Omidyar and Lewis and Their Approach to Management Advice

July 29, 2011; Source: New York Times | How much sway should management advice imposed by a donor have over the recipient nonprofit?  This is a question still very much in play and one on which we’d like your response.

This article in the New York Times by Stephanie Strom is focused on Peter Lewis, who led the growth of Progressive Insurance, and Pierre Omidyar, founder of eBay, both of whom have recognized that the nonprofits they have funded – sometimes quite handsomely, have from time to time suffered from bad management and that the problems can flow from the top – particularly when a charismatic leader is involved.

The article suggests that many nonprofits do not understand the value of a strong human resources approach. Strom Cites a senior project Director at Compasspoint who said that they found through a recent study that “Only a few said personnel management was “energizing,” while more than half said it was “somewhat depleting” or “depleting.” This should be a big red flag for any nonprofit.

Both Lewis and Omidyar have gained some renown/notoriety over the years for holding grantees’ feet to the fire or for reputedly being overinvolved with grantees but more recently both have begun to support management assistance efforts that apparently try to avoid crises of the magnitude that would create rifts between an organization and a management focused donor.

Some of this just makes good investment sense from the point of view of the donor. Here is one story from the article, pointing out Omidyar’s requirements of one organization:

‘When Linda Rottenberg, a founder of Endeavor Global Inc., a nonprofit that supports budding entrepreneurs in developing countries, began working with the network, her organization needed to lower its reliance on donations and expand a management team to cope with its growth. Additionally, Ms. Rottenberg’s husband, the author Bruce Feiler, had cancer, and they had young twins.

Omidyar put up $10 million to help Endeavor grow, but required the organization to meet stiff matching requirements for about $4 million of the gift.

Perhaps more onerous was the network’s insistence that Ms. Rottenberg undergo executive coaching. “If I hadn’t been going through what I was going through personally at the time, I might have pushed back on that more,” she said. “I did think, ‘Why do they need to put me on the couch?’ ”

She now praises that aspect. Mr. Giambanco gave her practical advice that she said had proven valuable. “We had been a very flat organization, where everyone had access to me, and now there was going to be this cabinet of senior managers to deal with and other changes he helped me figure out how to explain and manage,” she said.’

Dialogues about the usefulness of the advice of major investors in nonprofit programs have been going on for years in the sector with some seeing the aggressiveness of some donors in this regard as unwelcome, high handed and disruptive and others seeing it as part of the transaction and at times very useful.

According to this article Peter Lewis has now established the Management Center which provides seminars, coaching and consultative services to smaller nonprofits where he has leverage due to the relative size of his investments while the Omidyar Network works with more than 40 agencies that need assistance in matching employee skill sets with organizational goals, developing leadership succession plans, designing compensation structures and recruiting senior executives.

We would love your response to this article and would particularly be interested in stories when heavy involvement of a donor in management has worked out particularly well or badly. – Ruth McCambridge