Pugetopolis is home to the biggest bevy of billionaires the country's seen since the Gilded Age of Rockefeller, Morgan, and Carnegie. Rapacious those gentlemen may


Selling giving

United Way of King County is reinventing itself as a new charity for a new Gilded Age, applying business smarts to philanthropy itself. But the results expose some problems in privatizing society's safety net.

Pugetopolis is home to the biggest bevy of billionaires the country's seen since the Gilded Age of Rockefeller, Morgan, and Carnegie. Rapacious those gentlemen may have been—they didn't call 'em "robber barons" for nothing—but they also gave their loot lavishly to charitable causes. A football stadium, even free computers for kiddies, aren't quite in the same class—especially not when they're going to house a profit-making football team or help you sell educational software. People have rightly wondered: When will Seattle see some of its new-money wealth poured back into the local community to benefit those who need it most?

That question got a solid answer December 20, when Bill and Melinda Gates announced a gift of $30 million to benefit United Way of King County: the biggest single charitable contribution in Northwest history and only the first installment of a benefaction that could total nearly $90 million over the next 10 years.

In one way, United Way was the obvious candidate for the Gateses' first big venture in strictly local unrestricted philanthropy: While Bill Jr. was growing up, both his parents were deeply involved in United Way, serving on its local and national boards, chairing its annual campaigns. In another way, though, the Gateses' massive benefaction signals an enormous change in how United Way does business and its role in the community.

Once limited almost entirely to fundraising for basic health and community service needs, United Way of King County has reconfigured itself as a veritable Wal-Mart among local charities, proclaiming itself a one-stop shop to promote all your philanthropic goals, be they artistic, educational, or service oriented. It has also become the community's self-appointed charitable watchdog, establishing standards of efficiency and effectiveness for any group wanting its support and enforcing its rules with the threat of cutting off funding.

United Way's new aggressiveness has pleased many, and the hard-nosed rhetoric accompanying the change of direction has helped the group gain access to new-economy types versed in the dog-eat-dog vocabulary of the go-go '80s and '90s.

But the same qualities have upset others used to a gentler, more laid-back style of fundraising and frightened by what seems to them United Way's raids on other people's charitable turf. "I grant you that the people who wanted to revive United Way's fortunes had to play rough," one such observer says. "The organization was coming out of a long period of apathy; many of the groups it funded had developed a sense of entitlement and needed to feel more accountable—'outcome based' is, I believe, the jargon. But the implementation of the change has really been unnecessarily ruthless, and the emphasis on growth at all costs has made them slaves of the numbers. When they have to persuade people to let them pass through money to other charities completely outside the health and human service field just to inflate their own figures, you have to admit there's something bogus about it."

Bogus or not, the people responsible for United Way's new approach make no apologies for their business practices. The community-chest fundraising formula invented in Denver, Colorado, back during the first Gilded Age in 1887 worked splendidly for a century, but by the early 1990s the system was breaking down: The number of contributors to the annual fund drives was falling, contributions were stagnant, and the whole organization was beginning to look tired and out of date: "your grandfather's charity," in fact.

Then, in 1992, United Way very nearly suffered a fatal, self-inflicted coup de grace. Its national president, William Aramony, was charged in federal court with spending millions in contributors' money on limos, liquor, and his girlfriends' condos. Many of the groups' 1,400 local chapters pulled out of the organization, but the damage was done.

United Way of King County was one of the first local chapters to declare its independence, so it's fitting that it has been among the first to break away from custom and set a new course. In just five years, United Way of King County has recovered from the dip in revenue after the Aramony scandal broke and climbed to unprecedented heights, its take rising annually to graze gross revenues of $70 million in fiscal 1998-99.

The financial turnaround is all the more impressive in light of the fact that workplace giving via payroll deduction plans, the wellspring of United Way's funding in the past, has continued to erode. As long as most urban Americans were hometown wage-earners, the program stood the charity in good stead. Contributing to United Way was voluntary, or course; but when employees knew the boss was behind the campaign, setting up little contests between departments to see which could come closest to 100 percent participation, the difference between voluntary and compulsory got a little fuzzy.

But by the 1970s, the network of social, political, and church organizations that had ruled small-town America since 1900 was breaking down. Thanks to mergers, multinationalization, and new media, a new "establishment" was coming into being, less rooted in local interests and affairs. In the 1980s came the first wave of new-money high-tech millionaires and entrepreneurs, most of them with no real roots in the communities they found themselves camping in and from backgrounds with no connection to old money.

Employees, too, were a different breed. With the idea of lifetime employment a fond memory, they began dropping out of payroll deduction plans in droves. Many contributors who didn't exit in the wake of the Aramony scandal began objecting to United Way's stodgy notion of what constituted an appropriate charity for funding. What about the environment, they asked? What about gay-lesbian health? Hey, what about Tibet?

Today Steve Davis is CEO of Corbis Corporation, Bill Gates' world-spanning, Factoria-based digital image archive. In 1994, though, he was just such a troublesome employee, a mere intern with the firm of Preston Thorgrimson (now Preston Gates & Ellis). "Before going to law school I'd already done a lot of nonprofit work, mostly refugee and human rights, here and abroad. Plus I was very involved in the area of gay-lesbian rights in the workplace. And United Way was not exactly deeply committed to either of my areas of concern.

"So when Bill Gates Sr. made his annual pitch for the company United Way campaign, I sort of stuck my neck out and asked a lot of pointed questions about the drive's priorities. I didn't get any feedback right then, but about six months later I was called in by a couple of partners, including Mr. Gates, who said, basically, 'You think United Way needs new ideas, we're going to give you a chance to put yourself where your mouth is.' And that's how I found myself part of the team putting together the new strategic plan for United Way."

Davis took up his after-hours job with a critical, even skeptical, attitude. "But I very quickly had my eyes opened. The first thing I discovered looking from the inside was that the people giving their time to United Way were enormously smart, enormously hardworking. And that they were eager to learn and willing to change."

The strategic plan hammered out through hundreds of hours of meetings and retreats addressed every aspect of United Way's approach to fundraising, from the cultivation of volunteers to enhancement of brand image, but the most significant aspect of the plan was its new emphasis on bringing the well-off individual giver into the United Way circle to offset the erosion of the traditional payroll deduction base. This consideration had profound ramifications. By the mid-1990s, there was a lot of new money flowing through Puget Gulch; but to tap it, United Way had to learn to couch its charitable pitch in a whole new vocabulary.

A good example of the kind of person United Way needed to reach with its message was Jeffrey Brotman. No newcomer to the Northwest business scene—his father founded the men's fashion chain Bernie's—or to philanthropy, by the mid-90s Brotman had been elevated to the top echelon of the corporate world as cofounder and chair of Costco. "At that time, the federal government had essentially announced it was getting out of the social and health services business. I'd been talking to our senators and representatives, asking them what are we supposed to do to take up the slack. And nobody seemed to know—except reduce the budget some more," recalls Brotman.

"I'd been watching what was going on with the strategic plan and it seemed like a good time to get involved. Because of the amazing work the United Way board had done in defining community objectives, the organization had the potential to become the single place in King County, the principal place at least, for allocating our scarce dollars: to approach the job of funding charity the way we would in business, evaluating what you can do well and narrow the equation to something you can accomplish. And that means setting goals and objectives, something not that common in the social and health service field."

In addition, Brotman found that United Way's workplace fundraising approach didn't address getting donations from business people of his own generation—the people who actually own or manage today's workplaces. "If you look back to 1996 . . . there was almost no major involvement by the management of all these companies with active United Way workplace campaigns. In other words, the people funding United Way were the members of the community least able to afford it."

The solution, he decided, was for a few wealthy individuals such as himself to contact peers directly to make a case for support. "People who are demographically wealthy had to be confronted . . . for a couple years there Scott Oki [a former Microsoft executive now deeply involved in local benefaction] and I were kind of joined at the hip, going in to see people, telling the story, challenging them to join us. It wasn't easy; for a while I was not a popular guy. But it's just like the way Howard [Schultz] put Starbucks across: If you're confident you have a great product, you just have to put your whole effort into getting people to try it."

The primary thrust of the pitch to both new and old money was: United Way will not only ensure your contribution goes to the agencies you want it to, we'll also ensure not a penny of it's wasted. And after the damage inflicted on all charities by the revelation of William Aramony's peculations, accountability was perhaps the most effective word in United Way's new vocabulary.

Trouble was, most of United Way's traditional beneficiaries were not used to the idea of justifying themselves and balked at the very idea of letting anyone outside their own organizations evaluate their performance. "When we first began to talk to the agencies about change, every single one felt threatened," says Brotman. "Somehow or other they knew this was going to impact them. If our campaign worked the way we hoped it was going to, we were going to have this pot of money and have to decide the best way to spend it.

"And if you look at that task the way a business person does, you see right away that maybe trying to fund 2,500 agencies just in King County doesn't make much sense. There are wonderful people on the boards and staff of every single one, but that doesn't mean it makes economic sense: There are a lot of good businesses in the private sector, but that doesn't mean there isn't ever some consolidation in the interest of efficiency and effectiveness. When it comes right down to it, the agencies are just our delivery mechanism to get money where it's needed. And the better agencies ought to get more money."

There's no arguing with United Way's success in raw dollar terms. After decades of steady growth, King County United Way's take actually fell in the year after the Aramony scandal broke and failed even to keep up with inflation thereafter. That drift stopped abruptly with the campaign of 1996-97, the first conducted under the new "strategic plan": The take since has risen by 7, 14, and 18 percent annually.

But the gross figures conceal a trend that troubles even some of United Way's biggest fans. As long ago as 1990, they began allowing contributors to direct their gift to specific beneficiaries on its list of approved charities. In the 1990 campaign, less than 14 percent of donations were so "designated"; that total nearly doubled in the next five years.

It's hard to object to a program giving individual contributors some control over how their contributions will be spent, but the 1995 strategic plan introduced a new wrinkle which gave "designation" a whole new dimension. Donors were permitted—make that encouraged—to designate the organizations they wanted their gift to go to, whether it appeared on United Way's approved list or not.

And since you were now free to designate at will how your charitable dollars would be spent, said campaigners, why not make United Way the agent for all your giving? No need to write a separate check to Children's Hospital or the Aquarium or even the Denver Art Museum: Let United Way do the doling.

Again, from the giver's standpoint it all sounds perfectly reasonable: merely the charity equivalent of one-stop shopping. But to the proprietors of other nonprofit groups raising funds along Main Street, it smelled like competition, particularly as United Way proposed to deduct a percentage of each such gift to cover its own costs for handling the transaction before the target charity skimmed its own administrative cut. Linda Mathias, a 22-year United Way veteran currently in charge of the organization's public image, acknowledges that some beneficiaries of the new program bristled at United Way taking 12 percent off the top of "pass-through"contributions they could as easily have collected for themselves. To mute the protest, United Way instituted a $375 "cap" on such deductions, so that for gifts above $3,100 the skim no longer increases.

But Mathias is wholly unapologetic about the disputed practice: "For a long time we acted like we were a charity who did good things and so everybody should love us. We have had to learn that we are a business like any other business: Our survival depends on our ability to add value. When the strategic plan was coming together, one of the prime goals was to find anything that struck on what the donor wanted, and offering a one-stop solution to charitable giving was one of those things."

But the pass-through program had a bigger beast in view than the petty sums it brought in or even the convenience of donors: nothing less, in fact, than access to a new source of revenue to replace and supplement the shrinking pot provided by the payroll deduction plan. To implement it, the organization began deploying a new kind of recruiter for a new kind of giver: individuals and families, who in the past may have contributed to health and human service charities on their own or through United Way but whose big benefactions were directed elsewhere.

A shining example of such givers is Patricia Bullitt Collins, one of the heirs to the KING Broadcasting fortune, who has contributed in innumerable ways to the life of the city and region. Her recent experience with a United Way recruiter captures much of the organization's new drive as well as the disquiet it raises in some quarters.

"About three months ago or so I was invited to a fundraising party by a friend," she says, "a very nice man, very generous, and I was about to say yes when I asked who it was for, and he said United Way. Well, but, I said, 'I already gave to United Way this year'— because I'm a member of the Mary Gates Circle that gives $25,000 annually—and he said he knew that, but that this party was to interest people in giving $200,000 a year.

"And then he explained that under this new program, donors could specify any charity they wanted their money to go to, so that you could do all your giving at once, to the Symphony or the Opera or the University or whatever. And I said, 'Why would I want to do that?' And he said, 'It's to make United Way look good.'

"Well, I didn't much like the sound of that. The reason United Way was started was to take care of the needy, not to support the arts or colleges or make itself look good in the community. As far as I'm concerned, becoming a collector of money for all causes can only take the focus off the main focus on hunger and homelessness."

Mrs. Collins contacted United Way's current president-CEO JoAnne R. Harrell to express her concerns and came away unsatisfied. Harrell has been deeply involved in charitable work throughout her business career, and the strategic plan was already in place when she returned to Seattle from a stint as head of the pay-phone division of US West in Nebraska. She acknowledges there is still concern in the community about the plan's implementation, but she prefers to emphasize the positive.

"I approach the world, and United Way should approach the world, as a place of abundance," she says. "This community has so much . . . such incredible philanthropic wealth. A lot of that potential wealth is embodied in new companies, whose founders and members come from a different background than traditional community benefactors. They're not as rooted in corporate and social responsibility. If we're going to make contact with these individuals, we have to acknowledge their values and needs. They are our customers, and what we sell is giving. We have to be what it says we are in our brochure: efficient, effective, accountable. We have to be responsible in managing a wonderful community asset."

But why does that community asset, insisting that its primary mission is to support health and human service delivery organizations, also insist on collecting donations for every other charity under the sun—particularly when the practice manifestly put many people's backs up? Even strategic plan veteran Steve Davis has some concerns about United Way's tactics. "I think we started out right. I'm not so sure it's been implemented right. We were fortunate to start our campaign in a time of tremendous prosperity, and the general growth in campaign revenues has been very satisfying.

"But I'm a little worried about the emphasis on 'designated giving.' It sounds fine in theory, but the fact is that a tremendous amount of the need in this area is nonsexy, nontrendy, and not where most of us can see it; it's out in the east county and south county in areas our current prosperity just hasn't reached."

United Way spokespersons aren't eager to respond to the issue Davis raises, emphasizing instead the growing funds available for basic social and health services in each of the last three years' campaigns. But under persistent questioning, an answer emerges, a perfectly straightforward one, but it's apparent why it doesn't feature prominently in the publicity materials of a group as marketing-oriented as United Way. Designation, it turns out, is a kind of bait: Offering to handle wealthy givers' donations to arts, education, and scientific research is a way to get United Way's fundraisers through the door.

Once there, and in rapport with their prey, they take advantage of the opportunity by raising the possibility of additional giving—for the less glamorous community health and human services needs that have grown exponentially as government at all levels has retreated from the field.

"The Great Society is going away," says Mathias flatly. "In the past, not just the Kennedy and Johnson eras but all the way back to Social Security, the tradition was that government took care of basic needs—food/shelter/clothing. That's over. Now the greatest proportion of what we fund in United Way is basic needs: just keeping people alive for another day."

Behind the clouds of motivational, marketing, and business school jargon they emit, United Way personnel like Mathias seem to share a pessimistic view of the chances that government's retreat from the needs of the poor will be reversed in the foreseeable future and a conviction that the only way to bridge the need gap today is to persuade the smaller, ever-wealthier top tier of society to share its fortunes with those less fortunate. In a way, it's as if the 20th century never happened; we're back to the time of the robber barons, an era of incredible riches, stupefying consumptive display, and massive charity to salve the raw wounds the process produces.

But as United Way's dependence on massive benefactions from the wealthiest of the wealthy continues to grow, as instanced by the Gateses' huge gift last month, one can't help wondering, too, if United Way's "realism" in going where the money is to finance its mission isn't a disturbing sign that our society has accepted the distortions of the "New Economy" a little too quickly—taking the growing gulf between superrich and endemically poor as an unfortunate but inevitable by-product of economic life. The campaigners who inveighed against the robber barons a century ago didn't give up so easily. The "social safety net" we enjoy today, albeit a shredded one, is the legacy of their efforts. In that light, the renaissance of the United Way is as much an index of despair as a cause for celebration.

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