Omidyar and Lewis and Their Approach to Management Advice

Print Share on LinkedIn More

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

  • Cindy Worthy

    🙂 I think funders/donors taking a heavy hand in agencies they fund can put them on a slippery slope but hands-off funders are worse! Insisting on financial viability, strong boards and management is their fiduciary responsibility! Use outside agencies to monitor or train. Take a step back so you aren’t intimately involved.

  • David Singh

    I agree that a non-profit should take a more “business like” approach – there are some good lessons to be learned on operations, management and marketing.

    However, one should be careful not to fall in love with the approach. After-all we are in a recession due to many institutions falling in love with their own business practices and ignoring external environmental cues.

    I think there should be a healthy balance of incorporating business accountability and shareholder (or donor) value with the flexibility to allow non-profits to learn and absorb changes in their environment and react when needed.

  • Jerry Hauser

    You’re right to raise the question of how nonprofits can best navigate management advice from donors. It’s a question that we at The Management Center and our founder, Peter Lewis, grappled with from the start. We ended up resolving it this way: First, organizations that Mr. Lewis funds aren’t required to work with us; instead, we’re a resource that he helps make available to them. Second, because our work depends on organizational leaders being candid with us about their challenges, we have a firewall between our services and Mr. Lewis’ grant-making. So we function as an outside agency as far as his grant-making goes — just an agency that he trusts and supports.

    In fact, if we got the sense that an organization was working with us simply out of obligation, because they thought their funding would be tied to the work, we’d be hesitant to take them on as a client. Management coaching is much more effective when the managers being coached are enthusiastic about participating. On anonymous surveys of our clients (which include a significant number of groups that aren’t funded by Mr. Lewis), well over 90% report being “highly satisfied” with us, and part of that is likely because they’re actively committed partners in the work.

    Last, a quick reply to David above: He’s absolutely right that there are some egregiously poorly-run businesses out there! We don’t think of our work as bringing business practices to nonprofits. We think of it as instilling the kinds of practices that characterize high-performing organizations in ANY sector: building a strong team, setting ambitious goals, measuring and managing to progress against those goals, and creating a culture that fosters the relentless pursuit of results and constant improvement. Frankly, there are organizations in every sector that could step up their game in that regard — for-profit, nonprofit, or public!


    Jerry Hauser
    CEO, The Management Center

  • Ruth McCambridge

    Thanks for the thoughtful comments Jerry. I ran a similar effort myself out of the Boston Foundation and this all rings very true.