A New Era for Nation's United Ways

By Brad Wolverton

When United Way of America offered Brian A. Gallagher its top job, he felt conflicted. In six years as head

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of the local United Way in Columbus, Ohio, Mr. Gallagher had grown to appreciate life in the quiet Midwestern city. He found time to coach his elder daughter's basketball team, get involved in his church, and march in the city's Fourth of July parade.

But Mr. Gallagher, a 20-year United Way employee, saw distressing signs in the organization and felt compelled to think beyond Columbus. He had worried as corporate America started to shed thousands of jobs, sending some local United Ways into a fund-raising funk. He had grown concerned when many United Ways turned inward in the 1990s after the longtime United Way of America president, William Aramony, was convicted of stealing more than $1.2-million from the group. And an emerging divide in the system troubled him: About half of local United Way leaders believed that the organization existed to raise money. The other half, which included Mr. Gallagher, thought that United Ways had to transform themselves into organizations that focused on solving social problems, or risk losing their relevance in an increasingly crowded field of charities.

Concerned about United Way's future, Mr. Gallagher took the job as president of United Way of America, the umbrella organization that oversees the country's 1,400 local United Ways. "I didn't have a choice," he says. "I knew that no matter how good a job I did in Columbus, it wouldn't have enough impact. I had to set my sights higher."

'Shifting the Definition'

Now, two years later, Mr. Gallagher finds himself leading an effort to reinvent one of the country's largest and oldest charities.

The transformation he is attempting to make at the 107-year-old organization, whose member groups collectively raise about $4-billion a year, is "enormous and fundamental," he says.

"We're not talking about changing our fund-raising market focus from small to large donors," he says. "We're fundamentally shifting the definition of our business and our value. There is so much inertia about what we should and shouldn't be. To try to change the fundamentals of a system as large as United Way is daunting."

Among the biggest changes, Mr. Gallagher hopes to persuade local United Ways to:

• Diversify sources of revenue. After suffering the worst fund-raising decline in three decades in their 2002-3 campaigns, the nation's local United Ways experienced another setback during the most recent campaign season. Donations dropped about 2 percent in the 2003-4 campaigns -- a decline of $74-million from the $3.7-billion the group raised in 2002-3. Fifty-five percent of United Way's revenue comes from the 16 million donors who give through on-the-job solicitation campaigns. But because of job losses at big companies, Mr. Gallagher says, his organization needs to appeal more than before to wealthy individuals outside their place of work. He also wants to increase donations from women, blacks, and Hispanics. His approach is starting to pay off: More than half of the country's United Ways now receive a higher percentage of their total revenue from sources other than the traditional on-the job campaign than they did before Mr. Gallagher took over.

• Reduce redundancies. Mr. Gallagher wants to pool more resources from local United Ways to help those organizations save money on health insurance and pensions, eliminate jobs, and push more online fund raising. An idea of Mr. Gallagher's to create a single pension plan is in the works. And an organization he helped create last year already processes $430-million in contributions from 660 corporate campaigns.

• Work more closely with civic leaders to determine each city's greatest problems -- and then raise money to support those needs. When donors see problems getting solved, Mr. Gallagher says, they will increase their giving. His message has spread fast: 85 percent of the country's local United Way executives now think that their job is to help solve social problems rather than simply to raise money, according to a survey. And local groups that have made that approach the focus of their operations report bringing in up to three times as much money as they did when they were raising money for general community needs.

But the challenge of galvanizing support in a United Way system that some say often seems impervious to change might be more than Mr. Gallagher or anyone else can achieve, says Kevin Ronnie, director of field operations at the National Committee for Responsive Philanthropy, a watchdog group in Washington.

"Brian Gallagher is the best the United Way system creates," Mr. Ronnie says. "But the challenges confronting United Way are huge and systemic. They're beyond what any one person can accomplish."

Many charities that have long depended on United Way aid also disapprove of the direction in which Mr. Gallagher wants to lead the organization. Last fall, during a panel discussion at Independent Sector's annual conference, Hodding Carter III, president of the John S. and James L. Knight Foundation, in Miami, challenged Mr. Gallagher to respond to criticism that the changes he advocates "scare the hell out of" many charities.

"You know," Mr. Gallagher said in response, "fright at some levels is a good thing."

Mr. Gallagher then told charities to justify why they exist, and to stop whining that their financial problems result from budget cutbacks in state and federal governments.

"The fact is that if positively changing peoples' lives and condition in [their] community was directly correlated to the number of nonprofits in this country," Mr. Gallagher said, "we would have made a hell of a lot more progress over the last 10 years than we did."

Spreading the Message

Articulate and charismatic, Mr. Gallagher stands beside lawmakers to speak at news conferences on Capitol Hill, gets interviewed by the national news media during the Super Bowl for his organization's work with the National Football League, and sits in corporate suites at professional sports games.

In Denver this spring, Mr. Gallagher spoke to 100 executives and volunteers from some of the country's largest United Ways about changes he would like to see the organization make.

He said United Way must improve its efforts to attract large corporate sponsors that want to work with charities with a global reach. He described how United Way faces increasing fund-raising pressures as companies downsize and move jobs overseas, and as thousands of nonprofit organizations get started every year. Those changes have adversely affected United Way, Mr. Gallagher said: "Quite honestly, we're on a pretty steep decline -- we're not irrelevant, but we're in trouble."

But Mr. Gallagher remained optimistic about the future, saying, "Not having a strong United Way presence in this country is not an option."

Local United Ways are known for expressing "rugged independence" from the national organization, says Michael K. Durkin, president of the Mile High United Way, in Denver. But, he says, Mr. Gallagher's style of appealing to people -- logically show the problem, then rally support to overcome it -- has gained broad support as he crisscrosses the country spreading his message. (He spent 175 days on the road in 2002; 161 last year.)

It has helped that Mr. Gallagher is not alone in advocating change. When he took over United Way of America, many influential local United Way executives persuaded him to attempt to make broad reforms to the organization. "There was such an appetite on behalf of my colleagues, and I took advantage of that," Mr. Gallagher says. "The more people you can get to help push change in an organization this diverse, the more effective you'll be."

Some say that Mr. Gallagher has united fractious local United Ways more effectively than previous United Way leaders because he doesn't meddle where he isn't needed. He compares his job, in which he earns more than $400,000 a year, to the managing partner at a law firm, providing guidance and support to professionals who usually don't require much assistance.

Charm doesn't hurt, either. Mr. Gallagher, 45, comes across as approachable and inclusive, say those who have worked with him. He sometimes wears jeans to work, laughs easily, and exudes empathy. He seeks out common ground with strangers and listens intently to what others say, and when he agrees with an idea -- which is often -- his whole torso moves as he shakes his head in acknowledgment.

His empathetic nature comes from his mother, a Scottish immigrant, he says. Mr. Gallagher and his five brothers and sisters grew up in Hobart, Ind. A portrait that his mother painted before she died a few years ago hangs in his office.

His father immigrated from Ireland and cobbled together work as an industrial plumber, bus driver, and bartender. His family periodically received public and private assistance to make ends meet. Mr. Gallagher paid his way through Ball State University -- spending summers digging ditches and laying pipes -- and got his undergraduate degree in social work.

Many people agree that Mr. Gallagher's background -- growing up poor and understanding how that feels, but learning to mingle comfortably with wealthy people -- has perfectly groomed him for the top job at United Way.

"Brian has a very nice way with many kinds of people -- he's very cordial and persuasive," says William H. Gates Sr., chairman of the Governance Committee of the Board of Directors at United Way of America. "His greatest strength seems to be his ability to get diverse groups to gain agreement."

Financial Accountability

Mr. Gallagher made some of his most sweeping changes to the system soon after officials at the Capital Area United Way, in East Lansing, Mich., discovered in late 2002 that their longtime chief financial officer, Jacquelyn Allen-MacGregor, had forged the names of two officers in the organization to make hundreds of payments to herself.

The crime cost the local United Way more than $2-million, attracted national attention, and helped persuade Mr. Gallagher to impose strict performance standards for chief executives and boards of directors at United Ways.

He now requires every local United Way to provide the national headquarters with annual financial-data reports, pay for independent financial audits, write and adhere to a code of ethics, and have an independent company perform a detailed organizational assessment of the group every three years.

Mr. Gallagher also requires the 165 largest United Ways, which represent about three-quarters of the federation's revenue, to submit their Form 990 informational tax returns and annual audited financial statements to the national organization. United Way of America persuaded the accounting firm Deloitte & Touche to donate its services to review all financial statements and organizational assessments of each of the largest United Ways.

Some who don't follow Mr. Gallagher's lead have paid consequences. In August 2002, Mr. Gallagher called for the departure of Norman O. Taylor, the chief executive at the United Way in Washington, D.C., one of the largest United Ways, after questions arose about the spending of top officials in the organization. The group acknowledged that it had taken credit for more than $2-million in contributions that it did not handle.

Diana Aviv, president of Independent Sector, in Washington, which represents about 700 nonprofit groups, says it shocked her when Mr. Gallagher sought out The Washington Post and called for Mr. Taylor's ouster.

"The idea that Brian would take on a local organization was courageous," she says. "After he did that, I said to my development committee, Get him to join our board. He's the kind of leader the nonprofit field needs." (Mr. Gallagher agreed to join the Independent Sector board in January.)

Focus Criticized

While some view Mr. Gallagher as an icon for a new era of accountability at nonprofit organizations, many people question his approach. Among the most critical are charities whose work falls outside the areas that local United Ways have decided to support. Mr. Gallagher also has met with resistance from employees at local United Ways and United Way of America.

Mr. Gallagher's push to try to get local United Ways to solve problems makes the organization come across as "arrogant," says Karla Irvine, executive director of Housing Opportunities Made Equal of Greater Cincinnati, which got $70,000 from United Way this year, half of what it received last year.

"They're saying, We will decide what needs to be done in the community," she says. "But they've stopped giving money to many organizations that people rely on."

Mr. Gallagher, however, says that in many cities where local United Ways have started to focus on solving specific problems, more charities than before have begun to receive money from United Way.

Mr. Ronnie, at the National Committee for Responsive Philanthropy, says he fears that the new fund-raising approach that Mr. Gallagher advocates will not serve the long-term interests of the nonprofit field as well as United Way's previous method of raising and distributing money.

"They're putting too much focus on major donors and institutions of wealth and power -- and not inspiring a new generation of donors," he says. "That will have an unfortunate postscript in 30 or 40 years when a lot of people reach their earning prime and haven't been schooled in philanthropy."

United Way has experienced rapid growth in contributions from major donors during the past 20 years: More than 20,000 people each gave $10,000 or more last year, while few individuals gave that much in 1984. But Mr. Gallagher disagrees that United Way focuses too much of its efforts on major donors.

"I agree that if we turn into a large-donor institution exclusively we fail because the brilliance of United Way -- besides bringing special interests together to make progress on important issues in communities -- is the diversity of our donor base," Mr. Gallagher says. "But after two decades of incredible growth with major donors, our average gift is still $95."

And inside United Way of America's offices, one recent change that Mr. Gallagher introduced isn't sitting well with some employees. As part of an experimental seating arrangement Mr. Gallagher put in place last fall, many of the organization's 188 employees moved out of their offices and into cubicles.

Mr. Gallagher relocated from his spacious corner office overlooking the Potomac River into a windowless cubicle. His sequestered office, he says, sent the wrong message to people: "It felt too big, too isolated, and too corporate. We're not a corporation, and I'm not a corporate CEO."

Mr. Gallagher says he plans to keep most people in cubicles even though some of them don't like the change. "We broke down the walls," he says. "There's no going back."

Age: 45

Born: Hobart, Ind.

Education: Earned his undergraduate degree in social work from Ball State University and a master's in business administration from the Goizueta Business School at Emory University.

Previous employment: Has worked at United Way since 1981, when he started as a management intern. Most recently served as president of United Way of Central Ohio, in Columbus. Also has worked in Atlanta, Providence, R.I., and Reading, Pa.

Charities he supports: United Way, National Public Radio, Ball State University, the Kennedy Center for the Performing Arts, his Catholic church, and both private schools where his daughters attend.