Remaking the United Way

New proposals designed to enlist support of local organizations

United Way of America is considering changes aimed at improving its effectiveness, building donor loyalty, and quelling discord over how much control it should have over the roughly 1,400 local United Ways that it serves.

The proposed plan, which could cost as much as $50-million initially, plus $20-million per year, is garnering support among United Way officials around the nation despite past resistance to efforts to give the national group more power over local United Ways.

“Our entire field now realizes that we have the opportunity to move United Way into the next century, and that if we don’t do it right, and we don’t do it together, there may not be a United Way,” says Larry E. Walton, president of United Way of Central Maryland, in Baltimore.

The plan’s proposals, laid out in an internal report prepared by a committee of United Way volunteers and staff members, mark the system’s latest effort to remake its image and operations. They are meant to answer the challenges laid out in a report prepared last spring by the same committee. That report warned that divisions within United Way posed a serious threat to the system’s business and reputation. It said that United Way was unprepared to respond to changing conditions in philanthropic giving because of “major differences of opinion and approach among United Ways, exacerbated by an inadequate governance structure.”

The earlier report concluded: “We need to set aside our differences and acknowledge that we are all in the same boat and will sink or swim together.”

The new proposals are designed to encourage local United Ways to cooperate more fully with one another and with the national group in areas of mutual interest, such as improving the system’s relationships with large corporations that run United Way fund-raising drives in multiple locales. At the same time, the plan would allow the local groups to retain much of their autonomy, especially in distributing money to nonprofit groups. And it could give local groups a greater voice in the system’s national governance. The proposals are also intended to strengthen the federation financially by helping it to court more donors nationally and allowing it to share some costs among local groups, such as by negotiating national agreements for insurance coverage for United Way staff members. The nation’s 1,853 United Ways — including United Way of America’s 1,371 members — raised a total of $3.9-billion in their 2000-2001 campaigns.

Cost Savings

Officials at local United Ways big and small say the potential for cost savings is one of the top reasons for favoring changes to the system. According to the report laying out the proposals, if the United Way of America can help better coordinate pledge processing and the administration of benefits for United Way employees, for example, the system would save up to $150-million a year.

The report also touts the potential for increased revenue. If the national group could manage corporate relationships more effectively and persuade more national companies to allow United Way to solicit their employees, the system could see its annual income from corporate gifts and on-the-job fund-raising drives grow by up to $400-million, according to the report. Last spring’s report had said that companies were frustrated by the unwillingness of local United Ways to coordinate drives run in multiple cities and that the businesses were losing trust in the system.

“Much of this is about pragmatism — how do we do what we do most effectively, without duplicating efforts?” says Brian A. Gallagher, United Way of America’s new chief executive officer, referring to the new report. “Yes, we have local independence, local autonomy, but we also have shared responsibility, shared accountability, and room to work together so we all work more effectively.”

Mr. Gallagher, who was on the committee that prepared the report, says the proposals will be revised over the coming months after the United Way of America gets more feedback from local United Way leaders. A final report is expected by the end of the year, he says.

Fund Raising Not Top Goal

One element of the report, however — a revision of the federation’s mission statement — has already been adopted by the United Way of America board. The new statement drops fund raising as the top United Way goal, saying instead that the system’s sole priority ought to be helping to solve specific social problems that no single donor, charity, or government agency could tackle alone.

The new mission reflects a trend among local United Ways around the country toward measuring their success not in terms of year-to-year fund-raising gains, but rather their ability to achieve broad goals, such as lowering crime or poverty rates. The idea is to differentiate the United Way from a crowded field of other charities, and to prove the organization’s worth to donors.

Giving to United Ways has remained relatively flat over the past decade, after adjusting for inflation, and has accounted for a smaller and smaller share of overall philanthropy. Contributions to United Ways accounted for slightly less than 2 percent of total giving by Americans in 2000, down from more than 3 percent 10 years earlier, according to the United Way of America.

Among the main culprits are changes in employment patterns, which have undermined the system’s traditional reliance on on-the-job giving campaigns. In addition, competition from other such drives is growing.

Changing Role

A series of internal struggles has also shaken the United Way. A financial scandal in 1992 involving the organization’s top leader, William Aramony, led many local United Ways to put distance between themselves and the national group, which they said had abused its power and tarnished the entire federation’s image.

In the following years, disputes ensued over how much control United Way of America should have over the local groups.

Last year, Betty S. Beene stepped down as United Way of America’s chief executive officer after local United Way officials roundly criticized her for advocating a more-centralized system. Especially controversial were her plans to centralize the charity’s processing of pledges made by donors who participate in local United Way campaigns.

The United Way of America, in Alexandria, Va., operates on an annual budget of about $30-million, covered largely by local United Ways, which pay dues based on how much money they raise each year. Among the national organization’s functions: handling public relations on national issues and providing such services to local United Ways as professional-development training and fund-raising consulting. It also works to promote the federation through public-service advertising and such programs as a marketing agreement with the National Football League.

Many of the new proposals would broaden the United Way of America’s role in providing services to local United Ways. According to the recommendations, the national group would have greater responsibility for offering local United Ways consulting and training in areas such as human resources, computer use, and financial management. And it would more closely oversee the relationships between the system and the national employers that run United Way drives.

The United Way of America would also create a so-called Center of Excellence to help promote and replicate nationwide the most successful local programs. Local United Ways, in turn, would adopt an expanded set of systemwide standards that would include required annual financial audits, and agree to a peer-review plan and a process for resolving disputes among local United Ways, such as over fund-raising territory.

Such ideas have been raised before in recent years. But many of the local United Way officials who are lining up behind the new report say they are more willing than in the past to consider efforts to strengthen the United Way of America. What’s appealing about the new proposals, the officials say, is that while they are meant to create some cohesion and uniformity among the United Ways, they don’t tread on the autonomy of local groups. And local United Ways say that they feel they have a say in defining the national group’s expanded role. In the past, they say, it appeared the national organization was trying to seize power.

“The difference here is both the process — we feel we are being listened to — and the apparent recognition in the report and by the new administration that we can unbundle issues,” says Neil M. Belenky, president of United Way of Greater Greensboro, in North Carolina. “We can decide that some things are best left to the local communities to have total control over, some things would be most effective if the United Way of America had responsibility, and other things need to have all participants sign off on them. Before, it seemed it was all or nothing — centralization or decentralization.”

Mr. Belenky says, for example, that the report’s proposals would not hand to the United Way of America authority to develop a uniform pledge-processing system. But, recognizing the need for some standardization in the way gifts are handled, the report recommends that regional collaboratives take over pledge processing.

Mr. Belenky and other United Way officials say they also support the proposals that are intended to give local United Ways greater participation in decision making at the national level. The proposals call for two governing-board spots, with full voting rights, to be reserved for the presidents of local United Ways. Officials of local United Ways have not before been voting members of the board.

In addition, the proposals would allow for the the creation of a council of staff members from local United Ways that would meet up to 10 times a year and would, according to the report, “serve as an advisor and sounding board” for the United Way of America’s chief executive officer. The council would probably replace an existing group of local staff members that meets less frequently and has less connection to the system’s leaders.

New Voting Rules

Many of the bigger United Ways are also pleased with the report’s recommendations that would give them greater clout in systemwide votes. Now, each United Way, regardless of size, has one vote. That means, the report says, that the 652 largest United Ways, which operate in cities and towns that together make up 92 percent of the population, do not have enough votes to pass a measure by a simple majority in a systemwide vote.

Under the new plan, each United Way would have up to 15 votes depending on the size of the population in its area. That way, the report says, the largest 194 United Ways would have enough votes to pass a measure.

Barbara T. Edmond, president of United Way of York County, in Kennebunk, Maine, says a change in the voting system is inevitable, and is not expected to be “a deal breaker” among small United Ways.

“We recognize that it’s not necessarily equitable for me, raising $1.5-million and paying dues based on that, to have the exact same vote as someone raising $60-million, and paying a lot more dues,” says Ms. Edmond, who served on the panel that wrote the report.

In addition, Ms. Edmond says she expects small United Ways to welcome many of the report’s other recommendations, such as its call for the United Way of America to provide more training and consulting services to its members.

“Small United Ways don’t have the resources to get high-powered training,” she says. “We could all save a lot of time and money and learn more quickly and efficiently if we have a national organization offering an even broader and deeper array of support services.”

Paying for Changes

Still, the estimated price tag on the proposals worries some United Way officials. The report says that the extra expenses would probably be covered through a variety of means. The organization would look to attract more foundation grants, it says, and perhaps charge fees for more of its services. Money could also be raised, the report says, by increasing by up to 50 percent the dues that local United Ways pay to the national group.

United Ways already pay 0.75 percent of their annual campaign totals to the United Way of America, and any dues increase, officials say, would mean less money to cover local grant making and expenses. And paying more dues would be particularly onerous now, according to some officials, because fund raising has suffered recently thanks to the slow economy and widespread layoffs.

Eleanor Brilliant, a Rutgers University professor who has written a book about the United Way, says she expects the cost of the changes will be even greater than the report’s estimates. Among other extra expenses in the proposals, she said, is the cost of having the new, 30-member United Way staff council meet 10 times a year.

Ms. Brilliant says she also expects more opposition to the proposals to arise as they are fleshed out in the coming months and more carefully examined. For example, she says, local groups may not readily accept the report’s recommendation that United Way of America’s governing board have oversight over not only the national group, but also the entire system.

“The report doesn’t say what that means yet, so I guess people are giving it a chance to develop, but that would clearly tip the balance of control to the United Way of America,” Ms. Brilliant says. “That must be controversial.”