Model business practices from the private sector have helped the American Red Cross weather a difficult economy and enabled the non-profit to focus more keenly on its mission, Red Cross President and CEO Gail McGovern told the Detroit Economic Club today.
“We cut costs the way many businesses did in today’s economy: by making tough choices,” McGovern said. “This is hard in any business, but it is particularly hard in a non-profit when people are there to help others.”
McGovern, a former executive at Fidelity Investments and AT&T, said other nonprofit organizations can learn from the private sector, and, conversely, for-profit businesses can learn from the nonprofit sector.
“I’m now in my third year at the American Red Cross, and I find myself applying strategy and tactics that I learned from my business experience virtually every day,” she said.
Confronted with a $209 million operating deficit in her first year on the job, McGovern said the Red Cross was able to erase its operating deficit by June 2010 by adopting a culture of fiscal responsibility; streamlining and consolidating operations; and finding ways to generate new and recurring revenue streams. At the same time, she said, the Red Cross worked to be on the forefront of innovation and invest in the future.
“As anyone who has been through restructuring knows, steps like these are not just about dealing with a present crisis or challenge – these changes also position us better for the future,” McGovern said. “We’re setting the foundation and taking actions that will help the Red Cross grow and have even more impact in the years ahead.”
For-profit businesses can benefit from applying lessons from the nonprofit world, she said, advising them to focus on the people they serve; be transparent in their dealings; demonstrate that the business has a higher purpose and communicate that to employees; create a sense of teamwork by listening to and engaging employees; focus on partnerships and collaboration.
“More and more, the work of the Red Cross involves coordination and shared responsibilities among nonprofits, governments and businesses,” McGovern said. “In fact, collaboration and partnership are so prevalent in the way the Red Cross works that now it’s unusual for us to do something alone.
“The bottom line is that the challenges that non-profits and businesses face in the 21st century are too complex to solve on our own,” she said. “Successful leaders in this brave new world will find ways to partner and collaborate with others.”
Prior to joining the Red Cross in April 2008, McGovern was a faculty member at the Harvard Business School and served as president of Fidelity Personal Investments, a unit of Fidelity Investments. She was also executive vice president for the Consumer Markets Division at AT&T, responsible for AT&T’s $26 billion residential long-distance service and largest business unit.
About the American Red Cross:
The American Red Cross shelters, feeds and provides emotional support to victims of disasters; supplies nearly half of the nation’s blood; teaches lifesaving skills; provides international humanitarian aid; and supports military members and their families. The Red Cross is a charitable organization — not a government agency — and depends on volunteers and the generosity of the American public to perform its mission. For more information, please visit www.redcross.org or join our blog at http://blog.redcross.org.
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