Mobile Edition
Print
Get the Mag
Weekly Updates[ILLUSTRATION OMITTED]
HEIFER INTERNATIONAL'S revenue declined by about 10 percent in the fiscal year that ended June 30, an unaccustomed performance compounded by a budget that had projected growth of 8 to 9 percent, according to Chief Operating Officer Steve Denne.
Audited figures are expected to be available in October--months earlier than in previous years--but Denne's statement suggests that total revenue for fiscal 2009 was in the neighborhood of $117 million. In its annual report to the Internal Revenue Service, Heifer revealed total revenue in fiscal 2008 of $130.9 million--3.5 percent more than the $126.5 million Arkansas Business reported a year ago using leaked internal documents.
Denne, who will celebrate his first anniversary at Heifer next month, sees a silver lining in the "painful and difficult" cost-cutting that included laying off a fifth of the work force: The management of the Little Rock-based charity has a chance to impose efficiencies and controls that had been neglected during a decade of scrambling to expand its program capacity as quickly as its revenue.
"Everyone from the board on down recognized that the ability to lead and manage had lagged behind the growth," Denne, formerly vice president for strategic fundraising at the American Red Cross in Washington, D.C., said in a recent interview. "There was a pretty thoughtful acknowledgement that it was time to step up the capabilities."
Stepping up capabilities, in this context, meant hiring Denne and the other half of a team known internally as "the two Steves." Steve Stirling arrived simultaneously on Sept. 2, bringing two decades of marketing experience with the likes of Johnson & Johnson and Ameritrade to the new position of executive vice president of external relations.
Last July, in an interview with Arkansas Business, longtime President and CEO Jo Luck said the board of directors wanted her to transfer much of the day-to-day operating responsibility to the new COO, who had not been named at that point. She spoke of a five-year timeline for her retirement, a plan that is still on track, according to Denne, who is regarded internally as the 67-year-old Luck's heir apparent.
[ILLUSTRATION OMITTED]
His response to that characterization: "One job at a time."
Contingency Planning
Denne and Stirling, who was not available for an interview, stepped into an organization with an enviable revenue trajectory and a proven program for relieving hunger and poverty in developing countries around the world.
"I was impressed and pleased by two things," Denne said. "One, I know of no other nonprofit that lives its values as powerfully as Heifer does. And two, our international development program is really impressive, and it really works."
But Denne also found a "conservative" budget for fiscal 2009 that still proved to be far too optimistic and a splintered management structure littered with duplication. He also found the kind of internal turf wars that he says are inherent to nonprofits.
Denne's task from the get-go was to integrate programs that had been allowed to grow independently. "Clearly, we were missing opportunities for synergy and efficiency," he said.
Shortly after the two Steves arrived, it became clear that the fiscal 2009 budget created in the spring of 2008 was not realistic. That it projected revenue growth of at least 8 percent may seem foolhardy in hindsight, but it was the smallest increase in recent memory.
Heifer's revenue had grown by more than 75 percent between fiscal 2004 and fiscal 2008--and by more than 25 percent in 2008 alone. Most of the 2008 growth--$17 million of almost $28 million--was the first installment of a three-year grant from the Bill & Melinda Gates Foundation that can be used only for dairy farming pilot projects in Kenya, Rwanda and Uganda.
Excluding the Gates money, Heifer's revenue increased about 10 percent in fiscal 2008.
Program directors were complaining about the budget even before it took effect in mid-2008, Jo Luck told Arkansas Business last year. Only 34 new positions were approved of some 150 that had been requested.
"When people request what they want and we say here's what we can do--some people see that as cuts. It is not," she said at the time.
Prior to 2008, Denne said, Heifer was perpetually in a position in which "capacity was lagging the revenue, so the focus was always on 'How can we get more staff? How can we keep up?'"
[ILLUSTRATION OMITTED]
By last fall, however, as a recession turned into an economic calamity, real cuts were necessary, Denne said. The management began making contingency plans for a worst-case scenario--revenue of 10 percent less than budgeted.
"We actually cut our expenses by $8 million by January, and that was painful and difficult," he said. Among other things, top executives took a 3 percent pay cut.
But by March, it was clear even that was not nearly enough. A letter was sent to employees on March 23 warning of impending layoffs, which turned out to be the termination in mid-June of 230 employees--about 18 percent of the work force. The job losses include 28 in Little Rock, 33 in 16 other U.S. states and the balance in field positions around the world.
While it may have been easier for a newly arrived COO to evaluate dispassionately which jobs could be eliminated, "it's no way to win a popularity contest," Denne said.
The Educational Mission
With the same kind of unfortunate timing that has snared real estate developments from coast to coast, Heifer opened the $13 million Heifer Village on June 5, just days before the layoffs were imposed. The museum--also known as the Murphy-Keller Education Center, in honor of its major benefactor, the family of Polly Murphy Keller Winter and her late husband, the Rev. Christoph Keller Jr.--had been conceived in the economic sunshine that continued even as construction began in the spring of 2007.
Expectations that a capital campaign would come up with the entire cost of the project by the time it was completed proved too optimistic; according to the leaked documents, only a bit over $1 million was raised by the capital campaign in fiscal 2008 against a budget projection of $5 million. Even as overall giving was increasing, donor interest in building projects waned and internal scrapping over the cost of educational programs intensified.
"In my entire nonprofit career of 27 years now, there's always been fights over funding priorities," Denne said.
In September, the Little Rock Board of Directors agreed to facilitate a bond issue to refinance the $7.5 million mortgage balance on Heifer's headquarters and to bridge a $5.7 million gap in fundraising for Heifer Village.
Heifer's mission statement--"to end hunger and poverty and to care for the Earth"--makes no direct reference to an education mission. But the board of directors, according to Denne, has interpreted the mission statement to include education, both of impoverished families who receive livestock gifts from Heifer and of potential donors.
With the opening of Heifer Village, education of potential donors about the causes of poverty and the problems of poor stewardship of the Earth has been an increasingly visible part of the mission in Arkansas. But it is "clearly a minority proportion in how we spend money and organize our program," Denne said.
And, as part of Denne's overall reorganization plan, the education mission is now being subjected to the kind of "rigor and measures and metrics" that have long been imposed on the work done in foreign fields.
"On the program side, we've been pretty innovative in the field as far as rigor," Denne said. "But that rigor didn't exist on the education side."
As part of the new insistence that educational programs prove their effectiveness in support of Heifer's goal, even the program has a new name: "Global Learning for Action."
For example, the tour through Heifer Village ends with a request that visitors publicly commit to "make a difference." And there is now follow-up to see if visitors to Heifer Village and other educational facilities, including a farm in Perry County and a new educational center opening in California, then take action to further Heifer's mission--even if that action doesn't directly involve Heifer.
"It's been enormously helpful in terms of helping us get clear about the impact we're having so we can delineate low-impact [programs] from high-impact," Denne said.
$64 Million Question
For almost a decade, Jo Luck's vision for the Heifer campus has included a major attraction tentatively called the "Global Village," which detractors derided as a "poverty theme park." The scope and price tag have declined over the years, from $64 million in an early incarnation that included an artificial mountain enclosed in a glass dome to less than $40 million a year ago.
When asked recently about the status of the Global Village project, Denne hesitated before answering: "I think it's fair to say we're taking one step at a time," he said.
The experience of the Murphy-Keller center and the new center in California will help inform future educational projects, he said. "And then we'll see where to put resources and what form it takes."
Then he mentioned a possible use for the land adjacent to the headquarters that is almost as far removed from a glass-enclosed mountain poverty theme park as can be imagined: a community garden demonstration project.
The Main Thing
Heifer's primary program continues to be that envisioned 65 years ago by a Midwestern farmer named Dan West: making "living loans" of breeding livestock to families in developing countries. But even that proven and tested program and the wildly successful fundraising programs that allowed it to thrive are receiving management scrutiny.
FEED