New Red Cross Leaders Outline Fund-Raising Ambitions

Article tools

Printer friendly	E-mail article	Subscribe

Discuss any Chronicle article in our forums

With a new president and chief fund raiser in place, the American Red Cross is poised to unveil its most ambitious capital campaign ever — but first it needs money just to pay off its bills for sheltering and providing food to victims of the current hurricane season.

Gail J. McGovern, the Red Cross's president, has started aggressively seeking major gifts from corporate sponsors to offset costs incurred during this hurricane season, which has generated disappointing giving from individuals.

By the middle of last week, the Red Cross had raised only $5-million for its relief effort primarily related to Hurricane Gustav, which is expected to cost between $40-million and $70-million. The charity's disaster-relief fund is empty and the charity is currently borrowing money to pay for its relief operations.

"Rather than waiting for money to pour in, we're going the other way — and doing an outreach to big donors," Ms. McGovern says.

Ms. McGovern says her solicitations for gifts to replenish the disaster-relief fund are separate from a major capital campaign that the Red Cross intends to announce sometime soon. Ms. McGovern and Jeffrey T. Towers, who became the charity's chief development officer in March, declined to state the size of the campaign, but Mr. McGovern noted that some universities manage to raise between $400-million and $600-million per year with connections to donors that "pale in comparison to the ties of the Red Cross."

"I see no reason why an institution with a brand and mission like the Red Cross can't be a fund-raising machine," Ms. McGovern says. "The American public relies on us to respond to 200 disasters every single day. If we can't get that message out, shame on us."

The Red Cross's inability in the past to successfully raise big money during periods without a major disaster has hurt the charity financially. It announced in January that it would lay off 1,000 employees, mostly at its national headquarters in Washington, as it grappled with a $200-million budget deficit.

The Red Cross also had to borrow money earlier this summer, during the flooding in the Midwest, when the charity was spending far more on relief than it was bringing in through donations. Ms. McGovern says the Red Cross only recently reached the point where donations related to that disaster offset the charity's flood-related costs.

"You can see the pattern — we spend it and then we raise it. We want to flip that, so that we raise the money and then spend it," Ms. McGovern says.

Despite the latest financial setbacks related to this hurricane season, Ms. McGovern says the charity still intends to cuts its deficit to $130-million by June 2009, and to eliminate the deficit entirely by June 2010.

The Red Cross also has image issues to overcome, following a decade of organizational crises. Five Red Cross presidents have resigned in the past nine years, with several complaining of micromanagement by the charity's board.

Governance changes adopted in 2006 have cut the size of the board by more than half and limited the role of board members in day-to-day management decisions.

Then Mark Everson, Ms. McGovern's predecessor, resigned last December, after he was found to have had an affair with the head of a Red Cross chapter in Mississippi.

Ms. McGovern officially joined the Red Cross in June. She was most recently a marketing professor at the Harvard Business School, and prior to that held high-level management positions at AT&T and Fidelity Investments.

In an interview, Ms. McGovern and Mr. Towers spoke about the current hurricane season and their long-term fund-raising plans for the Red Cross.

Ms. McGovern: I am astonished at what our organization can pull off. Watching the disasters-operations entity in person is probably one of the finest examples I've ever seen in material logistics. It's really been something. The way our volunteers will pack up, leave their families, and tirelessly help victims of disasters — it really restores your faith in the American public and it's a beautiful thing to behold.

Have the charity's financial and organizational missteps in recent years had an effect on your fund raising?

Ms. McGovern: The press tends to try to look under every rock to see where we may have tripped up. There is no story. The way we conducted ourselves during Gustav and our state of readiness for Ike and Hanna — that's going to be one more step toward getting our brand reputation where donors will not have an issue with those things. Even when there is a story, like [Mr. Everson's resignation], when we do market research and look at favorability ratings, they're high. People love the Red Cross. It's as simple as that.

Ms. McGovern: I don't want to be in a situation where we're laying off staff again. It's too painful. We have to watch ever single dime. We have to be world class in raising funds. We have to give our brand a little bit of a kick, so that more people understand what we do every single day. It's not rocket science, it's not difficult to do. It's there for the pickings. The American public is waiting for us to get our act together and make the ask.

Mr. Towers: There is no question that the fund-raising potential of the American Red Cross is unlimited. It is the preeminent charitable brand in America. I draw that conclusion from market-research studies I saw before I got here. There is not another charitable organization that can claim it has benefited every home in America. I am confident that with the right message, and the right plan for deployment of our over 700 chapters, we can have a remarkably successful fund-raising campaign that will just change the paradigm for the Red Cross going forward. It's still too premature to comment on the size, but it's going to be big.

Some observers have called on the Red Cross to consider selling the blood-supply unit, which has faced $21-million in fines over the past five years for safety lapses. Is that something the Red Cross has considered?

Ms. McGovern: We supply the nation with 43 percent of the blood supply. It's part of our brand and heritage. Yes, we do get questions like that. Yes, as responsible owners of this business we're going to look into it to see if there's wisdom in doing that. But I believe it is part of who we are and what we do. We are providing the safest blood in the world and the FDA would be the first to acknowledge that.

Ms. McGovern: This board is a dream team for me. They are so supportive. They are ready to help us with the fund raising. They are not micromanaging one iota. They are providing the sort of governance I've seen at other world-class boards that I have served on.