They Didn't Even Give At The Office

United Way once loomed as the blue chip of charities: enormous, omnipresent, and with its income increasing steadily. But this year, for the first time since 1946, contributions are down. United Way chapters are cutting budgets, extending campaigns, or resigning themselves to falling short of goals--by millions. Some locals have declined as much as 15%.

The United Way network overall, according to preliminary estimates, raised $66 million less in pledges in 1992--a 2.5% drop from its 1991 campaign. But that estimate is based just on the 293 locals (out of 2,100) that have officially reported so far. Even if that relatively modest decline doesn't deepen, it means a cut in donations to the agencies United Way supports--of up to 30% in such hard-hit spots as San Diego and Denver. And some believe the final tally could be much worse. "If they're reporting they're down, they must really be down," says Martin Grenzebach, a director of the American Association of Fund-Raising Counsel, a philanthropic research group.

Several factors made 1992 a year to forget for United Way. First came the scandal surrounding United Way of America President William Aramony, who resigned in February amid charges of nepotism in appointments and misuse of agency funds for lavish living. Continuing recession and a wave of corporate layoffs added to the gloom, and they hit at the cornerstone of United Way donors--the white-collar worker. In addition, there was ever-increasing competition from rival nonprofit agencies and charitable drives--often in the workplace itself.

Publicly, many United Way officials' attitude is: "It was just a bad year." But according to Dwight Burlingame, a director at the Indiana University Center on Philanthropy in Indianapolis, "it's important for them to think of this as a watershed." Indeed, United Way's efforts to change belie its bravado. Last November, a new president, former Peace Corps Director Elaine L. Chao, took over the United Way of America, which is undertaking internal reforms (table). As for local chapters, many have tried to distance themselves from national headquarters, withholding their annual dues when the scandal broke and emphasizing their hometown importance to their communities when the fall campaigns began.

But it was to limited avail. There were a few success stories among the chapters--mainly those who had special homegrown help. United Way of King County, Wash., raised 2.2% more than in 1991, thanks largely to a $1 million challenge grant from Microsoft Corp. Chairman William H. Gates III (who sits on the national organization's board). And United Way of Dade County, Fla., had a 7% increase due to the "awareness and compassion" roused by Hurricane Andrew, says Campaign Chairman Anthony M. Burns, CEO of Ryder System Inc. But these seem to be isolated bright spots.

WALLETS SHUT. United Way officials unanimously blame the recession for the decline. Presidents at every suffering chapter--from Rochester, N.Y., to San Diego--link the fall in employee pledges to staff reductions at local corporations. In Cleveland, "$4.7 million was lost just from downsizing of our major companies," says President Jack C. Costello, ticking many of them off: Ameritrust ($1.5 million less), General Electric ($200,000 less), and BP America and Ohio Bell (down $500,000 apiece).

But many of those in the field--corporate campaign managers or heads of nonprofit agencies--assign a bigger role to the Aramony scandal. At Xerox Corp., workers reacted strongly to the revelations by closing their wallets, so the campaign raised 13% less this year, says Xerox Program Manager Lolita Penn. "In 1991, when we were really in a recession, I got apologies written on pledge cards from people who said they wanted to give but couldn't," she notes. "I didn't get any apologies this year."

Behind that disillusionment lie changing attitudes toward giving, especially in the corporate sector. Take Stanley Aviation Corp., a small aerospace-parts manufacturer outside Denver, which pulled out of United Way last year. The scandal was just the final straw: Employees had been unhappy with United Way's high-pressure techniques, and they liked the idea of "having a direct say in where their contributions went," says James A. Raabe, vice-president for finance. Now, Stanley conducts a workplace campaign on behalf of three local charities, which will change each year.

NO BANQUET. United Way faces more and more competition from other charities, which in the past decade have gained a 10% share of workplace drives. Campaigning in offices with United Way, many of these "alternative funds" had a very good year in 1992. While United Ways in Los Angeles, San Diego, and San Francisco were struggling, Earth Share of California, an environmental campaign, saw a 42% increase in gifts, raising $2 million overall. Greater Cleveland Community Shares raised 19% more, vs. the United Way of Greater Cleveland's 9% decrease.

United Way is working to contain the damage. "We are going to have a new reverence for donors' dollars," vows President Chao, who is implementing (and publicizing) a variety of unprecedented cost controls and accountability procedures. Local chapters are following the national example, trimming their staffs and free-spending ways. To kick off the fall campaign, for example, the Seattle United Way replaced its traditional lavish banquet with a Day of Caring, when volunteers set to work at local agencies.

But such soul-searching isn't enough, says Craig Smith, editor of Corporate Philanthropy Report. He says: "United Way has to do a better job of addressing its clients"--the donors. United Way of New York City, for example, is now approaching companies with an offer to custom-design programs for them that address specific concerns--truancy or drugs--and that can show measurable results.

Such long-term reforms are crucial. "We'll see 1992 as a real turning point, a signal that United Way should do business differently," says United Way of New York City President Ralph Dickerson Jr. "If we don't, we can't survive."

      Financial controls For the first time, managers will be held accountable for 
      their budgets, to be monitored monthly by senior vice-presidents. Senior 
      executives' expenses will be reviewed by volunteer outside auditors
      Governance Officials from local United Way chapters will have a say in the 
      national organization. They will occupy 15 new seats on the board and hold half 
      the positions on six new steering committees, including budget, ethics, and 
      Travel expenses Instituted daily meal allowances and mandated coach travel for 
      all business trips, including the president's
      Overhead Administrative staff slashed from 275 to 186
      Donor's choice Local chapters have expanded programs so that individuals can 
      direct pledges--often with a company matching gift--to the charity of their 
      choice, whether or not it's an official United Way agency