loosened up last year to coincide with the Family and Medical Leave Act. "You couldn’t do that before," she said.

Henning describes the organization as "pretty progressive" in its approaches to work ethics and benefits in general and even offers telecommuting to individuals as a means of compromising with a job description.

She acknowledged that SCA uses its benefits package as a way to entice executives into accepting a post. "The benefits are wide-ranging," she said. "Some aren’t actual benefits, but pluses that add to the environment."

William Whitney, a principal at executive recruitment firm Larsen Whitney Blecksmith and Zilliacus in Los Angeles, said nonprofits generally offer normal healthcare and vacation packages. "But, there is more emphasis than it used to be on items such as automobiles. This is because the job and labor market has become tighter and the search for good candidates in the nonprofit field has become more difficult."

He said, "Nonprofits can offer their version of a 401(k) where employee contributions can be matched or not. With the limited pension plans offered, there has to be a tradeoff – which is – there has to be a passion to be in the nonprofit field, as a result of the lack of opportunities for personal wealth building," Whitney said.

Colleges and universities have the broadest and best plans in the nonprofit sector, according to Robert Sellery, president of Robert Sellery Associates, Ltd., in Washington, D.C.

"They can offer subsidized mortgages or university housing, tuition plans where they are working, or a reciprocal education plan for a candidate’s child at another institution. This is where a group of colleges have banded together to offer a choice in location for the educational programs available at full or partial payment of tuition. For employees themselves, there may be no tuition required for participation in graduate student programs," Sellery said.

Where the nonprofit is not a school, Sellery mentioned, "One modest plan, for example, has an educational reimbursement plan for $1,800 annually with a lifetime cap of $5,400. This is a standard part of the benefits package at this organization."

That same nonprofit, according to Sellery, offers paid time off plus 10 holidays per year. The first three years has 20 days off; the fourth through seventh years offer 25 days; and the eighth year and beyond permits 30 days off. "Health insurance is a cafeteria plan (health, prescription and optical) with a $50 a month deduction for a preferred provider plan. With dental, visits to certain doctors are at no cost – but using outside-the-plan dentists creates a charge of $2.50 per month for a single person or $4 a month for a family," said Sellery.

"Life insurance at three times salary is free of charge, as is short-term and long term disability," said Sellery. Short-term covers 60 percent of salary after a two-week waiting period and long-term provides 60 percent after a three-month waiting period.

The sample nonprofit offers a pension plan open to participation after one year. "The nonprofit will put up to 8 percent of salary (up to the FICA limit) and 14 percent of salary above the FICA limit, which is in the $70,000 range," said Sellery, who said that vesting varies from place to place. Sometimes it takes effect immediately. Sometimes it is portable and sometimes not.

"One nonprofit vests 60 percent after three years of employment; 80 percent after four years; and fully vested after five years," said Sellery. "In addition, there is a tax-deferred annuity plan – and some organizations may offer matching contributions to 401(k)-type savings plans."

Sellery said that no-cost confidential employee assistance programs are being offered at nonprofits, as possibly a free checking account. "A lot of fundraisers do ask – or are provided with – automobiles and club memberships, which are indeed useful for their jobs. Presidents and executives at a higher level get these," said Sellery.

Kris Morris, partner at Morris & Berger in Pasadena, Calif., mentioned Supplemental Employment Retire-ment Programs (SERPs) as something executives seek when looking for benefits.

Morris said housing assistance is commonplace, but she is seeing more than just paying for the "pack up, pick up, and move." Morris gave an example of above and beyond paying for relocation. If an executive moves from Denver to New York City, one of the ways supplemental compensation is used is if the executive’s salary of $100,000 isn’t going to give them that much of a raise, the nonprofit pays (usually 3-5 years) for extra housing costs ($2,000/month to subsidize the cost for housing).

Another example, Morris said, is a five-year mortgage subsidy where it’s $2,000 per month the first-year, $1,500 the second, $1,000 the third and fourth year, and $500 the fifth and final year. A six-month to one-year clause may be agreed upon for when leaving the organization.

Anne Hyde, president of the Hyde Group, Inc., based in Cos Cob, Conn., said there has been much greater turnover during the past few years. "Such organizations have had to become much more competitive in developing both their donations and fund developing programs to include bonuses. However, they have to be based on results. The best approach is for a board to establish goals and objectives right up front."

"For nonprofits with 100 or more staff (not including volunteers)," said Michelle Pangallo, an executive with D.E. Foster Partners, Inc., Alliance Firm of KPMG LLP, "to attract and retain high-caliber talent, smart organizations recognize that certain privileges and benefits can tip the balance."

Pangallo said, "To most CEO-level candidates, the typical expectations would include car or car allowance, and parking — plus a car/cellular telephone. Also, memberships in an in-town club, to afford an appropriate and convenient venue for meetings, is fairly typical expense reimbursement for a CEO-level candidate, as is providing for professional membership dues," she said.

"I think that organizations are going to have to become more creative (with their benefits packages) because they can’t compete on base salary (because it’s too equal)," said Bryant. "Creativity will attract the (highly talented executives) and that will enable the organization to retain that talent for a longer period of time."

 

 

NPT staff writer Jeff Berger also contributed to this story

Special Report-Nonprofit Paychecks Continue to Climb

If you’re a planned giving officer anywhere in the United States, but particularly for a foundation, your 2001 paycheck is going to be significantly heavier. The average pay for the top planned giving officer at a foundation is $89,362. And, planned giving professionals at associations will receive the greatest pay hike, 26 percent to an average $57,382.

The holders of many of the top positions at nonprofits, however, will have to settle for moderate 4 and 5 percent raises. And, holders of the top job are seeing raises that are less than the rate of inflation.

These are among the findings from readers of The NonProfit Times who answered a survey form sent during December. Responses from 340 organizations were tabulated into this year’s study. The study sought information on eight positions: president/executive director; chief financial officer; program director; planned giving officer; development director; major gifts officer; chief of direct marketing; and director of volunteers.

All of the categories saw overall increases, from the miniscule 1.2 percent for chief financial officers to the average 11.5 percent for planned giving officers.

The other mean figures were: president/executive director, 1.3 percent; program director, 4 percent; development director, 5.7 percent; major gifts officer, 4.3 percent; chief of direct marketing, 4 percent; and director of volunteers, 4.5 percent.

The national averages projected pay for 2001 for the eight position are:

  • President/Chief Executive — $96,715
  • Chief Financial Officer — $62,361
  • Program Director — $56,862
  • Planned Giving Officer — $59,939
  • Development Director — $59,220
  • Major Gifts Officer — $60,945
  • Chief Of Direct Marketing — $52,758
  • Director Of Volunteers — $35,285

When breaking the statistics down further, the chief executive job at a cultural organization, on average, brings in the most cash, an average $140,635, followed closely by the bosses at foundations, who will bring home an average $137,496. The top job in the other categories sampled were:

  • Education — $114,371
  • Health — $108,413
  • Civic — $104,530
  • Association — $93,738
  • Social/Welfare — $85,666
  • Government — $81,059
  • Religion — $74,504

That pay ranking by type of organization held steady with few deviations throughout the study.

While planned giving officers were by and large in the middle of the salary pack in actual dollars, they are taking home an average 11.5 percent more in 2001 compared to 2000. The next largest increase went to development directors who pulled in an average 5.7 percent pay hike, with average salaries of $62,466 in the Mid-Atlantic region down to $49,617 in the South.

Obviously, size does matter. Planned giving officers at organizations raising $50 million or more will earn an average $89,644, and it ranged down to $26,000 for organizations with revenue of less than $1 million.

The same holds true for development directors. At organizations with annual revenue of $50 million or more, the average salary is $110,390, compared to the $38,346 for the top fundraiser at organizations with less than $1 million in revenue.

Size matters in all categories. For example, the chief executive position brought in an average $212,587 at organizations with more than $50 million in revenue as opposed to an average $61,228 for organizations with less than $1 million in revenue. Another example is the chief financial officer position where the $50 million organizations will pay an average $123,069 compared to the $44,456 to be paid by organizations with less than $1 million in revenue.

Regions also play into the salary mix. A planned giving person in the North Central region of the country will bring in 70 percent more at $64,240 than a similar position in the nation’s heartland.

The accompanying charts illustrate state-by-state how the country was regionalized for the purpose of this study. The charts also have a complete breakdown of salary by position and by region.

There are a few small catches. For example, 85 percent of the organizations polled responded that health insurance premiums had increased and that the average hike was 17 percent. Some 17.6 percent of those organizations said that employees would be picking up a larger percentage of the cost. And, 7.7 percent of organizations responded that benefits would be reduced in one form or another.

Employees can expect to pay an average 22.3 percent of the health insurance coverage, according to the data.

To some extent it’s still a seller’s market, with highly qualified job applicants able to command top dollar. The small rate of increase for the top two jobs may have a lot to do with contracts and letters of agreement that stipulate small raises in exchange for other benefits, such as annuities and vacation time, said David Edell, president of DRG, Inc., a New York City-based professional search firm specializing in nonprofits.

“I think salaries for CEOs and presidents have reached an unprecedented high level. There’s always been some unstated ranges of acceptable salary for nonprofit CEOs and presidents beyond which boards are unwilling to go. The increases are coming in non-salary issues,” he said.

“Additional benefits, supplemental pension plans, additional annuities, vacation, sabbatical and bonuses won’t show up as cash,” Edell said.

He explained that in multi-year contracts the increases are pre-determined so the executives know, by and large, what they will be earning.

If a board wants a particular candidate, price generally isn’t a problem. “It’s been my experience that they do what they need to do to bring the person to the agency,” Edell said.

It’s not unusual in a tight labor market for second tier executives to get a significantly larger percentage increase in pay. “Because there’s always been some disparity between the CEO and next levels and it has always been dramatic, it doesn’t surprise me” that percentages are weighted to the lower levels, Edell said.

A new twist on the payroll scene is the pre-emptive offer. Edell said boards and chief executives are taking a hard look at personnel and making offers to keep them signed-on for a particular length of time, three years for example.

“They are saying what can we do to make it worth your while to stay,” Edell said.

Organizations are also making aggressive counter-offers to keep top staff because of the cost of hiring a new person. He said that often the employee will stay and won’t have a bad attitude about having to field other offers to get a better deal in-house. “Some cases it is just communication problems, ‘why didn’t you tell me you love me’,” he said.

Salaries, despite a near decade-long climb have not peaked, Edell said. “I do think because there is the turnover we are seeing, the market has risen, and there’s a more limited pool of talent.”

Save Dollars on Your Brokers Commissions

As chief financial officers struggle with a nonprofit’s finances they would probably like getting back some of the money they spend just to coordinate the funds.

That’s just what the Goodspeed Opera House Foundation in East Haddam, Conn., has been doing. A portfolio of $7 million in trading brings back around $15,000 a year consistently for the nonprofit.

The income returns to the nonprofit from what ordinarily would have been part of the commission going to the broker for the trading. It’s called commission recapture or a commission recapture program (CRP).

Goodspeed’s endowment provides for the general operating needs of the nonprofit’s two stages where six musicals are presented annually. The endowment is structured with equities and a fixed income where the nonprofit maintains a value manager, a growth manager and bond manager.

However, not each applies to a CRP approach, according to Dawn Starr, the opera’s chief financial officer. "Our value manager actively buys and sells equities – the perfect way to recapture those funds," she said. "Nonprofits not currently participating in CRP should investigate the process."

CRP is a process where a fund receives a rebate from a portion of the commissions known as soft dollars. Soft dollars are portions of a broker’s commission that investment managers use to pay for research whether it comes in a proprietary way or arrives by third-party researchers.

The CRP directs an unbundling of the commissions to separate the research charge or the soft component from the execution charge. That charge then returns to the investor who paid for it. The CRP approach assumes that the recapture broker is competitive in any execution and its price.

The beginning CRPs came with the U.S. Department of Labor’s May, 1986 Technical Bulletin, which declared that commissions should be considered an asset of a plan and that sponsors had an obligation to monitor and control the commissions.

The number of nonprofits using CRP is hard to determine, according to Howard J. Schwartz, chief executive officer and president of Lynch, Jones & Ryan, (LJR) an institutional trading firm. LJR is a wholly-owned subsidiary of Instinet Corp., a Reuters Company with offices around the world and is based in New York City. Presently the firm helps around 200 nonprofits.

"Probably nonprofits would be the ones to flock to this financial concept without hesitation," he said. "The fiduciary responsibility of the trustees means they have stronger needs to watch operating expenses. CRP would be a no-brainer," said Schwartz.

LJR originated recapture programs in 1986 to help pension plans reduce transaction costs. The typical CRP client has pension assets between $500 million to $1 billion with the smallest fund maintaining around $50 million in assets.

Schwartz explained that the global market for commission recapture consists of around 10,000 possible institutions that contain $500 million or more assets, yet only 6 percent of the total market currently uses the concept.

Typically, CRP can reduce transaction costs from about 6 cents to 3 cents a share, according to Schwartz.

Most funds don’t have the clout with money managers to lower a commission rate because money managers trade on a block basis with multiple accounts at the same time. The nature of the business means that they don’t want different commission rates with various clients.

But, the CRP is a relationship between the fund and a broker where the broker agrees to execute the business in equities or fixed income with a rebate in mind.

"The money manager is uninvolved. He doesn’t care if the broker gives back half the commission to the plan," said Schwartz.

Generally, the choice of a broker comes from the investment manager, but major brokers carry relationships with many money managers. A client simply needs to send a letter of direction that asks the manager to execute a percentage of the overall trade with a specific broker. In return the broker agrees to rebate 50 percent of the commission back to that account.

The letter typically asks the manager to carry on 25 percent to 35 percent of the transactions in this way. This should pose no great difficulty to the manager, according to Schwartz, as the money manager is probably already doing business with a broker.

"It’s a 34 cents stamp and a one page letter," he said. "The implementation of the process is that simple," said Schwartz.

After the letter, a few hours per calendar quarter to monitor the progress remains as the only management effort for the nonprofit’s CFO. Most firms that handle such transactions also provide client support groups that send out monthly reports. Clients usually have 24-hour access to view accounts through software.

"It’s a no brainer," said John P. Casey, treasurer for the Altman Foundation in New York City. The foundation’s roots go back to the retail B. Altman and Company and its mission strives to aid schools, healthcare and the arts in New York City. The Altman Foundation started using CRP this year for its $275 million assets, although it isn’t using CRP for the emerging market. It chooses to use CRP basically for its equity portfolio.

"If the trade can be made for 4 cents a share with XYZ company and another company is 6 cents, then I’ll go with the other company," he said. "The process must be the lowest cost for the trade and by trading through a CRP broker, I can gain some of the commission back."

To date the Altman Foundation has retrieved around $10,000. "It’s free money I can apply to operating costs," Casey said.

The biggest fear money managers have is that a fund may be asking the manager to lose too much of their soft dollars for information. If Casey told a manager to trade 70 percent through a CRP system, the manager might lose its ability for new issues on the market and would lose research information.

"All I’m doing is saying they should put up to 25 percent of the total trading," Casey said. "Then I’m not upsetting anyone. So, I’ve limited it."

Most brokers provide investment research to attract business, according to Schwartz. "If you don’t provide the research you can use that 3 cents to offer a rebate," he said. "They can produce some research for 50 clients yet don’t have to produce it 50 times. The crucial point is there is money available for both CRP and also research."

So if CRP is so great why is only 6 percent of the market using the method? "CRP is not something readily apparent," Schwartz said. "It’s still a relatively new concept and has to be explained to the trustees and directors. It’s inside baseball."

Most funds use more than one recapture broker, yet according to Schwartz the corporate world generally uses one. The public world worries about Sunshine laws with a perception of favoritism so may use three brokers.

"If there were other parts of our portfolio that could apply to CRP, I would expand it," said Starr.

The opera also used CRP when it changed investment managers. The nonprofit went through LJR to liquidate the account and the differential was 2 cents on a share that ended up saving $1,400. Goodspeed gave its manager limits of 75 percent so if the manager came across a particular stock needing research, the arrangement would not hinder the manager.

"Even though we only directed the manager to going 75 percent with CRP, the manager pretty much directs it 100 percent , so it’s not a burden for them," Starr said.

 

Tom Pope is a New York City-based journalist who writes about management issues.

Leaders Need Guts, Cooperation

As Fred Grandy left his job as president and chief executive officer of Goodwill Industries International he seemed a bit frustrated. While progress certainly was made at the Bethesda, Md.-based organization during his five years, much larger, sector-wide issues weighed on his mind.

"I always thought that if organizations have the opportunity to band together to perform a greater good, that’s their natural default position. Well, it ‘ain’t.’ Just the reverse is true and that’s kind of too bad," said Grandy during a one-on-one with The NPT during his next to last day on the job this past November.

Grandy is headed to the University of Maryland to train the next generation of nonprofit managers for at least one semester while deciding on what’s next in an eclectic and successful career that has spanned Hollywood, the halls of Congress and the charitable sector.

"In this society, because we’re driven by outcomes and measurements, you’re as good as the measurements that you put up on the board. And, unfortunately, I see in the nonprofit world an enormous amount of energy devoted to self-preservation."

Nonprofits with national operations and affiliates, such as Goodwill, United Way and many others, are facing a crisis of courage and faith in each other, he believes. Local organizations are balking at many directives from national and are attempting to chart their own course. While they are holding tight to the brand name, they are simultaneously trying to hold at bay with the other hand.

There is civil war in some national nonprofit systems, with locals holding back dues from national and pushing for more control.

"This is what I’ve never understood. Surely there is a common ground where you leverage your corporate money with your individual clout. The more I look at confederacies, I realize this is not a governing model that we want to emulate," said Grandy. "The problem right now is there is a compelling societal need for these organizations to not just work together but to be leaders – to show government how to make welfare work or workforce investment policy work."

The problem is an inability of some top leaders, he said, to compromise. "We don’t really have a nation of nonprofits. We have an archipelago, and they separate themselves voluntarily and happily," he said.

You’d think there would be some cooperation and there is, just not when there’s turf involved, Grandy contended. "There are 181 Goodwills right now. I’ve seen this organization from the bottom up and the top down, and we are a lot more alike than we are different. I’m sorry. There is a commonality of mission that you may choose to disavow when you’re protesting some national policy at the board level. But we do, for the most part, the same thing. The level of delivery? That’s a little different. But, the basic day-to-day operation? That attention to the work needs of varied individuals is a common theme and we are much more alike than we are different."

Meaning of membership

The chief executives at nonprofits with numerous affiliates have to change the way they think and operate if they are to survive without insurrection, touting the commonality of purpose. "I think that on balance, even though members chafe about control, they like the quality that comes with it. If I did anything, I did it through the power of the pulpit," said Grandy.

Goodwill’s national board is now 50-50 sitting executives and lay members. "What they haven’t quite become aware of is they have the power," said Grandy. "But that’s not the mystery. The mystery is how do you exercise the authority? That’s what I’m hoping will be the defining factor for nonprofits as they go forward. The locals should control the national organization, but they need to have effective rules for governance. They can’t make them up as they go along. It can’t look like the Florida recount process." The boards also can’t evolve into peer admiration society if the organization is to thrive. In fact, the chief executives have to get in each other’s faces when it is appropriate, he said.

"They have to say we’re going to achieve these goals, and to do this we will all work out of the same play book or if we want to, relax them. There will be established procedures by which we do this," he said. "We have to have a common purpose. You have to have a common mutual respect, and you have to adhere to that. You cannot wrap yourself in the cloak of independence and autonomy any more than the national office can say: ‘You’re out because we just don’t like the cut of your suit’."

One of the challenges is that the nonprofit sector has emerged as a good job market. A decade of fighting to make nonprofit management salaries competitive with the private sector has made the top jobs quite desirable.

"It used to be that – certainly within Goodwill – you never had to worry about a board chair making less than the executive director. That’s not necessarily true anymore. I mean, we’ve got a Goodwill in Portland, Ore., which is doing $1 million a week in retail. I mean, that’s how successful they are as a business. Their executive is very well compensated and he earns every penny. But what that does is create a kind of parity of affluence between the executive director, the staff, and the board execs in a very kind of fast moving economy where people can be dispossessed very quickly, particularly in the financial services sector. We have more than a few board chairs that say: ‘Hey, you know, that wouldn’t be a bad job for me.’ That, to me, is a disastrous scenario."

Since it is happening more often, boards need to make some decisions. "You’ve got to upgrade your governance. You have to ask yourself: ‘Okay, do we then need some hard and fast rules as opposed to some comfortable understanding as to how, whether or not a board member can or should move to an executive staff position?’ That’s where nonprofits are not as nimble-footed as they might otherwise be," Grandy said.

Asked to describe his role as the chief executive of an evolving organization with some national versus local fights, he said, "My real role is to be an amiable pest, is to remind you of your potential and where you are, perhaps, not moving as rapidly and successfully as we should. And, frequently, to tell you things you don’t want to hear. One of them is: You are creatures of the tax code; there is an implicit bargain with government that you have got to fulfill. And you cannot cloak yourselves in obscurity."

That brings the question as to whether an "amiable pest" is a chief executive of a multi-affiliate organization or boss of a trade association of independent parts.

"I got hired to lead a national organization, and that was my presumption from the day I walked in until the day I leave. That assumes a new definition of rights and responsibilities. Is autonomy an important tool in this organization because it gives Goodwill the ability to assess and perform according to their community’s needs?"

While community needs vary, the mission should not, in Grandy’s view. "To me, the mission statement is something that you hang over all Goodwills and say: This is what we all believe in. This is our statement of purpose. The best mission statements to me are the ones where you look at the mission statement and know who it’s about without having to read the brand."

Brand is a growing awareness in the nonprofit world. "Although they fiercely maintain their independence and autonomy, they all choose to call themselves Goodwill Industries. Well, to the external audience, there is one Goodwill Industries. If I’m in Goodwill in North Carolina and a Goodwill in Oregon, is pulled into court because they are either abusing their clients or they’re selling stuff out of the back room, the first reaction is: ‘I’m not part of that.’ But if the scandal is large enough, as we know from United Way, people say: Hey, that’s a distinction but not a difference’."

Brand should mean something, and it should mean something equally to all, said Grandy. "I still argue that what holds this organization together and kept it strong is the commonality of mission. And if you want to go back to the social gospel movement in the late 19th century, if you want to refer to Robert Putnam in Bowling Alone and talk about replenishing social capital or in civic engagement – this is all kind of high blown kind of stuff that you hear. But it has real meaning if organizations want to go forward. I mean, this is why all of a sudden we’re seeing this renaissance of faith-based organizations. What holds them together? Faith. They believe in a common thing. They sacrifice individual prerogatives and concerns for a common good. And I think that, to a very large degree, is what makes us a little different from Dollar General."

Grandy believes there needs to be a sector-wide rethinking of mission. "There needs to be a renewing of the coven, but it has to be a covenant. It’s not a constitution where you sit down and say: ‘These are my rights as members; this is what I have to get for my dues; this is what you have to give.’ It has to be stronger than the artwork of lawyers. It’s got to be a belief that this organization is in place to make sure that people who are disabled, dispossessed, disadvantaged, disenfranchised, whatever – choose your ‘dis’ – will find a chance to achieve independence."

And, he said, "that’s what we do and we do it better than anybody else, and anybody who gets in our way is toast."

NPO Leadership a Revolving Door

When Peter Goldberg became part of a group called "the Leadership 18" in January 1994, he found himself among an elite group of the heads of some of the country’s leading health and human services organizations.

Back then, people like the late Thomas Garth of Boys & Girls Clubs of America, Tom McKenna of Big Brothers Big Sisters of America, and YMCA of the USA’s David Mercer were part of Leadership 18. The group of health and human service leaders the United Way of America brought together during the early 1990s collectively advocated for the constituencies they serve.

Seven years later, only Goldberg and Fr. Fred Kammer, who chairs Leadership 18, are left from that 1994 roster. And Fr. Kammer of Catholic Charities USA will be accepting a new assignment from the church at the end of 2001.

When he realized he would be the last one standing, Goldberg was amazed. "I know we always have turnover," he said. "(But) that to me was a bit surprising."

Change among leaders is inevitable, of course, and the Leadership 18 example by itself does not indicate a trend of executive turnover. Yet, with such players as Goodwill Industries International and UWA both looking to welcome new leaders for the second time since 1994, and the tendency for strategic plans to look at shorter time spans in a rapidly changing environment, sector observers are noticing new challenges for future leaders.

"I don’t think it’s anecdotal at all," said Betty S. Beene, who recently left her position as head of UWA. "There is clearly a higher frequency (among the large organizations). I think the jobs are harder and the pace of change is more demanding. If you’re trying to drive a great change organization, you’re going to need to break a lot of glass … and you’re going to need to leave."

There are few studies on nonprofit executive turnover. CompassPoint Nonprofit Services in San Francisco completed one on executive tenure in the Bay Area in 1998 and is finalizing a similar national study, which could be released as soon as this month.

Jan Masaoka, executive director of CompassPoint, said one of the findings of the Bay Area study was that being an executive director tended to be a one-time job, with the average tenure being just under six years. Only 25 percent of the executive directors surveyed wanted to be executive directors again, she said. And 68 percent said their predecessors did not go on to serve as executive director of another organization; 14 percent of predecessors did take another executive director position, and the rest were unknown.

In his book, Making Nonprofits Work, Paul C. Light, noted that the nonprofit sector has become a more popular place in which to work, citing statistics that show growth of upwards of 300,000 jobs annually between 1982 and 1996.

While the sector may be attracting more people, they do not appear to have the same long-term loyalty as their parents’ generation. Light noted his own research with 1988 and 1993 graduates of top public policy and administration schools, which found that only 5 percent of graduates believed a person should stay with any given employer for more than 10 years.

Betsy Johnson, executive director of the Washington Council of Agencies (WCA) in Washington, D.C., said the tendency toward shorter terms of service might be what’s fueling a faster pace in executive turnover. "I think that folk come in and take on a challenge and think they’ve done as much as they could," she said. "(They say) I’ve come and put my thumbprint on it and made a mark, and now I need to look for something else."

The apparent turnover may simply be the natural change of generations, an anomaly, or an example of the employment mobility of top people. Goldberg said he wasn’t sure what the reasons were for Leadership 18’s turnover since 1994, but it could have something to do with the challenges of running a high-visibility organization with national affiliates. "I don’t know what’s really at work here," Goldberg said. "Maybe we’re part of the general change in the workforce trend."

Beene said that heading large nonprofits, like heading major corporations, is much different than it was a decade ago. "The pace that’s required to succeed is both exhausting and exhilarating."

That pace includes an increasing emphasis on communication, which has always been paramount to leadership. When she was appointed to head UWA, she said, "the volume of communication was as high as the organization got around the Aramony controversy. I assumed that the volume of communication would decrease over time. It has not. It’s only increased."

And with her whirlwind travel schedule when she first joined UWA, Beene met UW leaders in all 50 states during her first 13 months. "Once you’ve established your ability and eagerness to listen and people really know you’re going to listen and act," she said, "you’re going to get a lot of it. … And these are not communications coming to me from people I don’t know."

Goldberg noted that most members of the Leadership 18 are from national groups with numerous local affiliates, and state issues have come to the forefront. "There’s a lot of challenge to bring local and state-based organizations (together on issues)," he said. "Holding all this community together in a membership organization is tough."

Add to the mix the travel and lost weekends of work, and the personal toll becomes taxing. Of course, Goldberg’s not looking for sympathy, either. "I don’t want anybody to feel sorry for us."

It’s unlikely any will. Organizations rarely have problems finding willing candidates for a top leadership position. Among the challenges for organizations is knowing where it wants to head. Of course, when a leader decides to depart, the time is often ripe for the board to evaluate the organization’s future direction and what type of traits it wants in a new chief executive. "CEOs are rarely clones of their predecessors," Goldberg said.

Goldberg, who also serves as board chair for Washington, D.C.-based Independent Sector, said no organization can afford to stand still. In the old days leaders were those who knew not only what faced an organization, but also what was around the corner. "(Now) a lot of us are responsible for looking around two corners," he said. "Try to anticipate a future that’s different."

Another challenge for today’s leaders may be a lack of cohesiveness in the sector. Goldberg would like to see a more unified force among the human service constituency of the sector. "I don’t know that we’re facing such immediate crises (right now)," Goldberg said. "We’re facing a lot of challenges."

Even though organizations may come together to face a crisis, they don’t always use their collective influence to seize upon opportunities. "To the extent we’re disaggregated, we’re not all powerhouses in the court of public opinion," Goldberg said. "I think we owe it to ourselves to look for opportunities to collectively exercise some leadership."

Collaborative efforts resulted in Leadership18’s mid-2000 missive about profitization in the sector (see NPT, February 2000). That report took more than a year to complete. "When you have a lot of transience, it’s hard to develop the collective sense of shared responsibility," Goldberg said.

Changing leadership traits

Jimmie Alford, whose runs a management firm based in Skokie, Ill., said there have been definite changes in the traits asked of nonprofit leaders. While in the past, leaders came with programmatic expertise and clinical backgrounds, during the past 15 to 20 years a bent toward managerial backgrounds has developed, he said. "It’s very clearly the case these days."

Of course, the new way is not necessarily a better way. "When you bring in a professional manager," Alford said, "looking at business units and benchmarks to measure success, they may miss some of the characteristics of a nonprofit."

And it is often those cultural differences that attract leaders to the sector in the first place. Alford said that during that 15 to 20-year period, the number of managers entering the nonprofit world from for-profits has roughly tripled.

And they’re often younger than in the past and finding better salaries than a decade ago. "I guess it reflects the nonprofit sector as a place that has more career opportunities," he said.

CompassPoint’s Masaoka said when it comes to corporate people moving into the sector, perception is not always reality. "I think that’s talked about a lot," she said. "I think it happens on the philanthropy and United Way side more frequently (than direct social services). They don’t end up running homeless shelters. They want to run foundations and museums of modern art."

She added that people who held executive director positions 15 years ago and don’t now would likely say the job looks much harder. "The demand for being accountable to multiple constituencies has grown enormously," Masaoka said, "with different, conflicting views of how they should be accountable."

Goldberg said that heads of charities are becoming more externally focused in general, building networks, public understanding, organizational recognition, influencing public opinion and raising money. "Look at university presidents," he said. "Will that happen in our field? I don’t know. I don’t think any of us know."

Alford echoed those thoughts on external focus and added that new executives find themselves looking to hire top operational people to mind the internal store. Moreover, nonprofit boards are expecting more information on program issues, personnel issues and financial issues to be handled by the professional staff. "Now the volunteers don’t have time for all those issues. They want all that homework done. They expect the CEO to come to the table with policy issues already thought through," Alford said.

Mark Rosenman of the Washington, D.C., office of the Union Institute, said he could understand why sector leaders, whom he described in general as "highly committed and skillful people," have allowed themselves to become more narrowly focused given the demands of everyday life — meeting payroll, keeping services flowing, etc. But they need to take a step back to see what’s happening. "I think leadership is motivated and committed, (but) it needs to pause for a moment and say ‘what’s going on here.’ How can we apply that energy to fundamental dynamics?"

Something to keep looking at, Rosenman suggested, is the blurring of the boundaries between commercial and nonprofit entities, which some people welcome and herald. "I do not think the challenge is to find a merged form of operation," he said. "I believe the challenge is to reassert the fundamental mission of nonprofit organizations, which in my mind goes well beyond delivering services as though they are commodities."

While some recommend nonprofits better target their services and become more narrowly focused and specialized in what they do, Rosenman said, "That ends up segmenting problems into what appear to be discrete pieces, rather than helping people to see the importance of serving the broader public good."

In Rosenman’s view, sector leadership needs to retain a strong commitment to traditional core values. "I think the critical characteristics or traits must remain an energy and commitment and purpose derived from a sense of mission and values," Rosenman said. "Nonprofit leadership cannot be allowed to become (merely focused on) administrative and managerial skills. Their passion in caring about people, truth, justice, altruism — if we lose that, I fear for the sector. Those characteristics must prevail."

Those characteristics aren’t always honed and developed in the ways or places they were in the past, however. Fred Grandy, who recently left the top job at Goodwill Industries, was also a part of the Leadership 18 after leaving Congress following a successful acting career. Now he will be a visiting professor at the University of Maryland, teaching a graduate-level course on bringing together public and private sector policy players to affect the implementation of public policy.

Grandy is hopeful the Leadership 18 might be able to help foster those graduate students interested in having a more entrepreneurial understanding of nonprofits and public policy. "I would like this to be more of a, what we call in this field ‘executive education course’ than a kind of traditional graduate course," he said. "They’re really talking to people that are doing this stuff, as opposed to people who have just taught it most of their adult lives."

Grandy said there is a compelling societal need for nonprofits to be leaders and work together "to show government how to make welfare work or workforce investment policy or housing policy or the pieces of education that are left on the table when you’re dealing with the underprivileged or the undereducated."

Dennis Young, professor of nonprofit management and economics, with the Mandel Center at Case Western Reserve University, and chief executive officer of the National Center on Nonprofit Enterprise, in Arlington, Va., described himself as an "optimist by trade." Yet he is uncertain of the reservoir of talent entering into and already in the sector. "I think there’s more energy from the corporate sector," which he wasn’t sure was a plus or a minus. "(They’re) more engaged than they ever were before."

The changing faces among nonprofit leadership leave Young only cautiously optimistic. "I think there’s going to be a lot of uncertainty," he said. "Sometimes you think ‘where are the Brian O’Connells (former president of Independent Sector) and the dramatic leaders.’ … I don’t know who they are. I think there’s a reasonable amount of good intention and talent, (however)."

Young is more optimistic about young leaders just entering the sector, as nonprofit management programs at universities and the training programs under umbrella organizations have gained greater awareness and prominence.

"There’s presumably a generation that’s been educated about the needs of the sector for the first time in history," he said. "I’d be optimistic about that."