Public Sector Management, Private Sector Thinking
Organizations can benefit from hiring private-sector executives, but they can also benefit from having their existing executives with nonprofit backgrounds begin to think like private-sector executives.
Ted Blevins, Executive Director of Lena Pope Home in Ft. Worth, Texas, who has been a nonprofit CEO for 30 years, exemplifies this style.
A seemingly meaningless phone call a few years ago is a perfect illustration of Blevins's approach to management. "Someone had 400 pounds of fish they wanted to donate," he recalls. "Obviously, if you take fish, you need coolers." The donor admitted other organizations had turned down the fish.
Blevins wanted the fish. He quickly networked with other organizations he knew could use the food. He took what his organization needed, shared the rest, and made the donor aware of this. That was 10 years ago. "Since then, that donor has given us more than $3 million," Blevins says. "They recognized we thought differently."
When Blevins arrived at Lena Pope, it had $400 cash in the bank and 400 clients. Today, the agency serves 20,000 clients, and its assets total $50 million. What's the key? "You can no longer think in the capacity you're currently operating in," he explains. "You need to think in the capacity that you want to be operating in--always looking toward the future."
He finds most nonprofit organizations operate with a three-legged funding stool: contracts (usually from the government), donations and fundraising, and sometimes foundation support. "We believe, to be successful in the future, you need a fourth leg, which is to find a way to have earned income...We evaluate the donations we receive to achieve their maximum potential, rather than simply spend them."
Years ago, Lena Pope received a donation of almost 100 acres of land. The organization sat on the land for years, using it for its own purposes. The land eventually gained value beyond the organization's use for it. "We found we could do our programs on land that was not as valuable," Blevins says. So he ground-leased the land to develop a shopping center, a deal costing $120 million over a 60-year contract. "It will probably end up generating more than $200 million in income, and we still own the land."
When the stock market dropped after 9/11, nonprofits lost significant portions of their portfolios. Lena Pope Home, however, saw a 5% increase, because it was diversified.
Overall, 50% of Lena Pope Home's $10 million budget is guaranteed income every year. Although some legal and operational issues need to be worked out, Blevins is careful not to get the organization in over its head, making sure the organization shares in the profits, but letting someone else handle the day-to-day management and risks. "We make sure the ventures we get involved in represent low impact on our workload."
- An estate with a significant gas operation was donated to the organization. Lena Pope had the choice of either selling it or partnering with a management company and operating it collectively. Blevins opted for the latter, becoming an 8% partner. "As a result, we made 25% more on those royalties than we would have if we had operated otherwise," he says. "This translates into about $700,000 more a year after taxes."
- A property donation included an institutional facility that did not meet the organization's program needs. Blevins turned around and leased the property to the state of Texas, resulting in about $160,000 annual income. "We still own it, and it continues to grow in value," he says.
Entrepreneurship has its downside, though. Some potential donors are more willing to donate because they see you are going to maximize the financial value of their donations. "Others," he admits, "think you're so successful that you don't need their donations," Blevins admits.
To be successful, Blevins explains, one must be open to opportunity, which is different than being an opportunist. He also points out that some organizations--his among them--have built boards with the business expertise necessary to make projects succeed. That is, board members have backgrounds in areas such as insurance, real estate, and finance. Lena Pope's "is not a rubber-stamp board," he emphasizes. "They are a board of experts that helps us take on these projects."
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