It’s Hard to Do Good (Chief Executive, August/September, 2004)

 

When the Chicago Children’s Museum asked Peter W. England to become its president and chief executive officer, the recently retired CEO of Elizabeth Arden USA turned them down, saying, “I don’t do kids and I don’t do museums.” After a 33-year career at consumer products giant Unilever, England explained, he had had his fill of black tie events and the rubber chicken circuit.  Most of all, he didn’t want to ask people for money.  He planned to move to Australia, where he had worked for 15 years, teach a management course or two and dabble in venture capital.

 

A chance comment made him reconsider.  “So you’ve come back to die,” said a friend in welcoming him to Sydney.  Within months, England boomeranged back to the U.S.

 

“It’s turned out to be terrific for me and probably good for the institution,” England, 60, recalls of the decision he made three years ago.  “I get to work with all the Chicago communities.  I’ve gotten involved in issues like education and the importance of early childhood development.  I get to see how another world works.”  He concludes, “I found it difficult to plan anything meaningful in Australia.  Here, I have a sense of legacy.”

 

England’s transition has, on the whole, been a happy one.  But with an increasing number of executives switching from the corporate sector to not-for-profit organizations, those who have already tried it warn that the metamorphosis isn’t easy.

 

Non-profits are almost always non-profits for good reasons,” notes Bennett Freeman, managing director of Burson Marsteller’s global corporate responsibility practice. “Revenue flow, sound management of budgets and attention to the bottom line are purely seen as a means and not an end.”

 

The fundamental disconnect filters throughout the organization, which is why any corporate executive who tries to cross cultures quickly learns a basic lesson: It’s not easy to do well at doing good.

 

Lost in translation

To be sure, the stereotype of an aging CEO looking to cap a corporate career with a spot of halo-polishing still exists.  But more and more managers are making the switch for different reasons.  Some are looking for an opportunity to give back to society.  Some see a sojourn in the not-for-profit world as a chance to explore other kinds of enterprises.  Still others are sought out by savvy organizations that recognize the advantages of a sharp business model and operations run as much by the head as by the heart.  A rocky economy, mergers and downsizings have further bolstered interest in crossing the street.

 

The result:   “At least 50% of all incoming inquiries will be from people in the corporate sector,” reports Debra Oppenheim, co-principal of Phillips Oppenheim, a New York-based search firm specializing in not-for-profits.

 

But even though the for-profit and non-profit sectors are strengthening their entente, the elements that made you so successful in one world don’t necessarily translate to the other.

 

Just because one has run GE doesn’t mean one can run Oxfam,” says Barbara Fiorito, chairperson of Oxfam America.  One of the fundamental challenges is managing an organization driven more by passion than by a paycheck.  Command-and-control, on the way out in corporate suites, never even made it in the door of non-profits.  With the stakeholders imbued with a strong emotional connection to as well as a personal identification with the organization’s goals and values, successful leaders learn to cultivate what Freeman calls “the culture of persuasion.”

 

Culture shock

“Everyone has an opinion – from hundreds of trustees to hundreds of staff people who have been with the organization for a long time to 900 field instructors,” explains John Read, president of Outward Bound USA, who used to run Heavy Duty Holdings, a $400 million global supplier of components for the North American truck market.  “You have to move through a strong emotional attachment of what the work is to get to the core.  It takes an enormous amount of patience to hear the passion and tease out what’s really behind it and to re-express what the alternative is and engage in discourse about how to move in the right direction.”

 

It also takes an enormous amount of time.  “You don’t have the alacrity of decision-making” that you do in the corporate world, says Morris W. Offit, president of the UJA Federation of New York, who splits his schedule between running the $200 million local non-profit and heading up Offit Hall Capital Management.  Offit estimates that it takes a good 25% to 50% longer to reach a decision in the non-profit world than in corporations.

 

While any new manager has to prove his or her business chops, leaders coming from “the dark side” have to quell instinctive suspicion that they are suits without a soul.  “Understand that there are a significant number of people who don’t trust you,” warns Douglass Lind, an executive coach with Sigma Group of America who devotes 40% of his practice to CEOs in non-profit organizations.  “These places tend to have bright people who are very good at resisting change, so passive-aggressive behavior is ubiquitous.” (Or: “You get a lot of people feeling incredibly righteous. I’m also a clergyman and I think Jesus Christ had it right when he said that righteous people are the biggest pains in the ass on the planet.  You have people who are immensely good at taking umbrage and being offended.”)

 

Previous experience with that particular organization or in a similar non-profit helps immeasurably.  John Barr had served on the boards of Yaddo and the Poetry Society of America, as well as publishing six collections of his own poetry before being named president of The Poetry Foundation in 2003.  Read had a transformative experience with Outward Bound 12 years ago, and has taken his family on seven more trips since.  Long before pushing perfume, England participated in the New Zealand equivalent of the Peace Corps.  “They’re already believers,” comments Sally Sterling, who specializes in non-profits for executive search firm Spencer Stuart.  “They’re part of the family.”

 

That non-profit notch on the resume does more than inoculate incoming executives against rejection; it exposes them to the language of the non-profit world.  Each organization communicates in its own peculiar dialect, which resonates in its own peculiar key and in an organization tuned to social justice, say, transforms business terms like “profit,” “market share” and “competition” into dissonance.  Depending on the organization, you may want to replace your copy of The Essential Drucker with Wendell Berry’s Collected Essays, counsels Lind, adding, “Be very careful whom you quote.  The authorities that are authorities to you may not be authorities to them.”

 

Which comes first:  Mission or metrics?

One of the most difficult challenges to surmount is learning to measure effectiveness in a world whose bottom line isn’t measured in dollars and cents but in intangible factors of behavioral change and social welfare. “The Holy Grail of the NGO world is impact evaluation,” says Fiorito.

 

“There’s something so simple and elegant about a bottom line in the business world,” notes Barr. “The equivalent of a bottom line in the arts world is much more judgmental. Is it books published?  Books read?  Poems remembered?  To what extent do we enrich the lives of Americans through poetry?  That’s a hard thing to compare to net income.”

 

Carl J. Schramm agrees.  “A business can look to increasing sales, growing revenue and earnings, improving measures of customer satisfaction, says the president and CEO of the Ewing Marion Kauffman Foundation, the country’s 27th largest foundation with $1.6 billion in assets.  “Even a non-profit like a college can watch SAT scores go up, applications increase, faculty prestige grow.  In a foundation, accountability and the ability to measure are much more difficult.”

 

Metrics are not just an important scorecard of success in implementing the organization’s mission.  Even more important, they define – and, in some cases, re-define – its mission.  That can turn into a double whammy of danger to a crossover CEO, as Norman Blake discovered in when he was chief executive of the Unit.

 

Brought in in January 2000 with the mandate of streamlining the bureaucratic organization, Blake chose to benchmark success on the quantitative measure of the number of medals won.  He proposed allocating resources accordingly toward those sports in which American athletes had the best chance of climbing the podium.  That contradicted the sentiments of other stakeholders – often former competitors volunteering on USOC committees – who wanted to spread and strengthen the Olympic spirit in all sports.

 

“I went hardcore toward serving the athlete,” explains Blake, who had no prior non-profit experience and concedes that in retrospect he may have pushed too hard too fast.  He promptly slashed the number of volunteer-staffed committees running the USOC’s day-to-day operations from 40 to four, a move that earned him the nickname “Norman Bates,” after the deranged killer in the movie “Psycho,” and suggested putting the money that had been spent on quarterly and monthly committee meetings in expensive resorts towards elevating the level of the salaried staff.

 

Emotions erupted three months later at a meeting to approve Blake’s overall plan for restructuring the USOC.  The steering committee initially endorsed it.  But the next day, the Athletes Advisory Council, composed of many of the same people on the steering committee, turned it down.  “That was like being stabbed in the back,” Blake recalls.  “Late that night, I told my wife, ‘This is a short-term job.’” He stayed through the Sydney Games and the Para-Olympics that immediately followed, then wrote his resignation letter on the flight home.  “It was one of the more disappointing experiences of my life,” he says.

 

Not your average corporate board

Blake’s experience epitomizes one of the hidden difficulties inherent in running a non-profit: corporate governance.  Non-profit CEOs who have headed up corporations note that the passion that trustees bring to the board of nonprofit organizations is far more potent than that of a for-profit counterpart.  While that emotional investment can be a help, it can also be a hindrance.

 

“As reluctant as some managers are to deliver complex financial information to a board, they can be met by a board that is equally reluctant to hear any bad news about their passion,” says Read.  “That results in boards that are not focused on the critical metrics of the entity and a less effective oversight.”

 

On the other hand, non-profit boards may be inappropriately hands-on because they care too much.  Phillips describes a hypothetical but all too typical situation:  A board member may have in mind someone he or she thinks would be a perfect development director.  In the best case, he or she will pass the name to the CEO.  But sometimes the CEO wakes up and discovers that the person has already been approached.  In the worst case, the board member, who may have been chosen for his or her fund-raising capacity, may declare, “If you’re not interested in this person, I’m not interested in contributing my $3 million a year.”

 

From love to money

Fund-raising is a fact of life for CEOs at most non-profit organizations.  “You’re only as good as the amount of money you can raise,” says Offit, who clinched his first donation at age 11 going from door-to-door for his uncle’s campaign on behalf of the Associated Jewish Charities in Baltimore.

 

In certain ways, there’s a direct parallel between fund-raising for a non-profit and sales in a corporation.  Think relationship selling and direct selling and the enormous amount of pre-sale and post-sale homework in closing the deal.  To use marketing terms, your program is your product.

 

In the for-profit world, however, the person making an investment expects a financial return.  “When you’re asking for money for a non-profit, it’s charity,” Offit explains.  “The return on that money is personal gratification, and how you measure personal gratification is very personal.”

 

“I made the mistake of thinking, it’s like sales so I’ll get a good salesperson and put her in the job,” recalls Read.  “That worked for about six months.  I had to recognize that I didn’t understand development for what it really was.  Development is a technical field and you need to approach it as seriously as you would taking your business into a new market channel.”

 

One basic lesson Read learned:  If someone is going to give a million dollars, they want to talk to the boss.  Read now spends 40% of his time in development, typical of a demand that ranges from 25% to 50% of a CEO’s schedule.  “I learned to visit myself as a donor.  I began to think about why I give to some organizations and not others, and how much more frequently the head of the organization needs to be in on the close.  People will support you to the extent that they think you believe in what you’re doing.  Every time you’ve got your hand out, you have to bare your soul and the organization’s soul and your attachment to it.  If you’re sitting there like a lump, you’re going to be unsuccessful.”

 

While non-profit fundraising at the CEO level is intensely personal, a corporate resume can open checkbooks. England convinced Allstate Insurance to commit another $600,000 on top of an earlier $400,000 donation to fund a safety exhibit at the museum.  “My background is helpful because I can talk their language,” he notes.  In fact, he adds gleefully, “Some of my previous customers actually support the Children’s Museum, one at considerable expense.”

 

The Non-Profit Pay-out

Every seasoned manager knows that there’s frustration quotient associated with every job.  Still, the level seems to be a lot higher in the non-profit world – and without luxurious perks to salve the pain.

 

It helps that salaries are no longer so skimpy, but you’ll have to put up your own pennies to pay for a new set of Pings.  Although The Chronicle of Philanthropy recently reported that some 52 nonprofit organizations paid their chief executives more than $1 million a year, most of these were chief executives of nonprofit hospitals and medical centers, with some foundation managers and symphony leaders thrown in.  The vast majority of the approximately 230,000 organizations classified by the IRS as nonprofit offer salaries rarely exceeding half that amount.  “Get ready for a pay cut,” advises Barr, a former investment banker who manages the Poetry Foundation’s $2 billion bequest from Ruth Lilly.  “When they say ‘not for profit,’ they mean it.”

 

Still, England is satisfied with the intangible perks – enough that he recently made a significant donation to the institution.  Once again, a chance comment – this one from his older daughter — endorsed his decision and summarized his personal return on his investment of time, money and dedication.  “She said, ‘Dad, since you’ve taken this job, you’ve now got a soul.’  I suspect I always had a bit of a soul,” he concedes, “but it might be a bit more prominent now.”

 

 

 

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