What Would Peter Do?

I understand that sometimes people just aren’t ready to hear things.  A couple of years ago, received a card from a student that I’d had in class a good 15 plus years before.  She was writing to thank me for something that I had, apparently, repeated multiple times throughout the courses she took with me.  She finally understood why I had stressed it as I had.   Why I then repeated—and continue to do so today—the important messages in hopes that someday, they will stick.

But sometimes, even with colleagues and others repeating the same messages, it just doesn’t seem to get heard.

To wit:  I receive Google alerts for “nonprofits.”  A recent alert contained what is becoming all too common:  two articles about questionable finances of nonprofits.  (For the record, the bulk of the items on these alerts are generally positive.)  And to make it to a Google alert means the scandal has hit the media and Google has picked it up.

The first one I came across grabbed my attention with the headline “Nonprofit Company Makes its Owners Wealthy.”  “No,” I scream, “this can’t be; no one owns a nonprofit!”  But despite this message being sent repeatedly, by lawyers, consultants, the IRS, etc., this message hasn’t taken.  And in particular, it seems never to have even made it to the ears of boards with founders as executive directors.   The “company” to which Los Angeles Times’ article refers is Social Vocational Services, a $63 million, state-wide organization that provides vocational and life skills assistance, as well as housing, to the disabled.

Over the course of the last five years, the CEO and his wife, who is the CFO, have made over $7 million, along with millions of dollars in real estate holdings.  And the dealings—renting property they own back to the nonprofit, starting a for-profit company that just leases vans to the nonprofit, etc.—are your standard conflict-of-interest practices that allow senior managers of the nonprofit to gain financially through dealings with the nonprofit.

Come on.  That lesson should have been learned by now by every board member and every executive director, her sister, his mother, etc.  What is the problem?

The other headline that caught my eye was from The Washington Post and read “FBI examines spending by Md. nonprofit.”  Here the deal was that the organization apparently couldn’t account for approximately $900,000 over two years.  It gets worse:  the organization’s annual budget is $700,000.  The organization claims that the disputed amount is a mere $61,000.

What don’t people get?

I read these newspaper articles today after earlier starting to read the main articles from the November 2009 issue of the Harvard Business Review:  “The Drucker Centennial:  What Would Peter Do?  How his wisdom can help you navigate turbulent times.”  I’ve read Drucker, attended lectures and read books by his disciples (unfortunately, though, I was never able to hear him), use some of his ideas, but I am not a flag waving Druckerite.  Nevertheless, as I was reading these two articles, and another about ACORN, revealing horrendous mismanagement and mis-governance of nonprofits, two things that I had read earlier in the Drucker articles sprang to mind.

First, in talking about Drucker’s early warnings about excessive executive compensation, Rosabeth Moss Kanter, in the article of “What Would Peter Say?” says, “More than 20 years ago, Drucker pointed to a top-to-bottom ratio that was then rushing past 40 to 1.  Just before his death [November 2005], the ratio was greater than 400 to 1.”  Is a nonprofit CEO salary of $872,311 excessive?

Second, there was a Drucker quote from an article he wrote for the July-August 1989 issue of the Harvard Business Review:  “Nonprofits need management even more than business does, precisely because they lack the discipline of the bottom line.”

Perhaps it is time to become that flag-waving Druckerite.

Editor’s Note:  And if two examples were not enough, Laura was interviewed for an article about a nonprofit in Arizona with some interesting practices.  Read the article in the Arizona Star.