Managing Organizational Change in Turbulent Times
Interview with Brian Gallagher, president and CEO, United Way of America

INDEPENDENT SECTOR Annual Conference, San Francisco
November 3, 2003


Sometimes funny, sometimes very serious, always insightful, Brian Gallagher, the president of United Way of America spoke out in an interview at the Annual Business Meeting of Members (where he had just moments before been elected to the IS board). Another IS board member, Hodding Carter III, president and CEO of the John S. and James L. Knight Foundation, conducted the interview.

HODDING CARTER III: The program portion this morning is titled, "Managing Organizational Change in Turbulent Times," and I can think of few people better suited to manage that topic than Brian Gallagher, president of the United Way of America.

He's a midwesterner by birth and indeed by much of his occupational life—born in Chicago, brought up in Indiana, a Ball State boy, and thereafter, a lifetime in United Way, a career, which has taken him across the country, to the deep south as far as Atlanta, and for many years, 16 to be precise, as head of the United Way of Central Ohio in Columbus, with a $51 million annual campaign. He’s now been some 22 months as head of United Way, and in that time, he has helped to guide an organization into a new way of doing business. And he’s done that at a time in which he’s shared with all of us a certain element of turbulent times. We need only say 9/11 and we need only say the evaporation of the market to know what that means. But also the particular turbulence which has faced him as the head of an organization in which some small tiny minority, but quite visible elements of the organization imploded ethically before our eyes.

We’re going to be talking about both elements—and there are two elements of this conversation—one, of course, is organizational change and one is turbulent times. But I thought before we do that, Brian, we’d talk a little bit about the man who is trying to manage it and in the middle of these turbulent times.

So, the first thing is, why did you go into United Way work, and why didn’t you get out?


BRIAN GALLAGHER: The first one is easier to answer than the second. I had never heard of the United Way growing up. But my dad emigrated to Chicago through Toronto from Ireland, and my mom from Scotland, and kind of tried to create a life for us. At times we were like a lot of families and struggled with different issues at home. So I was the product of human services. I’ve seen family members in shelters. I’ve seen family members in detox. I’ve been helped by volunteer coaches. I’ve … you know, “escaped” is probably the right way to put it, in terms of youth programming at a YMCA that put me in touch with families that started me thinking about college for the first time. And so I was intrigued by why those services were available, why people volunteered, why somebody who didn’t know me would care enough to invite me over to dinner after baseball practice or football practice, and help me in high school start filling out college applications. And so I decided at that period of time to figure out why that happened and commit myself to it. It wasn’t until I was at Ball State University’s social work program—and at that time, I literally had never heard of the United Way (which I’ve since reminded the social work department at Ball State that it was an important part of community life and that they ought to teach it). And I read the description. The idea that people would come together voluntarily to try to respond to human need and suffering, it made sense to me. So I did my practicum there and got into a management training program at United Way of America in 1981. I have thought of leaving United Way several times. I came in in 1981. If you were working for the United Way in the ’80s, you were king of the hill to the point of arrogance, probably. And then the Aramony scandal in 1992 … you go from that to family members questioning your integrity. You start thinking about why you do what you do.


Hodding: That’s an interesting thing. Because that period was a great period of growth for United Way right up until the implosion of Aramony. As you were watching it, what did you learn from that as a United Way professional, as a human being, and now of course as the president of United Way?

Brian: The most significant lesson for me and the thing we’ve been talking about in our world: it's not 1992. 1992 was so visible and so evident. When Ted Koppel is talking about you and you’re the butt of jokes on late night television, that one is easy to see and what the pain and the lessons are. What United Way was through the ’70s and the ’80s when it became United Way, not just Community Chest and United Funds, was about centralizing everything: centralized campaigns, centralized marketing, centralized talent management. And the world in the middle- to late ’80s was starting to decentralize: more and more nonprofits, technology advancing that was challenging anything that was centralized and the middleman and its application. I would respectfully suggest that Aramony didn’t have a vision for the next life of United Way. So that, in combination with the fact that we had evolved from what I would view as a human service organization into a corporation... [inaudible*], and we didn’t have a response to it.


Hodding: Now your environment was changing (and now we’re actually going to go off the prearranged track and go down this one for a moment). The environment was changing. But it was a successful environment right up until the "implosion." Why would anyone see anything wrong with it anyway?

Brian: It was successful by some metrics, by historic metrics. Campaigns were increasing but donor choice was increasing. The idea of the value proposition of the United Way—“one campaign for all”—was under incredible pressure. Quite honestly, there was also a challenge of whether we were having as much impact on people’s lives as we had historically. So there were a lot of things going on—like corporations, like colleges and hospitals. If you looked at the historic metrics on the outside, it looks healthy. Sometimes what you don’t do as leaders inside institutions that have been successful for a long time is that you’re not honest with yourself in terms of signs of impending weakness. And that’s what we didn’t do. Again, we were challenged with, if you were adding so many nonprofits every year and there were so many competing federations… What made you different as a federation? What made you different as a fundraiser? We grew up as a monopoly in the workplace; we were losing the monopoly position. We had developed talent that was monopolistic in nature. We didn’t pursue value in the 1980s, in my estimation. We worked to see how we could keep competition out. And that was what was not being discussed in the 1980s, and there was no vision for it. And then post-'92...the lesson for institutions that have been around for a long time: You get yourself so internally focused that you stop reading what the environment is telling you and how to start pursuing value again.


Hodding: Now we'll come back onto that track. The environment is telling you something the moment you come in as the new head after a year without someone actively in full control of the United Way. The environment is telling you that you’re in trouble with money, you’re in trouble on public perception. What all is going on? And here you are, the "practical idealist" (to use the phrase) facing this.

Brian: I got named in the job on November 5, 2001. And the environment wasn’t telling me that we were in trouble. The environment was telling me that we were less relevant. And I think there’s a distinction. After the attacks on September 11 and the $500 million that was raised for September 11th Fund, a billion dollars for the Red Cross, over $2 billion [total]... The attention quickly turned from, “Wasn’t it great that everyone was so generous?” to, “So, what are you doing for my money?” And it’s taking too long to get out. And if you were remember, we were in the middle of corporate scandals and so forth. It was fodder for media and legislators to focus on our sector in a way that it probably hadn’t been. So we were faced with this as a sector, but certainly as the United Way, and the Red Cross and certainly others… [inaudible*]

Historically, people really didn't care about United Way allocation committees, except you know the agencies that receive money. Now the national media cared about... How was the New York Community Trust and the United Way of New York City going to distribute it?


Hodding: Were you prepared for that kind of questioning?

Brian: No. One of the significant changes for us and certainly a lot of nonprofits is the understanding of how you deal in the public realm. We grew up as private nonprofits. And this was the most intense, public examination of our work around distributing income that I’d ever been a part of. So no, I don’t think we were prepared for it. I don’t think we prepared for … Bill O’Reilly rail[ing] at you. What do you do? Do you take him on? Do you go to different venues? I think the lesson out of it was the world moves faster than our institutions, and the news cycle is moving so quickly that by the time you’ve considered your response to yesterday’s cycle, it’s on to a different cycle. And so no, we were not prepared for it. We were prepared for distribution of income. And I think history will show that most every effort around 9/11 was a solid one. But we weren’t ready for the scrutiny.


Hodding: Let’s take our first leap. You just described the United Way. Do you think you’re describing the nonprofit world generally when you say, “We’re not prepared"? For those of you who hadn’t seen it, there are some reprints of a letter that Brian wrote to the Chronicle [of Philanthropy] a couple of weeks ago, in which he says toward the end, “We embrace the reality that forevermore we will be operating in the white-hot spotlight of the public eye.” We’ve been talking around the tables a little bit about this. And yesterday when we ran our exercise after our new leader had given us our charge, there was a great deal of difference of opinion as to what exactly that required—that white-hot spotlight.

Brian: Yeah, I think it’s something we all have to learn. I can tell you that my wife and I disagree on what we put on our public website now. She can’t understand the stuff we’ll put out in the public domain that includes compensation and salary and decisions and so forth. I think it’s inevitable—

Hodding: She’s a southerner, and we just don't talk about money down south. That’s a bad thing.

[Laughter from all] Brian: Well, Hodding, the thing I've discovered is you don't talk about much of anything. [Laughter]


Hodding: Irishmen always say that. What can I tell you?

Brian: I need some decoding when I go south...[laughter] Let me just stop there, all I’ll do is get in trouble, this is being videotaped. [laughter from all]

There are two things for the sector. One is that when you grow as fast we’ve grown and you take up as much space as we take up, and you employ as many people as we employ, you are now in the public domain, as a sector and certainly as institutions of any size or with a point of view… you are in the public domain. And so acting like you’re a private nonprofit is just not really embracing what the world is now.


Hodding: Is that a lesson just for the hired hand? Is it a lesson for the board? Talk about who all this is a lesson for.

Brian: It’s a lesson for the organization. If you’re the board chair, if you’re the finance committee chair, if you’re the nominating committee chair, it’s yours now. It’s not just the CEO or the senior team or the staff of the organization—the relationship has got to change because the environment is so different. And the thing, quite honestly, I’ll say as directly as I can say, and I put it on United Way first, but I’m concerned for the sector in this regard is that. . . We have developed such an institutional interest that I’m concerned that we won’t recognize our opportunities and responsibility for community and for sector. Even at the INDEPENDENT SECTOR conference, my sense is that still most of us here are mostly concerned with our institutional interest. And if we continue to stay focused on how I build our development efforts, how I build our reserves, how I build our staff versus getting more focused on the fact that 30 percent of American families are spending a third of their income on housing, that 45 million people don’t have health insurance, that 20 percent of Americans control 83 percent of net worth in the country. Until we start focusing on the issues beyond our institutions, our institutions won’t succeed, and the sector won’t succeed. [applause]


Hodding: About three different things come out of that particular remark. But I’m reminded...of a famous remark which he did or did not say, “Surely, madam, we shall hang together or hang separately.” And in this case, Franklin was speaking of a republic, but again the conversation I’ve heard around here keeps coming back to “but we don’t really have any business talking about the broader spectrum, we got to tend to our own, and in fact people will resent it if we talk outside our own silos.”

Brian: I think it’s a different risk model. When I hear that, you can’t say it comprehensively, but usually what I hear is “I’m afraid.”  Institutionally, I’m nervous about doing it. If we care about tax policy, if we make statements like I just made with elected officials or corporate leaders that don’t want to hear it, that there’s going to be ramifications. The fact is if we think short-term… I bet folks in the audience have been slapped around by folks that can slap them around. But the fact is longer term that's what’s going to produce value and what will bring you institutional success, in my view and my experience. But there is pain in the short term when you take risks like that.


Hodding: Let’s talk about another element of pain that you faced when you took over. Americans sort of cynically assume that there is corruption in politics—it’s our favorite sport. And when we’re not caught up in a gilded age, we assume that some businessmen are going to be corrupt. And then from time to time, we learn that a lawyer or a doctor or whatever… We don’t tend to think very often about nonprofits doing the "Lord’s work" as being liable to corruption. So you walk into office, another part of your turbulent times, and hit what?

Brian: Well, my local United Way was not performing, at least to my standards as a local donor. [laughter from all]  The fact is that you walk into a United Way that two things: had first and foremost lost its way on purpose (the local United Way in Washington, D.C.). $93-million campaign, 90 percent donor-directed, it was a "shelf-space" campaign, it was about moving money from point A to point B, in my estimation. So when I get a solicitation letter to our home for my daughter’s school, suggesting that I designate my United Way gift to support that [school], to me makes no sense. So they lost their way in terms of purpose for the organization. And then they clearly lost their way in terms of professional leadership and board governance. As we were looking for homes, and real estate agents and bankers would ask, “So who do you work for?” and I said, “United Way of America.” They said, “Oh, United Way!” And then my wife would say, “Oh no, not that United Way.” [laughter from all].

Another lesson is, “No, it is that United Way.” And, so the lesson again was mission and purpose; I think they drifted on that. You had a CEO who had been in the job for 27 years. You had a board that was geographically splintered, and so when issues started to arise, it was a board that couldn’t close ranks and take the necessary steps, and there was professional leadership that wasn’t resolved in terms of what was necessary.


Hodding: Well, you looked like you were a terrible swift sword. But what advice were you getting before you acted? What were the sort of institutional things coming down on you?

Brian: We were doing a couple of things. And there were lessons for us—short-term and long-term. We immediately started reviewing what was going on at the United Way in Washington. I think, more importantly, the formal processes don’t always … it’s the informal processes that are going to play out. And so, I went across the river and sat down with the board chair and the CEO at the time and suggested that what they had to do was do their own forensic audit. They had to understand what it was that they were faced with. If someone had operated unethically, illegally, you prosecute them. You tell the world what you found. You define the problem. And you define the solution.

They weren’t willing to do it. Or incapable of doing it. So, we decided that in the interest of United Way, not Washington, that we would change a Washington Post interview and turn it into a call for the board to step aside and the CEO and management team to step aside and start rebuilding the local United Way.


Hodding: Just between you and me, that’s fairly unorthodox.

Brian: I know. [laughter from all]


Hodding: And your own board?

Brian: Well, first of all, that United Way CEO doesn’t report to me. And the United Way CEO here or Chicago doesn’t report to me. So you sometimes have to take unorthodox steps to make your point that United Way of America owns the name, and we own the brand. My greatest “A-ha!” in 22 months is: Brand is really just about reputation. And I’m the CEO of reputation. So even if you don’t report to me, we’re going to go through the process. If you’re not willing to understand your responsibility to the global reputation, then we will use whatever means we have to use. Clearly, I had the support of our board. More importantly, I had the support of local United Ways around the country before we did that. They didn’t know that we were going to do it that publicly, but I was confident that they would support it. And more importantly long-term, again combine that with everything else that was going on, it allowed us to go to local United Ways and say, “We can’t have this anymore.” So we started sitting down with Senator Charles Grassley, who was the ranking Republican of Senate Finance at the time—started showing his office the reform we were going to take local United Ways through on standards and operations and revenue recognition and cost and ethics and all to be reported to United Way of America. He blessed them, we called a meeting of local United Ways at a time knowing that they couldn’t vote against it. So, 667 voted for higher standards on themselves, more centralized oversight—something we never would have considered two years earlier. But the Washington situation gave us the political cover, if you will, to reform long-term and allowed us to get back to purpose and mission.


Hodding: So lesson #2 is if you don’t take advantage of the moment when people are focused on scandal or the horror of it, it is unlikely that you will be able to get that kind of reform six months later?

Brian: Almost guaranteed. Almost guaranteed.


Hodding: That says something about this institution as well. Welcome aboard the board. [laughter from all] The thing is, you got Washington. For a moment there, you must have felt maybe you were beginning to be in the financial and securities industry cascade. I mean, you got Minnesota, and you got a vendor problem out here. Umm, expecting much more?

Brian: No. [laughter from audience] Here’s why… Len Roberts is the CEO of RadioShack and he’s our board chair. And we’re in the middle of this last year. Len told me a story of when he was the CEO of Arby’s at one point. He visited a store somewhere as a brand new CEO—and the conditions from a health perspective were horrible. So he said to himself, “This is a franchise business.” He said to the franchise owner, “You need to make these changes.” And this owner told him to go pound salt. Len rode up the street—literally up the street—to the health department and reported his store. [laughter from audience] And his advice to me was that "I think we have that situation right now."  You can have 800 Arby stores that aren’t a problem. If you get 10 that are, you got a problem. It’s not just me and United Way of America; my colleagues get it. It’s not just saying, yes, we have a code of ethics; yes, we have oversight in terms of governance; and so forth. The volunteer board chair has to sign it. It gets submitted centrally, we’re going to have both internal and outside experts look at it. If someone is going to steal from you, they’re going to steal from you. But if you raise it to the level of board discussion, have to report it to some central body that then looks at it—you’ve just raised it as a priority. And that’s going to, I’m confident, get us more standardized across the country.


Hodding: You have now been talking about the turbulent times. Let’s talk about some of the things—if you had no turbulent times at all—you had some ideas for what you thought United Way ought to be doing and how it ought to be going about its business. And now let’s talk about institutional change. What was it that you felt was most important and how did you go about getting it? Well, of course, one thing you had to do was deal with what we were talking about. But you had a larger design.

Brian: Well, even if you looked at what is the definition of the United Way. What is the value of the United Way when you’ve got 35,000 new nonprofits every year, and you’ve got a global economy that creates success more unevenly, and you’ve got technology that’s challenging why you’re in the middle of this transaction? And by the way, when we came into this, when we surveyed local United Ways and asked them, “Are you in the fundraising business or are you in the community impact business?” It was 51 percent, 49 percent. So job one was close ranks on mission. Why do we exist? And I think that’s true of any institutional change, especially in an institution where you’ve got 1,400 local United Ways independent in their operations sharing a name, 16 million donors, and you’re split down the middle in terms of why you think you exist. So it was first and foremost, my responsibility was to articulate who we are and where are we going. In my estimation, that’s about creating community change in people’s lives at a community level. Our metric of success has to be: Are more kids in school? Is there more affordable housing? Are less women getting beat up in their homes? Are fewer kids abusing drugs? And then you’ve got core foundation services like Meals on Wheels and disaster relief. Fundraising is a strategy. And the thing I’m most proud of is that we’ve closed ranks on that direction.


Hodding: “We” meaning the organization and you?

Brian: Yes. I don’t look at myself as the CEO of United Way of America. I look at myself as almost the person who’s got the seat for awhile in a professional partnership and that my colleagues around the country own this. And volunteers in those communities own it. My job is to steward it. And so after this meeting I go to Sacramento to go meet with a group of angry United Way-funded agencies about “Why are you talking about where you’re headed?”


Hodding: Talk about that. I think that if I’ve heard any criticism of Brian Gallagher it’s been, “He doesn’t understand how this is going to scare the hell out of all of these people who are depending on your fundraising for their money.”

Brian: You know... fright at some levels is a good thing. [laughter from all]


Hodding: He’s a real CEO.

[Laughter from all] Brian: I know what the conversation is going to be this afternoon. If you believe as a group of professionals in the human need business that you are collectively making more progress today than you were two years ago or five years ago, God bless you. Then we ought to continue to do what we’re doing. If you don’t believe that, then you ought to challenge yourselves, we ought to challenge why we exist, and don’t keep whining about the fact that it’s because of state budget deficits and federal priorities—it is that. But the fact is that if positively changing people’s lives and condition in community was directly correlated to the number of nonprofits in this country, we would have made a hell of a lot more progress over the last ten years than we did. [applause] 

And if United Way were to just stay in the space of "okay, let’s try to raise as much money as we can and get it to great agencies" (because they are great agencies). But the fact is that the biggest change in our world today is that the economy now is global and it’s not manufacturing-based. So when you look at the New York Times article yesterday of the emerging Chinese auto industry. And Cooper Tire & Rubber says we’re going to move these manufacturing— technology essentially and equipment—from Albany, Georgia, to China to manufacture there. Now we’ll continue to do some things here in Albany, but we’re not going to grow Albany—it changes the conditions. So the systems that we built, the United Way systems and health systems and education systems—were built for, at best, a national industrial-based economy. It’s not anymore. And so it’s not good or bad. But it’s changed the reality that families live in. And I think it’s irresponsible for United Way not to challenge itself to say, “Alright, how can we create the greatest impact?” And by the way, there will be success for agencies in it—just not as evenly. And, Hodding, if I could make this point … the great thing about Sacramento is that when this is all over, I get to leave [laughter from audience] and my counterpart has to stay. I’ve worked for five different United Ways. And I grew up raising money in United Way. And every time I went into a job, I would take a look at the fundraising record for the United Way over a ten-year period and then I’d draw a line. Then I’d take a look at the agencies we were funding today and funding ten years ago, and I’d draw a line. And in every single case, the lines were parallel: Donors figure it out at some point. You can’t tell me that we should be investing in exactly the same things today as we were ten years ago. And I come back to institutional interest. Our job is not to raise money for a finite group of agencies, especially when there’s not enough money given the number of nonprofits to come even close to funding their operating needs.


Hodding: I want to go two ways on that in a second. But let me go first on this. When I came in to a new job and thought I had some ideas, I tended to mumble for a couple of years until I was sure I had a board that agreed. You came in shooting. And you came in shooting with something that really changes the public philosophy of the way United Way projects itself. How did you do that? I mean, you had to pull that off. My successor, wherever you are out there, listen to this man... [laughter from all] You cannot waste two years.

Brian: You can’t. I mean, it’s a few things: Search processes ought to define whether your board and you are in the same place and whether your key stakeholders are or are not. And our search process did that. I’ll say, though, that we’ve dramatically changed our board as well, and that was one of the more challenging things in the last 18 months. But I’ve lived United Way for 20 years; I know what the issues are, and I know what the fear is. And I don’t mean to be flip about… that’s real when an agency was getting $300,000 a year from United Way and now it’s $250,000—that’s real. But I was absolutely sure in terms of what the environment was in local communities. And for better or for worse, when I took the job, I was 42, and I wasn’t then and I’m not now afraid to get fired. I’ve got a view that you only get your first year once. You only get your second year once. And you get your third year once. And, no one’s guaranteeing you the next one. I’ve watched each one of my successors since 1992 essentially get run out of the job. And so, it’s either you’re going to do it working on the right stuff or maybe it’s going to happen to you anyway.


Hodding: Well, I’m 68 and I’m still afraid of being fired. What can I tell you?

[Laughter from all] Brian: You’re smarter than I am [laughing].


Hodding: Let me go to something else—speaking about being afraid. I just got through quoting you, I gave a talk in Los Angeles the other day, and I quoted you because I found it to be directly on the money for something I was trying to say. But it’s also something that scares the hell out of a lot of us in this business. Now if I can find it, I will quote it… In effect, and you said it in many different ways: it’s not about the money—we’re now in the public policy business in effect. And that’s not the exact phrase... But talk about that for a little bit. Because you just talked about speaking with Chuck Grassley. Was that with the executioner's knife at your throat, or were you getting there ahead of the executioner? I mean what was it?

Brian: We were arriving at the same time. [laughter from all] But I wanted to avoid future encounters with weapons.


Hodding: Talk about that. Because a lot of us are afraid of touching the public policy question because we think it will encourage the guillotine.

Brian: Well, if you think of United Way for a minute, whatever your experience is with United Way. We’re not unique in that we raise money. We’re not unique that we’re local in nature. We’re not unique that we’re volunteer-driven. We’re not unique in terms of X percentage going to program versus operation. I think what makes us unique is the diversity of relationships that we have. When you’re the CEO of a local United Way, if you’re doing your job well, you’ve got relationships with city government, business leaders, organized labor, white people, people of color, in the suburbs, in the city, faith leaders—you’ve got this incredible diversity of relationships. And therefore, the value of United Way is how do you coalesce any of those relationships’ seemingly special interest to collective interest? And public policy, when it works well, is that. And quite honestly, not even public policy, just citizen engagement. The fact is the United Way ought to be a place, not the only place, but a core place where you can bring interests together, where you can get a business leader to show up in front of a state legislature in a committee room and say, “Early childcare is important.” And if the CEO of UPS shows up, that’s different than the child advocate showing up. And so we’ve got an opportunity and a responsibility, I think, to have a point of view on policy. And the second issue is pragmatic. The United Way raises just under $4 billion, a drop in the bucket compared to what the public sector is putting into programming. So, you got to have a point of view, I think, on Head Start reauthorization and on the CARE Act. When we stand up on the CARE Act, we’re not asked to talk about the tax incentives and so forth. We talk about social services block grant—it’s what nobody wants to talk about, but we talk about it because that has to be part of the dialogue. If we don’t get a billion dollars of flexible federal money back into communities, who cares if United Way’s campaign across the country increases 1.8 percent? Who cares?


Hodding: We’re at the point at which I have to tell you that having listened to you, a lot of us are going to care a lot more about what’s happening at United Way than we were before we heard you. And second, I want to say, I only wish I could clone you (though it’s against the law) and I would put you at every table here for our continuing conversations. Brian, thank you very much.

Brian: Thank you, Hodding.


Hodding: Great job, Brian. Great job.

[Applause and standing ovation]

* In some cases, audio quality did not allow for a complete transcript.
  This verbal interview has also been edited to improve readability for a written format.

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