[Congressional Record Volume 141, Number 162 (Thursday, October 19, 1995)]
[Senate]
[Pages S15335-S15336]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE ART OF MANAGEMENT IN A NONPROFIT WORLD

  Mr. PRESSLER. Mr. President, the global marketplace changes 
constantly as the economy and consumer preferences fluctuate. To be 
competitive, businesses must keep pace with marketplace trends. As a 
result, prestigious business schools across the Nation continuously 
develop and update new curricula in response to our changing world.
  Management practices, in particular, are beginning to depart from 
traditional business school teachings. After years of educating future 
business leaders about the art of managing businesses to maximize 
profits, professional schools are beginning to direct attention toward 
the management of not-for-profit organizations. Nonprofit groups are 
growing rapidly, becoming larger and more influential. Consequently, 
emphasis on the unique skills associated with nonprofit management is 
becoming increasingly important.
  John Whitehead, former U.S. Deputy Secretary of State, renowned 
entrepreneur, philanthropist, and expert in the world of nonprofit 
management, is paving the way for scholars to study the art of managing 
nonprofit organizations. Mr. Whitehead is founder of the John C. 
Whitehead Fund for Not-for-Profit Management at Harvard Business 
School. He is dedicated to teaching students about the important role 
not-for-profit organizations play in a traditionally for-profit 
business world.
  A recent article appeared in the New York Times describing Mr. 
Whitehead's achievements and his devotion to teaching nonprofit 
management. This article details Mr. Whitehead's recent contributions 
to the Harvard Business School and offers a fascinating account of his 
entrepreneurial ventures. I ask unanimous consent that the text of the 
article be printed in the Record at the conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. PRESSLER. Mr. President, John Whitehead is a skilled businessman 
and a generous philanthropist. His contributions to the study of 
nonprofit management will help those currently running nonprofit 
organizations and future managers maximize efficiency and attain group 
goals. Not-for-profit management strategies deserve greater attention 
both in the academic and business world. I applaud Mr. Whitehead for 
his dedication to the mission of nonprofit groups and wish him well as 
he continues to promote better, more-effectively managed nonprofit 
organizations.

                               Exhibit 1

  How to Succeed in Nonprofits by Really Trying--Harvard Is Given $10 
                   Million To Teach Management Skills

                         (By Karen W. Arenson)

       When John Whitehead was co-chairman of Goldman Sachs from 
     1976 to 1984, it was held up as the epitome of the well-
     managed Wall Street firm. It made money and it ran smoothly.
       Now Mr. Whitehead is trying to bring some of those same 
     management skills to the nonprofit world. In what he calls 
     the third stage of his life, after Goldman Sachs and service 
     as Deputy Secretary of State, he has presided as chairman or 
     president over several venerable institutions, from Harvard-
     University's Board of Overseers and the Brookings 
     Institution, to the Trustees Council of the National Gallery 
     of Art and the Greater New York Councils/Boy Scouts of 
     America.
       But he is not content simply to bring his own management 
     counsel to the boardrooms of a Rolodex of nonprofit 
     organizations. He has a broader aim: to improve the whole art 
     of managing nonprofit organizations. To that end, he is 
     giving $10 million to the Harvard Business School to endow 
     the John C. Whitehead Fund for Not-for-Profit Management.
       His goal is to encourage several developments: research in 
     nonprofit management techniques, teaching of these 
     techniques, and more emphasis on training business school 
     students and managers of nonprofit groups.
       ``I became fascinated by nonprofits,'' Mr. Whitehead said. 
     ``Their reach is much bigger than I realized. One out of 
     every 10 workers in the United States works for a nonprofit. 
     And if you add in the volunteer time, it's even greater.''
       ``But I came to realize that while people who run 
     nonprofits are fully committed, they are not very good 
     managers, and nonprofits are not very well run,'' Mr. 
     Whitehead said.
       Sometimes they are not on the up-and-up either, as Mr. 
     Whitehead has learned the hard way. Earlier this year, after 
     he had planned his gift to Harvard, he and other prominent 
     businessmen were embarrassed to learn that they had foolishly 
     lent their names to the New Era for Philanthropy, a charity 
     based near Philadelphia that was essentially a giant Ponzi 
     scheme. New Era for Philanthropy filed for bankruptcy 
     protection in May, and it and its president, John G. Bennett 
     Jr., have been charged with fraud.
       But the more common problem, one he has seen much of since 
     he became involved in the nonprofit world during his years at 
     Goldman Sachs, is a lack of management expertise. That is 
     something he can offer, although he is quick to add: ``Just 
     to show that I don't know everything. I went on the board of 
     a regional theater that went out of business.'' He declines 
     to name the theater.
       He describes himself as a sucker for getting involved in 
     nonprofit groups, and said he has a particular affinity for 
     the ones that need help, ``not just the big prestigious ones, 
     but some of the little, weak ones.'' The list, he says in an 
     embarrassed tone, is too long to enumerate, because someone 
     might think he does not have time for so much.
       But he is disciplined in his approach, spending the first 
     hour of each day in his Park Avenue office working on 
     business for AEA Investors Inc., a private investment company 
     of which he is chairman. The rest of the day, sometimes 
     starting with a 7:30 breakfast meeting and going through a 
     late dinner, is devoted to his menagerie of nonprofit 
     institutions.
       ``He does so many things, but the remarkable thing is that 
     he does it all so effectively,'' said William Boardman Jr., 
     director of university capital giving at Harvard. ``His very 
     special capacity is to focus and not to waste time, and he's 
     very insightful.''
       Mr. Whitehead has given one other $10 million gift, to 
     Haverford College, ``my other first love,'' where he was an 
     undergraduate and other nonprofit groups say he has been 
     generous.
       He described his own philosophy that good citizens need to 
     be generous in both time and money. Having had the ``good 
     fortune to make all this money,'' he said, ``I say somewhat 
     facetiously that by giving it back, it will come out even at 
     the end.''
       When he started discussions with John H. McArthur, dean of 
     the Harvard Business School, a couple of years ago, he 
     discovered that several faculty members there had been 
     talking about doing more on nonprofit management. Mr. 
     Whitehead held out the prospect of a large gift if they could 
     develop a productive plan.
       The group did more than plan. Research has begun to build. 
     Courses have been added (elective courses on Social 
     Entrepreneurship and on Field Studies in Social Enterprise). 
     Case studies are being written. An eight-day advanced 
     management program for executives who run nonproit programs 
     attracted 50 participants last spring (at a subsidized price 
     of $3,000), and another session will be held next year.
       Satisfied that the commitment was there, Mr. Whitehead told 
     the school he was ready 

[[Page S 15336]]
     to make the gift. Even though Mr. McArthur is stepping down today, to 
     be succeeded as dean by Kim Clark, Mr. McArthur has promised 
     the nonprofit initiative would remain a priority, and that he 
     will stay involved with it.
       Despite the new attention, it is unlikely that nonprofit 
     management will ever be a main theme for the school. The 
     M.B.A. class of 1996, for example, has only 40 students out 
     of 807 who came out of government, education or nonprofit 
     jobs. Even though 10 percent of the class of 1995 cited 
     working with a nonprofit group as their career goal after 
     graduation, the school sent only 11 students into those 
     fields. ``The financial pressures are very high,'' Mr. 
     Whitehead said.
       But Mr. Whitehead said he did not worry that nonprofit 
     management would be a stepchild at the business school. He 
     said the new course on social entrepreneurship was over- 
     subscribed last spring, when more than 10 percent of the 
     second year class signed up for it, instead of the 60 that 
     had originally been set as the limit.
       ``Usually elective courses start small and build their 
     reputations,'' Mr. Whitehead said, ``But this was very 
     successful. I was just delighted.''
       He spoke of the growing interest among business students, 
     who know they are likely to serve as directors of nonprofit 
     groups, as he and so many other business executives do now; 
     and the growing recognition that they should know more when 
     they do.
       ``I believe more of this kind of program, and more 
     scholarship, will help,'' he said.
       That is not to say that Mr. Whitehead sees such programs as 
     curing all ills. He does not think that better education 
     would have stopped the scandal involving the Foundation for 
     New Era Philanthropy.
       New Era persuaded sophisticated executives like Mr. 
     Whitehead to funnel money they wanted to contribute to other 
     charities through New Era, saying that it would be matched 
     after six months. The participation of top business leaders 
     like Mr. Whitehead helped attract other donors.
       ``New Era was a real tragedy,'' said Mr. Whitehead, who 
     stands to lose up to $1 million in the bankruptcy. ``I doubt 
     that a program like this would have lessened the problem. If 
     you have a dishonest guy, there is not much you can do. I 
     hope we will all be able to put it behind us.''
       Although the management of nonprofit institutions is a 
     relatively new academic specialty, Harvard is by no means the 
     first university to turn its attention to the subject. There 
     are now more than three dozen centers for the study of 
     nonprofit enterprises at universities around the country, 
     from Yale and Duke to the New School for Social Research and 
     the University of San Francisco, and at least a dozen offer 
     some focus on management.
       In addition, there is already one other school at Harvard, 
     the John F. Kennedy School of Government, that focuses on 
     nonprofit enterprise, and sends about a third of its 
     graduates into jobs in nonprofit institutions. It even offers 
     the only course on nonprofit management at Harvard.
       While the two schools talked about the possibility of a 
     joint program, Mr. Whitehead's money was ultimately directed 
     to the business school.
       ``They both have a role to play,'' he said, ``My interest 
     is in teaching managers business skills. The Kennedy School 
     teaches them about the policy issues. There is a different 
     kind of emphasis, and there is room for both.''
       Those connected with the business school program, the 
     Initiative on Social Enterprise, which was established in 
     1993, concede that there is much to learn before there is a 
     discipline that offers the depth and breadth of business 
     management. They talk of the overlap between the two fields--
     and the differences. And they talk about building new 
     intellectual capital.
       V. Kasturi Rangan, a business school professor who is one 
     of the leaders of the social enterprise initiative, talked 
     about the crossover in his own field of marketing:
       ``Nonprofit management offers its own challenges, but the 
     trick is to bring the core disciplines into these 
     challenges,'' he said. ``We don't have Marketing 1 for 
     toothpaste, and marketing 2 for computers. marketing is 
     marketing.''
       He added, however, that nonprofit groups face a dual 
     customer problem that is unique to them, because they need to 
     concern themselves both with the clients who receive their 
     services, and with the donors who pay for the services with 
     their charitable contributions. The usual marketing 
     discipline, coming out of consumers' choices that weigh 
     benefits against costs, doesn't apply when consumers and 
     payers are separate, he said. So a nonprofit group needs to 
     develop special internal measures to know whether its 
     products are appropriate.
       It is analysis like this that excites Mr. Whitehead and 
     makes him feel that his money will be well spent.
       ``This is fun,'' Mr. Whitehead said. ``This is what keeps 
     me going.''
                                                                    ____



                           JOHN C. WHITEHEAD

       Born April 2, 1922, Evanston, Illinois.
       Education:
       Haverford College, 1943.
       M.B.A. with distinction, Harvard Business School, 1947.
       Professional life:
       Goldman, Sachs & Co., 1947-1984. Securities Industry 
     Association, chairman, 1972-1973. New York Stock Exchange, 
     director, 1982-1984. Deputy Secretary of State, 1985-1989, 
     Harvard University, President of the Board of Overseers, 
     1989-1991.
       Current leadership in these organizations:
       AEA Investors Inc. International Rescue Committee. United 
     Nations Association of the U.S.A. Andrew W. Mellon 
     Foundation. International House, Youth for Understanding, The 
     Brookings Institution, and Asia Society. Greater New York 
     Councils/Boy Scouts of America. J. Paul Getty Trust, 
     Rockefeller University, Lincoln Center Theater, and Outward 
     Bound.

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