When a difficult economy exacerbates changes already occurring in philanthropic giving, nonprofits hoping to make the world a better place can end up locking horns. In Mercer County this scenario has been playing out between Mark Lamar, executive director of Hamilton-based Family Guidance Center, and Herbert Klein III, president and chief executive officer of United Way of Greater Mercer County.
The quarrel between the two men came to fore in the wake of cuts made by United Way of Mercer County after its total revenues slipped to about $4.5 million in the fiscal year ending June 30, 2012 from a high of $10.1 million in 2007. “We have not gotten the donations from corporate donors and individual donors to the programs we were funding,” says Klein.
This topline revenue includes revenue from all sources, with $3.5 million from the United Way campaign (about 77 percent of total revenue). Of the remaining $1 million in revenue, $600,000 comes from grants (about 13.3 percent of total revenue), which are restricted to being spent on the program they are funding; and the remaining $400,000 is from gifts in kind, smaller drives, and other miscellaneous revenue.
The two largest grants are from the Robert Wood Johnson Foundation, a $354,000 community impact grant and a $125,000 public health partnership grant (the second year of a $250,000 grant); the others are from smaller foundations.
From the $3.5 million raised by the campaign, $1.6 million is money designated by donors to 501c3s anywhere in the country, for which the United Way functions as a pass through for a small administrative fee; the remaining $1.9 million of resources under management is the money United Way of Mercer County can actually spend on programs, operations, and administration, and Klein notes that 80 percent of administrative monies are attributable to programs.
The lowered revenue has led to big changes over the last few months: cutting operating costs by 35 percent, laying off four employees, and delaying payments to area nonprofits.
The belt tightening is continuing during the fourth quarter with funding cuts of $162,000 to about two dozen agencies. In 2013 United Way will stop funding two multi-agency collaborations, Lamar’s United Family Strengthening Partnership and the United Early Education Connection. The total reduction to Mercer County nonprofits next year will be $635,000.
Last year, to honor contracts it had with several organizations, the agency had to spend $700,000, a “significant chunk of the reserves we had,” says Klein.
Lamar, a longtime activist and cheerleader for United Way, is very unhappy about how the organization has responded to cuts in donations and is concerned that it is abandoning its commitment to a safety net for the poor in its cuts to food, family, and other programs.
His thoughts were expressed publicly in a letter to the editor (U.S. 1, November 21, 2012), signed by Lamar, and the directors of CASA of Mercer County, CONTACT, Womanspace, HomeFront, Rise, and PEIKids.
Klein, on the other hand, maintains that United Way, both nationally and locally, has been pressed to develop a new model as more individuals designate their charitable gifts rather than donate to a community pot for United Way to distribute.
“Funding agencies is not my objective,” says Klein. “I am interested in solving problems that move the needle.” Because United Way no longer had sufficient donations to support all of its organizations, the board decided to narrow its focus to what it can measure and where it can have the greatest impact — it will be working to improve health, education, and income outcomes while working with nonprofits that are able to show measurable improvements in these areas.
In these three areas, United Way of Mercer County is following a change of direction for its parent organization, specified in its vision of “a world where all individuals and families achieve their human potential through education, income stability, and healthy lives.”
In line with this vision, in 2008 United Way initiated a 10-year program to achieve three goals: improving education and cutting the number of high school dropouts in half; helping people achieve financial stability and getting 1.9 million working families on the road to economic independence; and promoting healthy lives and increase by one-third the number of youth and adults who are healthy and avoid risky behaviors.
To achieve these goals, United Way says that it plans to mobilize millions to give, advocate, and volunteer to improve the conditions in which they live; to connect all sectors of society to create long-term social change in its three areas of endeavor; to raise, invest, and leverage philanthropic contributions to create and support innovative programs and approaches to generate sustained impact in local communities; and to hold itself accountable through a commitment to continually measure improvements in education, income, and health.
A 2008 report that introduced United Way’s goals for the common good, declares on page 2 that “what gets measured gets done,” something Klein is very comfortable with. “I come from a measurement world, the management consulting and startup world, and I am a firm believer in that which is measured is done,” says Klein, who attributes this line to Harold Geneen of IT&T.
These new thrusts represent a significant change in the identity that the organization had maintained since its 1887 founding in Denver, Colorado, by a local woman, two ministers, and a rabbi who recognized the need for cooperative action to address their city’s welfare problems. The organization they created served as an agency for a united campaign to collect funds for local charities as well as to coordinate relief services, to counsel and refer clients to cooperating agencies, and to provide emergency assistance where necessary.
“The face of the nonprofit world is changing dramatically,” says Klein. “Government funding is going to be cut, and U.S. citizens have lost in the last four years over $20 trillion of net worth.” The result is fewer dollars for nonprofits at a time when there has been an explosion of 501c3s, each with their own boards and overhead, and all chasing the same charity dollars.
How the actors in the world of philanthropy and in the human services sector move forward amid the new financial realities reflects their own deeply held beliefs. Klein, on the one hand, says, “If you’re going to invest in a 501c3, you’re going to want to know where your money goes, who was helped, and was that help successful in moving the needle permanently for that person.”
An example of what Klein has in mind is the United Housing First program, which gets individuals off the street and into permanent housing and then provides them with a caseworker and wraparound services. “We are about transforming lives permanently,” says Klein, who adds that United Way employs Ray Myrie and Eric Williams, two individuals who went through this program, both of whom Klein has mentored.
Klein met Williams two years ago when he was homeless, a drug dealer, and a former convict. Today he is married, has his own home, works at United Way two days a week, has gotten his GED is in college learning to be a substance abuse counselor, and has been proposed as facilitator for one of United Way of Mercer County’s grants.
He has also gotten healthcare for his heart, is learning how to eat better in nutrition classes, and has reconnected to his four-year-old daughter. “He has a long way still to go, but Housing First was designed for the long haul,” says Klein. “We here at United Way take those opportunities to transform someone’s life very seriously; we are involved in the first person, not just as a conduit of money.”
To make such global changes in people’s lives requires bringing together a basket of services. “We at United Way are integrators,” says Klein. “Most 501c3s are single-issue 501c3s; in order to produce an environment where a person can thrive, you have to integrate multiple 501c3s to be successful.”
Certainly Lamar also supports long-term change and social transformation, but he suggests that Klein has perhaps misjudged donors’ interests in sacrificing organizations that focus on pressing short-term needs, like food or domestic violence counseling, to those that can demonstrate long-term social change.
Lamar says about Klein, “He has seen difficulties in the results and has said the causes are not attractive to donors — that they are not interested in what United Way is supporting and don’t feel like giving to it. He is blaming the relevance of the causes, and we highly dispute that.”
The two men’s philosophical differences come to fore around the issue of funding food banks like Mercer Street Friends, funding for which was cut not long after Klein came in.
Whereas for Lamar simply providing meals to hungry people is a countable outcome, Klein maintains that the “eat for a day” model is not transformational. “It solves no problems other than ‘I’m hungry,’” says Klein. With any program around food and nutrition, he suggests, the issue is typically poverty, which itself has many contributors and manifestations that must be addressed.
For Klein, a better way to give families access to food is a new United Way program to help people fill out the forms for the earned income tax credit, which only 25 percent of those eligible claim. “It puts thousands of dollars into the hands of families so they have money for food as opposed to going to a food bank,” he says. “A food bank addresses a symptom.”
Food aid, Klein suggests, should be part of a larger program, noting that United Youth Metro is adding a nutrition component by providing an after-school snack and teaching about nutrition.
“We look at the problems we want to solve and then construct programs that will address those problems,” says Klein, and food is not a current focus for United Way of Mercer County, which Klein notes has 21 separate food banks.
For Lamar, however, food in and of itself is an outcome. “Food is a precondition to getting anything else done,” he says. “It is the metabolic reality to outcomes. Defunding food, saying it is not an outcome and not the thing that makes the difference — I think that reveals a flawed philosophy about what people need.”
Lamar also maintains that providing food for hungry people contributes to one of Klein’s three specified outcomes — health. He says, “You would have to play a trick on yourself if you don’t think food is germane to health.” The defunded Mercer Street Friends, he adds, sends food home with children every weekend, because it knows they are hungry then, and it also has a food and nutrition program.
Lamar adds that he himself it is criminal that our society still has homeless shelters and food banks — but only because these shouldn’t be causes anymore — not because such services should not be funded by the community.
With regard to the Klein’s focus on transformational change, Lamar asks, “Do you really say, unless we see people going to college or having good-paying jobs, feeding them wasn’t worth it? If you don’t eat for three days, what can you possibly be good at?”
Although Lamar is comfortable with the three new focal points of the organization, he would rather see United Way of Mercer County firming up its traditional role. “I love United Way, and I think that as a convener of communal funds and as a decision-making body it has a role, and it has always had a role,” he says.
Its approach has been for a collective group of charitable, community-minded volunteers to make decisions about where donations should go and what causes it should support; and as new social causes like domestic violence, AIDS, and relief efforts come to fore, United Way brings them into the fold.
Klein, however, thinks Lamar’s vision for United Way is history, not present reality. He says, “Their model, which is that United Way funds agencies and the agencies do the work — that model has not been a United Way model for many years.” He adds that the change of direction he has brought to the local group is in line with the worldwide United Way model.
The model Klein has implemented at United Way of Mercer County focuses on oversight and outcomes, he says, pointing an article in the November 1 Chronicle of Philanthropy that his approach mirrors.
“There is a shift in the philanthropic sector to being able to produce real outcomes and to measure those outcomes,” says Klein. Lamar and his nonprofit colleagues, he says, focus instead on how many units of service were delivered and who got helped.
But Klein probes further, asking, “Was it permanent? Can you measure their progress? They can’t tell you that, and donors want more.” Klein asks whether it makes more sense to evaluate the effectiveness of the United Youth Mentoring Link at Trenton Central High School by noting the number of mentoring visits and students served or by comparing the 90 percent graduation rate of students in the program with the 47 percent rate for the school overall.
In Klein’s view, outcomes must also be tied to an economic effect. For example, he notes, the United Aging and Disability Partnership has been keeping seniors in their homes about 18 months longer, with an annualized economic benefit of close to $16 million to Mercer County.
When Klein introduced this approach of measuring outcomes in a different way, the initial responses of agencies were that they could not afford the tools necessary for such measurement.
Klein is not surprised by the difficulty agencies have in changing how they do evaluation, because it means redefining what success means, and, he adds, agencies need to be trained to do this.
Nonprofits, he says, have been accustomed to measuring themselves via the efficiency rating they list on the 990 forms that federally tax-exempt organizations must file yearly with the IRS, that is, the amount spent on programming divided by the total amount spent, but Klein maintains that this only tells a very small part of the story. “It ignores the most important question — of the money you do spend, what is the return on investment to the community for that money. That has to be dollars.”
Despite the belief he has heard expressed by people in social services that their outcomes cannot be measured because they are talking about people, Klein looks at it differently. “I believe that if it is real, it can be measured.”
Recognizing that making the change to this new paradigm can be difficult, United Way is helping agencies make the transition. Klein, for example, has invested in software, used by 3,000 projects nationwide, as well as a fulltime person whose entire job is to measure outcomes for every project that United Way has funded.
The change of perspective that Klein is bringing forward is not optional, but a requirement for agencies who seek United Way funding. Klein says, “We will not fund any project that does not begin with that end in mind, which is outcomes. That represents a clear strategic direction change for United Way of Mercer County, but we believe it is a strategy change recognized by the industry as a whole.”
One thing that has surprised Klein during his tenure is that some groups actually refused to report to him, and they in fact were cut loose. “If you get funded, you report; there are no two ways about it,” he says. “I found it incredibly disappointing that an agency did not believe that they would have to report to a funder.”
For Lamar, it is not just the substance of recent changes that is a matter of concern, but also the way the new United Way strategy has been implemented. In particular, he is not comfortable with the fact that the specifics of the changes did not grow out of a communal decision-making process.
Community involvement in decision-making has been a hallmark of how United Way functions. In 2006, for example, United Way of Mercer County embarked on a major fact-finding mission that included a community survey to over 300 prominent people in the community — donors, community residents, politicians, both decision-makers and stakeholders — and focus groups to find out what kinds of needs were important to the community members. One of the focus groups, notes Lamar, took place in a Presbyterian church with a large Latino population in Hightstown, a town where United Way has in fact defunded all its services.
Out of that 2006 communal process United Way’s board determined that agencies should be collaborating officially through a formal affiliation that would allow the staffs of individual nonprofits to work together more closely — so that clients wouldn’t fall through the cracks as they moved from one agency to another.
The United Way originally set up 11collaborations that started in January 2007, and Lamar calls the approach “very creative, inventive, and innovative” and says about his own collaboration, which comprises eight agencies, “It was a great idea, and we got very good at it.”
When Klein arrived in 2010only nine collaborations were still functioning; then last year they were cut to six. “It was a case of refining our approach and narrowing our focus,” he says. "The approach before was like spreading peanut butter thin on a piece of bread. As a funder we have to be able to contribute and commit enough money to have an impact.”
For Klein, the development of collaborations was a first step toward the move from an agency focus to a solution focus. At that time the initial set of collaborations were formed, says Klein, “We said, ‘These are the problems we want to solve, and we have all these agencies being funded,’ and they were asked to organize themselves in such a way as to address these problems,” says Klein.
Despite the success of the United Family Strengthening Partnership, Klein maintains that there was little support for the organizations that were part of it and he deduces this from data on donation designations — very little was given to the Family Guidance Center, even though Mark Lamar would come and present regularly during United Way campaigns to employee groups, most recently at Johnson & Johnson, Janssen, United Parcel Service, JC Penney, Keebler, and Rhodia, as well as at Princeton and Rider universities. “Our community votes with dollars,” says Klein. “We look at where people want to give their money, and it tells us where they care about.”
It is this attitude even more than the United Way’s strategic changes and the funding choices those implied that really makes Lamar angry. Klein’s “conclusion is that people are not giving to you because you don’t have outcomes and donors aren’t buying what you are selling,” says Lamar, who sees no evidence that the donation shortfall is because the causes are not attractive to donors.
In fact, the reason people did not designate the Family Guidance Center and the other agencies in the collaboration, says Lamar, is that these agencies specifically discouraged potential donor’s from designating agencies and told them instead, “We hope you will give to the community impact fund, where we will distribute funds based on need in traditional United Way fashion.” Lamar continues: “If we encouraged them to designate, the money could go to TriState, or to Oregon. Our emphasis was to keep money in Mercer County.”
Another serious criticism that Lamar makes of United Way’s new approach is that it is trying to do services itself. “This was never their strong suit; it’s not what they do,” he says. “They raise funds and identify organizations that have competencies to do this work. But to preserve itself in its mission drift, United Way is saying it is going to start doing its own programming.”
“What I don’t like,” he says, “is that they are taking donor funds now and paying for themselves to do services.” For example, rather than paying Family Guidance to do financial counseling, an area in which it is licensed and certified, United Way is doing an 11-week financial counseling program for 25 families in a church. “Not only is it a bad design,” says Lamar, “but it won’t work. United Way shouldn’t be using community donor dollars to do its own programs — it is a conduit.” Instead of investing in community agencies and raising money on their behalf, he adds, “they are pulling money away from them and putting it into United Way.”
Lamar is also uncomfortable with the way the United Way has claimed as a new program an effort that has been done for years by people in the Mercer County community — helping low and moderate-income people complete applications for earned income tax credits, which can entitle a family to a credit of $3,000 to $4,000. According to Klein, this program has helped people complete 1,052 returns, which produced an economic return, using the Internal Revenue Services 4.33 multiplier, of over $6.5 million to the citizens served and the larger community.
“It’s been going on forever,” says Lamar, noting that efforts like these are not really a professional program, but a matter of training volunteers to help people out. “Donor funds don’t help that,” he says. “Volunteers do the work.”
“It has been going on forever and has returned lots of money to the community and to people,” says Lamar. “It is a positive thing, but my concern is that Herb is representing it as something United Way is deeply involved in — like they own it and have created this brand-new thing.”
Lamar adds that at the same time that Klein is playing up this effort as returning significant economic benefit to the community, he is walking away from Family Guidance Center’s consumer credit counseling program — which is licensed and certified and also does debt consolidation, mortgage foreclosure prevention and loan modification, and housing counseling — efforts that similarly have substantial economic outcomes for the community.
Lamar also raises alternative approaches that United Way has not followed. To improve fundraising, for example, he would like to see Klein and his agency promoting the services of existing communal organizations that are already skilled and effective in what they do. “There should be an emphasis on the good things going on,” he says. “We think they are missing opportunities — every organization is managing to raise lots of money for its specific services.”
He also notes that it would have been far more palatable to the human services community than disaffiliating existing organizations. “There was no discussion about an across-the-board cut, which everyone thought would be more equitable,” he says.
Finally, Lamar is very concerned with process, especially during a period of crisis. “When making changes,” he says, “certain attributes are important: transparency — there is none; a certain amount of open thinking — it is a closed group not making good decisions using a calculus of convenience and is not coming up with good programs; honesty — it is not being honest, the EITC is being projected as if it is a great new thing they are doing, but it has gone on forever.”
A glaring example is the way he learned about United Way’s elimination of funding to his agency. His first inkling was when a Trenton Times reporter called him on a Friday before the meeting he had scheduled Monday with Klein and asked, “How do you feel about losing all your collaboration’s funding?”
Lamar grew up in Albany, New York, where his 90-year-old father is a social activist and an ordained Presbyterian minister. His mother, he ways, marched on Washington more than a few times for civil rights. A favorite expression of Lamar’s father, who is a graduate of both Yale University and Yale Divinity School and does not see the spiritual and secular worlds as separate, is “You do religion with a New York Times in one hand and a Bible in the other.” Noting that his was a “great house to be raised in,” he says that his siblings also work in the community — as teachers.
Lamar graduated from Boston University in 1972 with a degree in history. After a couple of years in business managing a steel scaffolding warehouse, painting houses, and driving trucks, he earned a master’s degree in social work at Rutgers University. He started out as a family therapist and case worker at the Community Guidance Center of Mercer County. He became the executive director of his agency in 1986 and has been a part-time lecturer at Rutgers School of Social Work since 1997. He earned an MBA in 1991, after studying part-time while working at the Rutgers School of Management. “I love business,” he says. “Nonprofits are businesses.”
Klein’s father is a retired engineer who used to be head of information systems for the New York State tax and finance department. His mother is a retired registered nurse. He grew up in Latham, which is five miles north of Albany, New York.
Klein majored in economics and minored in computer science at the State University of New York-Albany, class of 1980.
He spent the majority of his career in management consulting for Accensure and Price Waterhouse, working on large systems integration for manufacturing and for computer and shop floor control systems. Then he served as chief executive officer of three startups: an asset management firm, from 1997 to 1998; the second Agilquest, an enterprise software company from 1998 to 2001, and an asset holding company. Looking back, he says, “Most of my career has been in turnaround and fast-growing companies. I took this United Way over because it is a turnaround.”
Before coming to United Way, having sold his interest in the last startup, he heard that the Lewis August Jones Foundation, which had sponsored an international, full-scholarship camp for gifted and talented teenagers, Camp Rising Sun, was looking for a chief executive officer.
He remembers the camp as a transformational experience; he was 13 and at just that point in his life when his life, which had up until then been controlled by his parents, began to open up. “It changed the way I viewed the world, because I was sleeping in tents with boys from all over the world,” he says.
The camp was designed so that each teen would get a chance to run the day, including orchestrating food, jobs, assemblies, and cleaning the bathrooms. Each kid also had a project they would lead to build or create something, learning thereby how to form a team.
Klein worked at the foundation from 2004 to 2009 when his contract expired, and he felt he was leaving the organization in good hands. He heard about the United Way job through networking and decided he would give it a try.
Lamar has been deeply involved with United Way, working closely with four different directors before Klein came on the scene. Not only has he been on the receiving end, as an agency director for 27 years, but he has been a United Way fundraiser, speaking at corporations, running a campaign at his agency, and giving through his own family.
“I think United Way should be deeply in the safety net business and very happy about it and finding new ways to keep the community strong and help those most in need and not think this is a waste of money, throwing money after a chronic problem,” he says. “If people have a need and you have an ability to help them, you help them. That is the beauty of United Way as a broad-based organization.”
Lamar and his colleagues are not happy with the way things are going and expect to continue speaking out about them. “We have always looked at United Way as public good that has helped community, and we feel it has been kidnapped,” he says. “Its scope is narrowing, and it is a place we don’t recognize anymore.”
Klein, on the other hand, notes that a change agent has to have a thick skin, and he characterizes the attitude that is causing people to drag him through the mud because of a financial decision he had to make as a “guard the feed bowl mentality.”
He says that 501c3s are notorious for not working well, duplicating services, and wasting donor money, but then putting forward an efficiency rating of 88 percent. He’s not comfortable with that. His question remains, “What economic value did you deliver to your community and were you efficient in delivering it? Did you work with others or did you just duplicate things in place.”
Family Guidance Center Family and Children’s Services, 1931 Nottingham Way, Hamilton 08619; 609-586-0668; fax, 609-586-4759. Mark Lamar LCSW, MBA, executive director. www.fgccorp.org.
United Way of Greater Mercer County, 3150 Brunswick Pike, Suite 230, Lawrenceville 08648; 609-896-1912; fax, 609-895-1245. Herbert Klein, president/CEO. www.uwgmc.org.