Charity at a Crossroads

Plagued by problems, the American Red Cross promises changes, but critics say an overhaul is needed

As 2006 begins, the American Red Cross is making a host of New Year’s resolutions. Amid Congressional

scrutiny, the charity has pledged to correct mistakes it made during Hurricane Katrina and find a new chief executive to replace Marsha J. (Marty) Evans, who resigned last month after a contentious relationship with the Red Cross Board of Governors during her three-year tenure.

But experts in the nonprofit world and former Red Cross executives say the venerable organization’s promises fall far short of what is needed. The charity must undertake a massive overhaul of its management practices to improve its charitable operations and renew the public’s confidence in the organization, they say.

They suggest that the Red Cross national headquarters, which is based in Washington, coordinate its activities better with other charities, recruit more minorities to volunteer, upgrade its technological infrastructure, and communicate better with Americans about how it operates. Without such changes, nonprofit leaders and members of Congress question whether the organization can fulfill the emergency role it has been assigned by the U.S. government.

While a new chief executive may help correct some of these problems, some critics say the group’s flawed governance structure and other weaknesses will continue to plague the nonprofit group.

“It really doesn’t make much difference who you put in the job because you have a structure that’s broken,” said one of several former Red Cross executives who spoke to The Chronicle on condition that their names not be used. “If you’ve got a car with electrical and mechanical problems and you keep changing the tires, the car is still not going to run.”

Revolving Door in CEO’s Office

During the last six years, the Red Cross has had three chief executives and three interim executives, counting Ms. Evans’s temporary successor. The high turnover rate has raised concerns for a key U.S. lawmaker. Last month, Sen. Charles E. Grassley, an Iowa Republican who is the chairman of the Senate Finance Committee, sent a letter to the Red Cross asking about the departure of Ms. Evans.

“It’s time for the Red Cross board to start answering questions about its role in the turmoil at the top of this premier charitable organization,” Senator Grassley said in a statement accompanying the public release of his letter. “In fact, the name and notoriety of the Red Cross make it essential for those governing the organization to go the extra mile to ensure public confidence not only in the Red Cross but in the nonprofit sector generally.”

Ms. Evans, a former rear admiral for the U.S. Navy, announced her decision to leave last month — just a few hours before a U.S. House of Representatives subcommittee held a hearing asking tough questions about the charity’s performance. She said she had been contemplating her departure for several months.

“I had been thinking about leaving the organization after my three-year anniversary on August 5, but in the aftermath of Hurricane Katrina, I knew I had to stay and lead our pivotal response to that epic tragedy,” she told Red Cross personnel in an e-mail message that was released to the public. “Now, with our successful hurricane response continuing in steady hands, I believe the time is right to step down as your president and CEO.” She added: “I look forward to spending more time with my family.”

When she was appointed chief executive in 2002, she told The Chronicle she planned to stay in the position for at least five years.

The Red Cross said Ms. Evans’s resignation was unrelated to criticism of its response to the Gulf Coast hurricanes, and instead pointed to a deteriorating relationship between Ms. Evans and the 50 members of the Red Cross Board of Governors.

“In terms of the actual running of the business of the Red Cross, the board was not unhappy with Marty, and the board was not unhappy with the organization,” said John F. (Jack) McGuire, the organization’s executive vice president of biomedical services, who was appointed interim chief executive. “The issues here had to do with communication and coordination between Marty and the board.”

Attempts to interview Ms. Evans were unsuccessful. Bonnie McElveen-Hunter, chairwoman of the American Red Cross, declined to comment.

Mr. McGuire said that he didn’t know whether the Board of Governors asked for Ms. Evans’s resignation.

Seeking More Details

In his letter to the charity, Senator Grassley said he was not satisfied with the reasons the Red Cross stated for Ms. Evans’s resignation.

“The American public deserves more than a papering over of the reasons for her departure,” he wrote. “If coordination and communication is at issue, then please provide a detailed discussion of what exactly were these issues. Please provide all written memos, communications, e-mail, etc., that support these concerns cited by the Red Cross spokesman that justify this explanation of Ms. Evans’s departure.”

In response, the Red Cross said it has “enjoyed a positive working relationship with the senator and welcomes his questions, as well as the opportunity to respond to his concerns.” The charity said it would reply to Mr. Grassley by January 30, as he had requested.

Tough Job

Amid this inquiry, the Red Cross is conducting a search for a person to become its next chief executive, a position that some say is one of the hardest in the charity world.

According to nonprofit experts, the Red Cross leader needs to be a good communicator who can connect with the American public, a crafty politician who can navigate the demands of local Red Cross chapters and U.S. lawmakers, and a skilled manager who can oversee the organization’s 4,000 employees.

The Red Cross is “the kind of organization where you say we need a really strong leader, and yet it’s very difficult for a strong leader to thrive because there are too many powerful constituencies,” said Daniel L. Kurtz, a former New York charity regulator.

Bernadine P. Healy, who ran the Red Cross from 1999 to 2001, says the influence of one constituency — the local chapters — needs to be reduced for the organization to function. Thirty of the board’s 50 positions are chosen by local Red Cross chapters, which hamstrings the charity’s leader, she said. “You have an organization that has a governance problem. It doesn’t have an independent board,” she said. Most of the board members “are from the chapters, and they feel their role is to protect the chapters.”

Ms. Healy was forced to resign from the Red Cross after clashes with the Board of Governors about how to spend donations raised to help victims of the September 11, 2001, terrorist attacks.

Role of Volunteers

Local Red Cross leaders, however, say that restructuring the board’s makeup would jeopardize the group’s identity.

“We are volunteers, and we’re a volunteer-led volunteer response from all over the country,” said Sam Tidwell, chief executive officer of the American Red Cross of Greater Miami & the Keys. “And the only way you do that and keep an organization like ours successful is to have the local communities represented in that Board of Governors structure.”

Yet how successful the organization has been in terms of responding to a large-scale disaster is of some debate.

At a Congressional hearing last month, Rep. Jim McCrery, a Republican from Louisiana, said the Red Cross was not prepared for Hurricane Katrina, and that Congress should consider changing the government policy that identifies the charity as the primary provider of shelters and other emergency services during a large disaster.

“I question whether it is prudent for Congress to place such a great responsibility in the hands of one organization,” he said. “The national Red Cross was poorly prepared.”

The Red Cross has defended its Katrina efforts, saying that the destruction the hurricane wrought on New Orleans and other parts of the Gulf Coast was far greater than the federal government, the Red Cross, or other emergency organizations had foreseen.

While Mr. McCrery did not offer detailed ideas about how to redesign the nation’s disaster plan, he did encourage lawmakers to consider giving other nonprofit groups a larger role to play in the federally coordinated effort.

Other nonprofit officials have supported the idea, in part, saying that the Red Cross should at least consider giving other charities some of the enormous amount of money it usually raises after a major disaster hits. For the Gulf Coast hurricanes, for instance, the Red Cross raised more than $1.98-billion of the more than $2.8-billion all nonprofit groups collected.

“In the current model, monies contributed to the Red Cross do not go to the many other worthwhile nonprofit organizations that are also called on to respond to a disaster,” said Emmett D. Carson, chief executive officer of the Minneapolis Foundation and chairman of the Council on Foundations, an association of grant makers in Washington. “If the Red Cross continues to be the lead agency, it should have a responsibility of sharing resources with other nonprofit organizations that are also responding to the emergency.”

Joshua Gotbaum, former head of the September 11th Fund, which worked with the Red Cross to help victims of the 2001 terrorist attacks, warned that removing the group as the primary responder to disasters would hurt the nation. “The notion that a group of historically uncoordinated and competing charities could organize either in advance of or in the wake of a major disaster is wishful thinking,” Mr. Gotbaum said.

He added, however, that the federal government should structure its agreement with the Red Cross as a contract, and then consider awarding the lead charity role in relief efforts to another group if the Red Cross does not meet the terms of that contract.

But the Red Cross’s supremacy in disaster fund raising is already starting to be challenged. A fund created by the former presidents George H.W. Bush and Bill Clinton, for example, raised more than $100-million for Katrina, an extraordinary amount for a new group. The donations included $23-million from the Wal-Mart Corporation, a longtime Red Cross supporter.

If the Red Cross doesn’t fix its host of problems, observers predict that more donors will choose to bypass the American Red Cross and give to another organization when disaster strikes.

“It used to be a national treasure,” said Gregg Cebulski, executive vice president for strategic development for Benenson Janson, an advertising and marketing company, in Studio City, Calif., that specializes in nonprofit work. “Now it seems to be too much structure, too many layers, too little response, too many people.”

“Leadership can fix those things; you see turnarounds in companies all the time,” he added. “But they don’t happen because of people sitting on their laurels and thinking the way it is is the way it’s always going to be.”

Brennen Jensen, Elizabeth Schwinn, Nicole Wallace, and Grant Williams contributed to this article.