American Red Cross

How Gail McGovern focused on mission and saved the American Red Cross

By Linda Strowbridge

Photography by Rachel Smith

It was an American icon with a mountain of problems.

The American Red Cross was running an operating deficit of more than $200 million a year, burdening the nonprofit with a $612-million debt. Back-office and information-technology functions were duplicative, disjointed and, in some cases, strikingly obsolete. Problems with its blood service had saddled the agency with a longstanding federal court order to improve safety procedures, and millions of dollars in fines as it struggled to comply.

Donations were inconsistent and the American Red Cross brand, which had carried founder Clara Barton and legions of followers through noble work in war zones and disaster areas, was beginning to feel a little time-worn.

Yet as Gail McGovern stepped into the role of president and CEO in 2008, she felt confident that she had all the business savvy and leadership skills needed to repair an icon — and with good reason. Before joining the Red Cross, McGovern had taught at Harvard Business School, managed a $26-billion P&L as executive vice president of AT&T’s consumer markets division, overseen a $500-billion investment portfolio as president of Fidelity Personal Investments, and generally been recognized as one of the top female executives in the country.

“At the risk of sounding a little immodest, I walked in the door thinking, oh I know everything there is to know about leadership,” McGovern says. “But I have learned so much more about leadership being part of a nonprofit than I had expected.”

New lessons in strategic listening, operational rightsizing, social media opportunities and the power of mission transformed both McGovern and the American Red Cross. That powerful combination of Fortune 500 skills, nonprofit lessons and sheer passion eliminated the organization’s operating deficit, modernized and streamlined its back-office operations, changed and improved its disaster-response operations, strengthened both fundraising and blood services, and even turned the venerable institution into one of the cool kids in the social-media and mobile-app world.

Now the American Red Cross is embarking on a plan to apply its newfound strengths to expanding its mission … and saving more lives.

THE LISTENING QUEST

Taking on the job of an agent of change in a 134-year-old institution sounds daunting. Fortunately, Gail McGovern had Clara Barton covering her back. Dashing into her office at American Red Cross headquarters, McGovern points to one of her favorite Clara Barton quotes, displayed on the wall: “I have an almost complete disregard of precedent, and a faith in the possibility of something better. It irritates me to be told how things have always been done. I defy the tyranny of precedent. I go for anything new that might improve the past.”

As she took over as president and CEO, McGovern knew one of the big transformations she would need to make at the American Red Cross was modernizing and rightsizing its back-office operations. But surely that would be the easy transformation.

“I have had thorny IT cutovers before. I have led big, unwieldy organizations. I feel like a strength of mine is to get big, bureaucratic organizations to move in a swift fashion,” McGovern says.

Red Cross back-office operations, however, were distributed among 720 chapters. Each maintained its own finance, payroll and other systems, including its own IT infrastructure.

“Our IT was so old and frail,” says McGovern, who started her career as a computer programmer. “People talk about legacy systems. I think some of our systems were written by Clara Barton herself. Some of the programs residing here were in languages that I wrote in the 70s.”

Just determining how to overhaul the IT systems took two years to plan and nearly five years to complete.

Meanwhile, McGovern needed to find ways to streamline all Red Cross operations to eliminate the operating deficit, while never compromising mission. To accomplish that and identify other priority issues within the organization, McGovern went on a “listening quest.” Touring Red Cross sites, she met with donors, volunteers and chapter executives to hear their concerns and ideas.

“That was humbling,” McGovern says. “I learned that the right answers don’t come from you and your leadership team … It’s really cool to see the wisdom in the crowd.”

Consequently, when McGovern and her team embarked on a dramatic restructuring of the American Red Cross, she invited 30 chapter executives to participate in the first round of consultations.

“We took a nice mix,” she says, of old timers, new timers and a few curmudgeons.

Initially, Red Crossers objected to proposed changes that didn’t obviously advance the organization’s mission.

“I was so surprised because they pushed back with such passion and they were fearless,” McGovern says. “The two big surprises were how brutally frank people were, and I love that now … I was also surprised at how much better their ideas could be because they were in the trenches. Once people understood the whys [behind proposed changes], there was no stopping them. They just kept fine tuning and improving on ideas … And I kept learning more and more because this place is remarkable and everybody cares about the mission.”

The feedback was so valuable that round-two consultations included another 50 chapter executives and round three reached out to “everybody we had an email address for,” McGovern says. “We got thousands of responses” and some profound ideas, including a proposal that enabled the American Red Cross to eliminate an entire layer of management between headquarters and the chapters.

By the end of the consultations, McGovern had a bold plan to transfer back-office operations from the chapters to Red Cross headquarters, shift local disaster-response operations from headquarters to the local chapters, restructure the chapter network and “skinny down” headquarters. But McGovern still had to sell the plan to the Red Cross’s 340,000 volunteers.

She convened a large meeting to roll out the restructuring plan. Stepping up to speak, McGovern found herself facing a lot of individuals with stern faces and folded arms. The mood of the room, however, changed when attendees realized that McGovern’s team had completely overhauled the initial plan to reflect the proposals of local voices.

And that’s when Gail McGovern tapped the most powerful tool for transforming the Red Cross.

“Red Crossers will do anything to forward the mission,” McGovern says. “They will go through hoops for you if you convince them that the reason you are making these changes is to improve mission delivery. The culture is if you say, ‘Student body left,’ they are going to ask you a lot of tough questions, like ‘Why are we going left?’ But when you tee it up that it is for mission, they will make a hard left for you.”

That culture alerted McGovern to a new and powerful side of leadership: “What it taught me about leadership is it is a lot more gratifying and challenging to lead with the power of your ideas as opposed to the power of your office.”

It also paved the way for big changes and improvements at the American Red Cross.

DISASTER SERVICES AND DIGITAL HUGS

Tasked with leading disaster-response operations in their regions, Red Cross chapters proceeded to implement a “neighbor helping neighbor” model that delivered fast and effective aid while also lowering the cost of disaster response.

The model came into its own during the Red Cross response to the tornado in Moore, OK. “Sixty-five percent of the people who responded to that disaster stayed in their homes that night. We didn’t have to fly them in,” McGovern says.

Red Cross headquarters continued to spearhead responses to multi-state disasters, but even the largest efforts coordinate closely with local chapters and maximize volunteer use. After Superstorm Sandy hit the East Coast, for example, 90 percent of the Red Cross’s 17,000 responders were volunteers.

“What I hear from the local chapters is they don’t feel like there is a hierarchy. They don’t describe Washington as the boss,” says David Kenny, CEO of The Weather Channel. Long-time colleagues, Kenny and McGovern have formed a close partnership between The Weather Channel and the American Red Cross. McGovern even sits on The Weather Channel’s board of directors. “The chapters describe Washington as a resource. I think Gail did a terrific job at creating this culture where local chapters feel serviced by national as opposed to controlled by national.”

In addition to empowering chapters, McGovern began fostering partnerships with private companies, non-governmental organizations and government agencies to further the Red Cross mission, Kenny says.

“Also, the technology changes she has done have helped make the Red Cross relevant in the current era as opposed to living on the success of the past,” he says.

In recent years, the Red Cross has launched a string of free mobile apps that provide detailed instructions on how to handle myriad emergencies, from earthquakes and tornadoes to pet first aid. It created a four-person social media team that quickly attracted a Twitter following of more than 2 million.

“They are so good. They are clever, they give digital hugs, they are funny and they are thankful,” McGovern says.

Eager to attract young supporters, the Red Cross created a new realm of 21st-century volunteer opportunities, including digital jobs. In the wake of recent disasters such as Typhoon Haiyan in the Philippines, thousands of volunteers pored over satellite images and Google maps to pinpoint hardest-hit areas and help Red Cross responders and others target their efforts. In disaster after disaster, Red Crossers now comb social media for Tweets or other messages from individuals in danger and relay their information to responders in the region.

At the same time, the Red Cross has expanded its mission, responding to more disasters, aiding more individuals, and broadening its activities to not only provide disaster response but also help communities prepare for or prevent disasters as well as rebuild after disasters.

Last fall, the organization embarked on a major new prevention initiative.

“More people die in home fires every year than in all the national disasters added together,” McGovern says, adding that house fires rank as the second-largest cause of preventable death in America. “It is 2,500 people who die each year; 13,000 are injured. What we found was so much of it was preventable. We respond to one of these every eight minutes. So we put a stake in the ground that we are going to reduce death and injury by home fires.”

Realizing that most fires happen in vulnerable neighborhoods, the Red Cross launched a program to bring volunteers, fire officials, community leaders, corporate supporters and others together to send teams house to house, offering to install free smoke alarms. Already, the program has documented 13 cases where smoke alarms or related training saved occupants from injury or death.

“One of the Boy Scouts installed a smoke [alarm] in the home of a woman who that night left her oven on and her home burned down. But she got out. So that kid has a story to tell his grandchildren,” McGovern says.

But the Red Cross aims to save a lot more than 13 lives.

“We set a very large and ambitious goal over five years to reduce the rate of death and injury from home fires by 25 percent,” says Cliff Holtz, president of humanitarian services for the American Red Cross. “We decided not to worry about [whether] the goal is too big, because as soon as you start to think about limitations, you start underestimating what you are capable of delivering. So we set a big goal. If we miss it and, say, affect survival and injury rate by 20 percent, we will still make a big difference in society.”

THE OBSESSIVE HUNT FOR TALENT

Leaders of the American Red Cross insist the organization’s recent advances were only possible because the organization has attracted extraordinary talent both within its employees and volunteers.

“I am just really blessed. I inherited the most remarkably talented people,” McGovern says. “I walked in here and I could actually have had the lowest IQ in the room. It is just stunning how smart they are. And I love not being the smartest person in the room.”

But McGovern made it her mission to fill the Red Cross with highly talented people.

“The lengths I will go through to get the right person in a job are almost obsessive,” says McGovern, who describes talent as her favorite topic. “I have been giving leadership talks since the 80s. I always say, if you forget everything else, just remember one word: staffing. That is the most important thing you can do as a leader.”

While McGovern will sometimes risk hiring an individual who lacks a particular skill, she insists each new hire must be fundamentally smart and nice. Promising applications for her direct reports are vetted by every member of the team and each member gets a pocket veto on the hire. Furthermore, the person must fit into McGovern’s model for an effective team. Each team, McGovern says, needs diversity of thought and must contain a broad range of personality types, including a strategist, a tactician, an optimist and a contrarian.

“You need to create a group that can solve any business problem collectively,” she says. Ultimately, “if I have even one percent doubt that the person isn’t going to work out, I won’t hire them.”

Bonnie McElveen-Hunter, chairman of the American Red Cross board and founder/CEO of Pace Communications, says McGovern has also served as a talent magnet for the organization.

“Gail is not only exceptional in her own being, she also attracts exceptional people,” McElveen-Hunter says. “She has inspired people to join our team that have had experience in running large, complex organizations, who understand logistics and biomed and all the services we deliver. She has built an exceptional team.”

The board of directors recognized McGovern’s extraordinary talents early in her tenure as CEO, McElveen-Hunter says. Less than two years after approving her appointment, the board voted unanimously to make McGovern the first CEO in the Red Cross’s 134-year history to be invited to join the board.

“The kind of business experience that Gail has is extremely important for not-for-profits,” she says. “She is one of those people who can lead with her head and her heart. She can pore over financial statements, totally understand them and ask all the tough financial questions without hesitation.

But she also has a compassion, a care for the people who need our services … She also just happens to have more energy and focus than any mere mortal.”

“There is a description of Clara Barton that we have posted at the Red Cross,” McElveen-Hunter added. “It says Clara Barton was a leader that had the command of a general, the wisdom of a saint, and the heart of a woman. Honestly, I can think of no better, succinct way to describe Gail McGovern.” CEO

Linda Strowbridge is a freelance writer based in Owings Mills, MD. Contact us at editorial@smartceo.com.

 

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