CASE STUDY: American Red Cross
The American Red
Cross just hired its seventh CEO since 2002 and laid off some 1,000 employees in March. What's the problem at the nation's oldest nonprofit?
Writer Keith Epstein explains.
THE ARMORY ON MANHATTAN'S EAST SIDE at 26th
Street and Lexington
Avenue near Gramercy Park, is a grim,
mostly windowless fortress of brick. A little over six years
ago, after the terrorist attacks of September 11, the vast,
100-year-old former weapons warehouse became a
sort of Ground Zero of the human heart. Sheltered
from TV cameras, thousands of New Yorkers lined
up inside in pain, hope, and desperation to find
loved ones as bodies were still being pulled from the rubble. The
distressed and distracted filled out long forms, provided dental records, recited wedding band inscriptions, tried
to describe scars and tattoos—all of it more
clues for the coroners. Some needed counseling;
others simply needed an ear. All had to wait for hours.
Heat inside the building soared to above 100 degrees. Not a
compassion center, thought Bernadine Healy, at
the time the chief executive of the American
Red Cross. Ellis Island circa early
1900s. Rows of bureaucrats, long waits, dingy, dour
conditions—in short, a mass of people in need
being treated callously.
In the chaos, Healy spotted Red Cross volunteers standing along the walls, doing nothing. Healy was sure they cared but after demanding an explanation, the volun- teers just shrugged, saying they didn't know exactly what to do. To Healy, it seemed
obvious that volunteers should mix with people in need of counseling, compassion, and comfort. They
shouldn't need permission to care. Victims were
like patients, she reasoned, and she lost no time
telling then-Mayor Rudy Giuliani that the armory was an abomination and that he had to do something.
It worked. Authorities moved the compassion center downtown, to Pier 94. Queues
moved. Air conditioners started humming. Healy's example
worked, too. Volunteers mixed.
Though no longer a practicing cardiologist, Healy had always tended to be a doctor in demeanor, no matter her
situation. But her no-nonsense approach never seemed more pressing than on 9/11, during those hours of national emergency when she realized just how far from its sterling, well-earned reputation the nation's oldest emergency relief organization had strayed.
Dealing with the
Armory was one thing. But dealing with the Red
Cross, itself, would not be so easy. Within a
month, Healy was ousted by her 50-member board.
Four years later, the Red Cross board also would force out Healy's
successor, Marsha Marty Evans, a former Navy rear admiral, amid a
similar echo chamber of bad press alleging poor preparation, failure to
meet victims' needs, and unmet promises of reform. That
time, the criticism came in the maelstrom of
Then it happened again. Last November, the board forced out newly appointed CEO Mark W. Everson, again amid controversy. Everson, the former IRS Commissioner, was hired in May 2007—then sacked some six months later amid scandal surrounding an extra-marital affair with a local chapter leader. On April 8, the ARC appointed its seventh president and chief executive since 2002, Gail J. McGovern, a professor at the Harvard Business School.
It's not usually the buzz of personal scandal that surrounds a departing CEO. Most often, it's been talk of bitter struggles between Red Cross
management and its board of directors. But now, the Red Cross is at the center of another storm—a precipitous decline in donor dollars that forced it to lay off of 1,000 people in March from the ranks of the ARC's national headquarters. The layoffs represent, in part, a move by Red Cross interim managers to eliminate a $200 million budget shortfall, get the nonprofit's financial house in order, and boost donor trust. “I have every confidence that if we can educate the American public on the mission of the Red Cross—not just in national disasters but on the work we do every day—it will go a long way toward jump-starting our fundraising activities," McGovern told The New York Times shortly after her hiring was announced on April 8.
But other troubles continue to plague the nonprofit. Its blood bank organization, for example, was fined $4.6 million by the Food and Drug Administration on February 6, bringing the total number of fines imposed by regulators against the Red Cross to more than $20 million. The FDA is alleging that the Red Cross has failed to properly screen blood donations for public safety.
In truth, the organization's problems are widespread—and strike at the core of its culture, as well as its mission and its plans for the future on a new philanthropic landscape where calls for doing more with less are the norm. Can the Red Cross heal itself?
A woman views photographs of those missing in the 9/11 attacks. The photos were posted on the exterior walls of the Armory on 26th Street, which temporarily served during September 2001 as a Family Center for relatives of the dead and the missing. (Associated Press)
Its leaders are trying. Two years ago, in a massive public relations campaign aimed at
reassuring potentially skittish donors that the Red
Cross is now truly bent on reform, the
nonprofit's leaders vowed once more to be
ready and more responsive—not only to hurricanes but to the storms swirling around their own organization. They quickly
curbed some shortcomings, launched an outside review of
governance, and hinted at the possibility of
eventual changes imposed by Congress.
"We are absolutely committed to making the Red Cross the best
it can be," Bonnie McElveen-Hunter, the Board's chairman, said at the time. McElveen-Hunter, a publishing
company entrepreneur and former ambassador to
Finland, has overseen the board shrink in size from 50 members to the current 28. That board has itself encountered serious
scrutiny and it may end up getting downsized even further in an organizational reengineering. "We're very eager as a board to get this
right," she has said.
Some people, though, are not so sure.
Peter Dobkin Hall, lecturer on nonprofits at Harvard University's John F. Kennedy School of
Government, says: "I don't think they have a clue about the real nature of their problems or how to solve them. They're stills somewhat deep in denial."
More clear is what the
challenges being faced by the Red Cross suggest
about the peril to all nonprofits of failing to fix key problems, stick to their core missions, and make the long-term
management and strategy changes required in today's
era of heightened public and political
scrutiny. What other nonprofits learn from the
Red Cross and its struggles toward reforms,
say nonprofit experts, could provide valuable
lessons in survival and globalization for all.
A History of Woes
To be sure, the American Red Cross has been dogged by controversy, even before 9/11. Healy, for example, had ample
evidence that the nonprofit was seriously
ailing long before the terrorist attack on the World Trade Center: a million dollars had been stolen in a New Jersey chapter,
and still the chapter wanted to keep the person employed. An audit in Boston noted that
money the ARC had been given there was not easily traceable. Local chapters from Boise to Buffalo, when they
needed cash, had been dipping into a national disaster fund thousands of times a year, collectively, though most disasters were house fires, not catastrophic tragedies. Healy also had struggled, without success, to free the organization from a cloud of repeated violations of blood safety rules—some so serious that the Food and Drug Administration, back then as it is doing now, sought to levy millions of dollars in fines.
Washington, D.C.-based Red Cross could be
strangely absent when needed the most. The
September 11 terrorist attacks were a shocker
for everyone, but even so, on that morning,
after the planes hit, no volunteers had gone to the Pentagon—no
specialized teams, no equipped emergency
response vehicles, not even cots for the
firefighters. Aghast, Healy urged her teams to
the scene at the Pentagon. Then, to get needed
supplies to New York City, Healy
improvised. When Amtrak offered a few seats on a train, she asked for
the entire train. She got five mail cars.
After 9/11, the situation only worsened. The organization had collected too much blood while valuable red cell supplies went unused. The Red Cross also seemed to have more money than necessary. Americans making donations after 9/11 thought, naturally enough, that their money would go to victims of the attacks. Instead, it
turned out, the Red Cross routinely set aside money from big disasters
in case of future little ones—money for use by
local chapters to finance their many smaller needs.
The Red Cross also wasn't working
well with others. A 2002 study by the General
Accounting Office, the watchdog arm of Congress, concluded that collaboration could enhance charitable organizations'
contributions in disasters—a not-so-veiled hit on
the Red Cross for failing to cooperate with other humanitarian organizations.
Then there was the post-9/11 house-cleaning that swept Healy out the door. It happened amid new promises, new reforms, and a pledge of complete transparency. Donors were assured that contributions would be used only as they were intended. "For the first time, a major charity resolved to use consistent language in all appeals, to double-check on an ongoing basis that donors understand and approve the use of their donations, and to discontinue soliciting funds beyond a determination that immediate needs are met," policy analyst Paula DiPerna noted in a report, Media, Charity, and Philanthropy in the Aftermath of September 11, 2001, for the Century Foundation. DiPerna wasn't the only one who thought things would change. Says Healy: "I thought 9/11 was going to transform the organization, I really did."
came Katrina. As the world looked on, the Red
Cross, once again, stumbled badly. It had
never had many chapters in the disaster area—a
total of seven in Louisiana and seven
in Mississippi, compared with
44 in Ohio and 31 in New York. And without
a presence and a web of ongoing relationships
with local groups prior to the disaster,
collaboration with the locals during the rescue
efforts again proved problematic. When nearly
245,000 Red Crossers arrived on the scene from
all 50 states and D.C.—five times the highest
number sent by the ARC to any previous disaster—very few of them had either the local knowledge or the connections needed to help. Masses of New Orleans residents jammed into the Superdome rather than into more habitable
shelters. A black minister told The Washington
Post of victims who felt like they were being
herded like cattle.
"Katrina was a wake-up call to look at things a whole lot differently."
—Jack McGuire, Former Interim President and CEO, American Red Cross
Cultural insensitivity and a lack of language translators for the Hispanic and Asian immigrants
living along the Gulf Coast—as well as for the
French-speaking members of the United Houma
Nation tribe of Louisiana—led to misunderstandings.
People in need, meanwhile, overwhelmed Red Cross
phone banks, which were ill-equipped to handle the rush of calls coming in, and many Gulf Coast neighborhoods were,
in reality, simply out of reach.
victims had to wait hours, if not days, for
help. Was it New York all over
again? Meanwhile, the philanthropic
giant among charities seemed unable to assure
donors that the nearly $2 billion raised for Katrina victims was being targeted appropriately and used well. Once
again, hints of poor accountability, impropriety, and
even criminal conduct emerged.
The Red Cross
had neither controls on costs nor reliable
records of inventory, and nobody routinely checked volunteers backgrounds before they signed on. Rental cars
disappeared as well as generators, air
mattresses, and computers. And supplies sometimes
had little relationship to need: Food would end up
at places where it couldn't be cooked. Mops, paper towels, and bleach would be handed out in neighborhoods that had been demolished. In Mississippi, victims
wanted water to drink, but Red Cross
volunteers only had bleach. "The basic needs of the beneficiaries are not
being met," Mike Goodhand, a British Red
Cross logistics executive who assisted U.S.
counterparts in New Orleans, wrote in
a September 2005 report.
In response to it all, past interim CEO McGuire told Contribute in a 2006 interview: "I know we worked hard to be prepared beyond 9/11 for major disasters and learned some lessons from 9/11," he said. "...In Katrina, our task was 1.41 million families. In 2004, we deployed about 35,000 volunteers. In Katrina, we had to deploy 235,000 volunteers. The scope of the disaster was beyond our capacity at the time to respond. Some of our systems did pretty well; some of our systems broke completely. It was a scope and scale issue that exposed anything about us that had any weaknesses."
A young man with "R.I.P. New Orleans" painted on his
arm was one of the
evacuees who had resided in this temporary shelter
set up by the
American Red Cross in the wake of Hurricane Katrina. The
shelter housed some 1,700 evacuees, most displaced by flooding.
Yet the organization's leadership and cultural problems—despite renewed efforts at reforms—continue to dog the nonprofit, and there remains frequent turnover at the highest ranks of the organization: The ARC has gone through seven CEOs and acting CEOs since 2002: The latest CEO to leave ARC before Gail McGovern's appointment, former IRS Chief Mark Everson, was barely on the job for a half-year before the board asked for and received his resignation, on November 27, "for his engagement in a personal relationship with a subordinate employee" who was a married president of a Mississippi chapter, according to ARC Press Officer Carrie Martin.
Then, on January 8, the Associated Press broke a story that a former executive at the Minneapolis chapter of the American Red Cross was suing the chapter and ARC national organization, alleging sex and age discrimination by colleagues. The case is pending. And most recently, on February 6, the Food and Drug Administration again fined the ARC for blood safety violations.
Laments Healy, who still keeps an image of Red
Cross founder Clara Barton in her Washington
apartment (Barton is shown embracing a soldier
while, hand held high, she keeps the Grim Reaper at bay): "It's a magnificent institution with a magnificent
mission that it has failed to live up to for a
The irony isn't lost on Red Cross
executives, current and former. Barton, the
Civil War-era heroine and a virtual one-woman relief
agency, launched the Red Cross 127 years ago. Yet even Barton, a one-time Patent Office clerk, encountered resistance
and needed grit to get things done. Her first
famous act was improvised: She ripped sheets
into towels and cooked for an exhausted Civil
War regiment. Already on her way to celebrity and yet overcome by battlefield needs and running short of supplies
near Bull Run in August 1862, Barton, like her
21st-century descendants, had trouble
delivering. "All night, we made compresses and slings,
and bound up and wet wounds when we could get water (and we) fed what we could," she says in The Life of Clara
Barton, a 1922 biography by William Barton. "Oh,
how I needed stores in that field!" Eventually,
even Clara Barton was forced out, over a rival's
charges of misused funds and mismanagement.
What has changed since
its inception is the mammoth size of the organization
and its role as the nation's prime disaster humanitarian. Barton could never have imagined todays bureaucratic
behemoth of 746 local Red Cross
chapters, 35,000 employees, and a budget surpassing $3 billion.
Though the Red Cross
counts on catastrophes to drum up most of its
press and its donor contributions, today's
volunteers are more likely to be engaged in
local blood drives or responding to local fires.
Most of the organization's 72,883 calamities last
year involved fires; only 39 were larger-scale disasters. The group's annual convention and gala, meanwhile, are glamorous affairs on the social calendar in Washington and other big U.S. cities,
events at which First Ladies speak and pop stars perform.
Controversy may not be
new to the Red Cross, but it has never been so
noticed, nor so pronounced. "I discovered in my
9/11 research that there has been criticism of
the Red Cross about its response to all major
disasters at least since the 1906 San Fran- cisco earthquake and fires," observes Tom Seessel, a social policy consultant with Thomas Edison State College in New Jersey, who studied September 11 relief efforts for the Ford Foundation. In 1989, for instance, the Red Cross ran into trouble when mayors in the San Francisco Bay Area discovered much of the money collected after a major earthquake would go elsewhere. But it was largely a local story.
Most critics agree that
what the Red Cross faces now are problems of its
own making, and that in today's era of increased calls for more accountability and efficiency, it's time for the organization to reinvent itself. Indeed, close students of Red Cross activities say it may simply have too many layers, too many people or too much bureaucracy. It also may be experiencing the organizational ill-effects of a long-standing virtual monopoly, conferred by Congress, as the national voluntary disaster relief agency. In his research, Seessel concluded the Red Cross was "careless" about specifying the purposes for which it was going to use donors' money, forcing it to invent new programs and services to exhaust excess funds in response to extensive criticism.
Even remedies urged by former Senate Majority Leader George Mitchell as part of an institutional rehab after September 11, laments Seessel, didn't seem to have pro- duced any systemic change (but instead) only bought a little more time until the fault lines were exposed again in Katrina.
Reforms and More Reforms
organization viewed as resistant to change and
outside advice, the Red Cross is now being forced to turn itself around in today's new climate of public opinion. Its leaders, after 9/11, began taking
the first necessary steps: A thorough
examination of mission, charter, structure,
accountability, governance, staffing, and the
relationships between national and local
branches as well as government agencies. It
has increased the level of outreach to other
local and national disaster groups. And in a culmination of the latest in-house examination of its methods and strategies, President Bush signed into law last May reform legislation aimed at downsizing the board and beefing up external governance.
Red Cross may be headed in the right
direction, Seessel predicts no fix will be
complete without more in-depth study and ongoing work at reform. Acknowledged past interim
Red Cross CEO Jack McGuire: "We need to learn how
to prepare for the unexpected." McGuire
told Contribute in a 2006 interview that he intended to host war
game-like scenarios involving simulated
disasters, "so that we can test ourselves and
really ask the question, how good are we?" McGuire stepped down on May 28 of last year without having many of his proposed initiatives completed.
Since Katrina, however, the ARC has accomplished some change. It has tripled warehouse
capacity and has stocked those facilities with
more supplies than victims of large-scale disasters are most likely to need. It also has nearly doubled the capacity of its call centers. And in a strategic break with how it had approached disaster operations for decades, the Red Cross also is reaching out to recruit more racial and ethnic minorities as volunteers: According to a March 2005 memo from former ARC Chief Evans to the Red Cross board and its local chapters, five percent of Red Cross volunteers are black, two percent are Hispanic, and two percent, Asian. "These low numbers ... underscore the challenges facing the organization as we seek to reach out to diverse communities," Evans wrote. As a result, the Red
Cross is now working with the NAACP to recruit
more volunteers and is forming partnerships with churches, local nonprofits, and other community groups. And further, instead of relying on its own volunteers to set up
shelters and deliver Red Cross meals, other local community
organizations are being recruited to help.
The Red Cross also is working to change its culture. On its Web site,
the Red Cross noted in April 2006: "Red Cross
representatives need to be aware of their
reputation for arrogance, bureaucracy, and
insensitivity." A checklist of reforms adopted
by the ARC in the summer of 2006, for example, concluded by urging a
culture more reliant on partnerships, more risk-tolerant, less bureaucratic, and more adaptive.
Meanwhile, a committee of high-profile
outsiders including Ira Milstein, a New York corporate lawyer, that set out in 2004/2005 to examine how the organization governs itself, has helped Red Cross leaders focus on central questions relevant for all nonprofits: How large should the board be? Who should be on it? The Red Cross board had long been criticized for including eight presidential appointees who rarely
attended meetings. Others repeatedly insisted that most of the board's members, from local chapters, had grown too dominant,
hindering effective leadership by the ARC's chief
executives. William Josephson, who ran the
charities bureau in the New York attorney
general's office after 9/11, had one word for the ARC's 50-member board: unmanageable.
And in a culmination of the latest in-house
examination of its methods and strategies, President Bush signed into
law last May reform legislation enabling a series of in-house reforms aimed at "modernizing" the way the Red Cross governs itself—including a plan to downsize its 50-member board to 12-25 members by 2009 and to 12-20 members by 2012. (As of February 1, it had 28 board members.) Further changes legislated by Congress include recommendation to limit the board's focus solely to
governance and strategic oversight and to set up a new Office of the
Ombudsman to provide additional oversight and annual reports to
Congress on how well the ARC is doing its job. "With these reforms," said Tom Lantos, D-Calif., a co-author of the reform legislation, "the (Red Cross) will be in a better position to maintain the good name it has developed through its good work."
But while many of those advocating change at the troubled nonprofit reforms applaud the legislation, they also suggest that the ARC's biggest problems lie elsewhere. The truth is, say observers, nonprofits can no longer conduct business as usual. In the nonprofit sector, the message appears to be loud and clear: you are not really out of sight anymore, nor even truly independent, says Olson. The public and the politicians are watching. Adapt—or risk a Red Cross-like PR calamity, over and over again.
Lessons for Other Nonprofits
Conservancy President and CEO Steven J.
McCormick says he feels as if he's reliving his
own institutional experience: the scrutiny, the
bad press, the large board, the difficulties
with local chapters, the questions about whether
the organization had strayed from its mission,
the hiringof outside governance experts. What's
happening to the Red Cross is so very similar, notes McCormick, recalling that the Red Cross looked to the Conservancy as a model for relief and
repair. "They've taken a page from our experience
in getting outsiders to make recommendations."
Disclosures in 2003 could not have been more disruptive to the Conservancy, also a star in the nonprofit firmament. Long dedicated to preserving animal species by protecting land and waters they need to survive, the organization had sold undeveloped land to trustees at reduced prices and allowed drilling for oil, or at least a
local chapter did, without the knowledge of
the national board. The nonprofits
chairman at the time, Henry M. Paulson Jr., chief executive of Goldman
Sachs Group Inc. and now treasury secretary in
the Bush Administration, summoned his crisis-management
team from Wall Street and assembled an independent governance
team for a review.
Since then, the Conservancy has made
numerous changes. One was to more than halve the size of its board, which had 40 members. "There were simply too many of them to operate as a modern, hands-on board," says Millstein, the New York corporate lawyer and chairman of the Red Cross governance advisory board, writing in an April 2005 progress report. "In all candor," acknowledges
McCormick, "the tradition (at the Conservancy)
was that the board was largely for fundraising
and for positioning" the prominence that comes
from having a high-profile board. Millstein, a leading expert on corporate governance who has advised boards of companies such as Disney and General Motors, spent this past summer advising the Red Cross on whether to redefine the organization's mission along with several other outside
experts who also guided the Conservancy.
One big step for
the Conservancy was to emulate developments in the business world.
Like a growing number of nonprofits, the Conservancy has adopted some of the core principles of the Sarbanes-Oxley
Act of 2002. Aimed at curbing corporate misdeeds, that law
was never intended for nonprofits. Still, the Conservancy and its corporate-lawyer advisors took the legislation's notions of accountability and governance to heart. Finances are audited, just as are the books of corporations, and its staff is empowered to investigate how it uses money. There also is a policy that encourages and protects whistleblowers, something the Senate's chief
charity critic, Senator Charles Grassley, has
urged the Red Cross to do.
also refuses to make loans to directors, officers, or employees, has stringent conflict-of-interest prohibitions, and aims for compliance that exceeds exist- ing tax laws. And the
Conservancy's changes go deeper, still. For
instance, the board now routinely assesses the
threat to reputation of every decision. A risk
evaluation committee of people from throughout
field managers, scientists, marketing
executives, and others—examines land deals and
other decisions before the board. Where once
such decisions were left to local chapters,
risks are now assessed by the full board. Thus,
the oil drilling arranged by the local Texas
chapter would never occur today.
Meanwhile, a complex land and timber exchange involving a major paper company as a partner cleared all hurdles not long ago. "We're not trying to avoid all risks but to maximize the conservation we can attain," explains McCormick. "It's got to be a calculated risk." In addition, local chapters need to have a safe forum to bring up difficult subjects. "There's so much more candor between managers and the board now," he says. "Before, managers felt they had to impress the board."
Not that the Conservancy has solved
all large nonprofit woes. With more than 50
chapters, and over 1,500 volunteer trustees
each of whom is meant to be an ad- visor and most of whom want to feel involved in governing difficulties remain. A chief executive might feel he or she best understands what an organization needs, but the many operating units can still prevail—a chief source of friction within the Red Cross. Acknowledges
McCormick: "That is a code we haven't cracked yet.
We try to be inclusive and transparent, but then
more people realize they can participate. You can get in a loop where you can't get to closure, because every time you make a deci- sion, a segment doesn't like it, so you adjust it again and again."
Even so, having too
many cooks can be critical to an organization's success. Daniel Curran, director of the Humanitarian Leadership Program at the Harvard Business School, is among academics now
exploring the challenges of managing such
multi-governed organizationsgroups that must
weigh imperatives of inclusion with good,
centralized decision-making. Says the Conservancy's McCormick: "That's the fundamental struggle for the Red Cross. How do you align your operating interests around the fundamental aim of the enterprise? We sure haven't figured it out."
Cross is not exactly oblivious to the impact of
its turmoil on other organizations. "When you get
stabbed, we bleed," nonprofit leaders have told
Red Cross Board Chairman McElveen-Hunter, she told Contribute in a 2006 interview.
sharp contrast to previous decades, bad
publicity has become a way of life for some
charities. Diana Aviv, chief executive of the
Washington, D.C.-based Indepen- dent Sector, an
advocacy group for nonprofits, tallied, in one
recent 18-month period, 500 stories of nonprofit
misdeeds. "Reporters are asking more questions, and so are members of Congress." Senator Grassley has, for months and months, engaged in scrutiny of nonprofits and has repeatedly hreatened new legislation to police them. That has included investigations of the Red Cross. Add to the mix of prying eyes the Internal Revenue Service, which is busy scrutinizing how nonprofits
govern themselves and compensate executives. "All
of the groups I know of are taking this trend
really seriously," says McCormick.
With each new
revelation, fresh investigation or criticism
from Washington, some donors grow
more reluctant to give. They demand more
accountability when they do, and hope their own philanthropy won't expose them to scrutiny.
"Trust is the glue that holds the whole nonprofit sector together," observes Kathleen McCarthy, director
of the Center for the Study of Philanthropy at
the City University of New York. "There's a deep vein of cynicism
in society now. With scandals like the Red
Cross and what the United Way has gone through, there's a
lot of concern about maintaining trust in the
nonprofit sector. If people don't trust, they
Aviv, too, has been challenging nonprofits to be more open and accountable. The Red Cross story matters to every charity, says Aviv, whose organization has been championing such self-regulation as a way of warding off government rules and enforcement. When scandal happens, there's a concern among donors
that the problems are just the tip of the
iceberg. Her advice: take a hard look at current practices, encourage scrutiny, and, if trouble strikes, don't hunker down or draw around the wagons. She also urges nonprofits to question each other. "We are each others' keepers," she explains. "When something appears in the paper, we need to call up and ask, Is this true? This is making us all look bad. Group pressure is an enormously powerful influence on behavior."
"That's the fundamental struggle for the Red Cross: How do you align your operating interests around the fundamental aim of the enterprise? We sure haven't figured it out."
—Steven J. McCormick, Former President and CEO, Nature Conservancy
As for the Red Cross, itself, the jury is
still out. Will its latest remedies be far-reaching
enough? Does the new legislation force the changes most needed to create lasting reforms? Harvard's Peter Dobkin Hall
doubts much can happen at the organization
without serious consideration of more
fundamental issues involving organizational
purpose, structure, and culture. Others say the
Red Cross simply has too much on its plate. Olson, the lawyer
hired by the Red Cross to lead the governance audit, acknowledges
the limitations. "Outsiders reviewing how nonprofits are run are only dealing with part of the picture."
This can be significant—as when considerable
work by Olson led to changes at the Public Broadcasting
System some years ago. PBS had to examine
other critical issues such as its relationship
with Congress, subscribers, and funding.
To be sure, changes in governance and culture take a long time to accomplish anywhere. MacGuire, a past Red Cross Interim CEO, acknowledges that transforming such American Red Cross won't be easy or quick. "That's going to take years," he says. "It's a journey over a very long time."
Cautions former CEO Healy: "This is not the time to win a PR game. This is the time to radically change the organization. If that happens, there may be hope."
KEITH C. EPSTEIN is a Washington, D.C.- based journalist who is a regular contributor for CONTRIBUTE. Epstein's work has appeared in a variety of publications, including The Washington Post and BusinessWeek magazine. Please send comments to firstname.lastname@example.org.