Thursday, December 1, 2011

The Red Cross is in Dire Need of Financial First Aid

By any measure, 2011 was a very big year for natural disasters in the United States. Tornadoes, blizzards, floods, wildfires and droughts were among the weather releated clamities the country suffered this year. With extreme weather events become more common due to climate change, there has never been a greater need for disaster assistance. Which is what makes this report about budget cuts and job layoffs at the American Red Cross all the more distressing:
For the American Red Cross, it has been a doubly challenging year.

While coping with a relentless series of natural disasters, the organization has carried out a nationwide overhaul that slashed more than 1,500 jobs, pared down many local offices, and left some former loyalists with badly bruised feelings.

President Gail McGovern says the 130-year-old Red Cross had little choice but to restructure in order to ward off a projected deficit. It has merged and consolidated many chapters to reduce duplication, and given the national office control over local fundraising so all funds can be spent as strategically as possible.

"We have remarkably loyal donors, and they're also demanding," McGovern said in an interview. "They want to be sure their hard-earned dollars are being used to optimize the mission and are going to help the people we serve."

During the year, McGovern said, the Red Cross has eliminated roughly 1,000 positions at its local and regional chapters and about 170 positions at its Washington headquarters — in each case about 10 percent of the work force. In addition, about 400 posts out of roughly 20,000 were eliminated in the biomedical and blood services division.
It was also distressing to see that the Red Cross president is not above engaging in a little corporate FlackSpeak:
McGovern insists that the core missions — notably disaster relief, blood banks and assistance to military families — will not be impaired. She said the Red Cross responded vigorously to this year's nationwide onslaught of tornadoes, floods, hurricanes and wildfires.

"If there was any doubt in anyone's mind that we would be able to fulfill the mission, that doubt was removed," she said. "If anything, we're doing it better."
I'll take that bet, Ms. McGovern. Because that is the kind of statement you can make that cannot easily be verified or refuted. In fact, the article then goes on to list a number of instances where the Red Cross is not actually doing it better. For example:
In Western Massachusetts, the overhaul was complicated by a decision to cut several programs deemed to be outside the core Red Cross mission. An HIV/AIDS support program was shifted to a regional hospital, but there were hitches finding new agencies to provide non-emergency medical transport.
Digging a little deeper into the article, it becomes apparent that the agency's financial troubles really began at the time of the market crash:
It's the second major Red Cross overhaul in recent years. In 2008, faced with a deficit of about $210 million, it laid off one-third of the 3,000 employees at its Washington headquarters.

Under the leadership of McGovern, who became president in 2008, the deficit was eliminated, but she says the new cutbacks were needed to prevent fiscal problems from resurfacing. The Red Cross estimates that this year's restructuring will save $80 million, including salaries and centralizing administrative operations.

"We did not lightly go ahead and make these decisions," McGovern said. "Layoffs are very difficult in the nonprofit area, because they're not here for the money, they're here because of their hearts."
Which is exactly why you shouldn't be absurdly claiming that you are "doing it better" despite the layoffs, because that is obviously an insult to those who are losing their jobs. Just be honest, Ms. McGovern. The Red Cross is shrinking because the money to fund it is drying up. Fewer people with good jobs means fewer donors to give to charitable organizations like the Red Cross. It's an important truth that people need to hear so that they can prepare themselves for the eventual day when the Red Cross will no longer be there for them when disaster strikes.


  1. Not one mention in the article about how the increased price of gasoline and diesel affects them. I guess all the EMS equipment must run on bio something or other.

  2. Ben Bernanke could fund the whole organization with 0.0001% of what was given to the big banks.

  3. I never liked the Red Cross. Back when the Northridge earthquake hit Southern California I worked for a motor-home rental outfit that donated the use of about 20 of the older vehicles for use as temporary housing. A few days later the owner told me that the red cross was renting these motor homes out for nearly as much as our company was. He was pissed, so he made arrangements to retrieve the remaining motor homes and void the rental contracts the Red Cross made them sign. The fire department then handled the rest. I'll bet money that the board of director are gonna be fine.

  4. @Anon - as a mega charity with a CEO who talks the corporate FlackSpeak, you have to figure that things like that happen frequently with the Red Cross.

  5. My family members and I have worked for the red cross for years. They are losing money every year because of wasteful, bad decisions that are regularly being made by people in charge. Then in order to make up for their mistakes, they cut our benefits, take away our raises, and lay off dozens more of us every year.
    To give an example: blood collection services started using a new kind of scale last year to hang the bags on, supposedly to save money, because these scales were cheaper than the brand we used before. The special batteries used for these new scales are only designed to last 12 months, so every 12 months, we have to order 360 replacements from the company, one for each scale in New England. Each replacement battery costs $96. So, every year, Red Cross New England Region spends over $34,000 on scale batteries. Which is more than most collection, laboratory, donor services, or equipment maintenance employees are being paid in a year. You know, the people who are being laid off.