The Accidental CIO

By Rob Garretson  |  Posted 12-06-2006

The Accidental CIO

Technology was supposed to be one of the saviors of the Dance Theatre of Harlem. Two years ago, the world-renowned ballet company was in disarray. When it should have been celebrating its 35th anniversary, it was laying off dancers. A financial crisis had the nonprofit institution $2.5 million in debt, forcing a six-week shutdown of its dance school and the hiatus of its celebrated ballet troupe—a hiatus that continues to this day.

Following the shutdown, an emergency infusion of funds from New York City and private donors helped DTH reopen its school and reconstitute its board of directors. At the same time, DTH hired an executive director to provide much-needed management discipline, and it looked as if the dance company would turn the corner. Part of the turnaround strategy included plans to shore up the theater's technology infrastructure.

In the fall of 2004, the company did manage to upgrade some basic IT necessities, but more work was desperately needed. So in the spring of this year, fund-raising officer Rodney Trapp led an interdepartmental task force to create a strategic IT investment plan for DTH. Yet, sadly, after painstakingly crafting a modest list of four key technology priorities, the entire plan was summarily dismissed by the company's finance director. He thought the entire effort was a waste of time and human resources. Most of the DTH tech plan would never see the light of day.

Such is often the fate of technology initiatives in the parallel universe that is the not-for-profit sector. While there are numerous examples of nonprofits that have invested aggressively in information technology to help deliver on their social or charitable mission—the American Red Cross and the Bill and Melinda Gates Foundation are among the notables—the experience at DTH is much more typical. Fact is, most IT managers at nonprofits must work on shoestring budgets, using outmoded technology, in an environment where their contributions aren't given high priority.

Technology advocates at nonprofit organizations—most even smaller than DTH, with its staff of about 23—typically have that role "thrust upon them, without the authority to go with it," says Jeffrey Forster, technology services director for the Bayer Center for Nonprofit Management at Robert Morris University, in Pittsburgh. Adds Forster: "The nonprofit techie is just a really lonely job."

ZIFFPAGE TITLEObstacle Course

Obstacle Course

Though the U.S. nonprofit sector is enormous—with an asset base of nearly $1.8 trillion in 2003—the vast majority of the 1.4 million nonprofits registered with the IRS are relatively tiny. Of those 501(c) tax-exempt organizations, 94 percent take in less than $1 million annually, and 81 percent don't even crack six figures. DTH, with fiscal 2005 revenues of $4.8 million, is in the top 5 percent, though it's dwarfed by behemoths like the American Red Cross at nearly $4 billion.

"Size does matter," acknowledges Red Cross CIO Steven Cooper, noting that the global relief agency has an internal IT staff of about 600, plus another 250 or so contractors that it uses to augment staff or provide specialized skills. The annual operating budget of the IT organization is about $200 million, or about 5 percent of the relief agency's total expenses, a slice of the pie more akin to a Fortune 500 corporation than a humble nonprofit.

Yet regardless of size, nearly all charitable organizations are hindered by some major obstacles to technology investment. The most obvious is the pressure, both internal and external, to keep administrative and overhead expenses low, relative to what's spent on the charitable programs themselves. "There is a desire to put all the resources into the mission, and minimize the resources that are in administration and overhead," says Forster. "So nonprofits have both the authentic desire to do that and the absolute desire to say they are doing that."

That's the reality at the Christian Children's Fund, where more than 81 percent of its $191 million in fiscal 2005 revenues went toward program expenses, according to Charity Navigator, which is itself a nonprofit that compiles data and ratings on charities to help inform contributors. "Our goal is to have most of the dollars go to the projects," echoes Bill Cavender, interactive communications manager at CCF, who is responsible for the organization's revamped Web site and a new intranet application being rolled out to its 33 overseas offices around the world.

"Nonprofit organizations get dinged for administrative costs," Forster notes. "Even reasonable administrative costs can turn off a donor." With general overhead guidelines suggesting that no more than 25 percent of budgets be spent on combined administrative and fund-raising costs, most nonprofits are hard-pressed to consider major capital investments such as IT systems.

Another common barrier to technology innovation at nonprofits is their salary structure, which is often significantly below market, making it harder to attract and keep technical talent.

Even so, nonprofits aren't as technically impaired as they were a few years ago. "The digital divide in terms of the hardware, the networking, the Internet connectivity is actually going away in the nonprofit sector," insists Forster. "But what that leaves is an aspiration gap." In other words, now that at least some nonprofits have a basic technology infrastructure in place, they no longer aspire to move up to the next level and acquire the latest IT tools and solutions that for-profit businesses take for granted.

Many nonprofits are led by executives who have not worked in corporate environments where they've had experience with applications that revolutionize business processes, Forster adds. "They can't envision what it would mean to have a network that was up most of the time, and to share constituent information throughout the organization in an efficient way," he says.

ZIFFPAGE TITLEFund Finding

Fund Finding

One executive who did aspire to better his organization's IT capabilities is Rodney Trapp, Dance Theatre of Harlem's development manager. "I am a fund-raising officer at DTH. My role has nothing to do with technology," he says. Yet Trapp led his company's technology task force for four grueling months in the spring and summer of 2006, only to have the effort largely quashed by budget realities. It was precisely Trapp's vision of how information technology could transform the still-struggling nonprofit that made him an accidental CIO.

"I challenged everyone to think beyond our current situation and to imagine DTH operating at full capacity," says Trapp, in chronicling the task force's work on a technology investment strategy. But his comfort around computers, and a short stint at AT&T Solutions in its Global Client Support Center—where he earned a promotion to Level 1 technician and learned "to troubleshoot a variety of problems on Cisco and Bay [Nortel] routers and switches"—made him among the most tech savvy of the DTH staff. So it was Trapp who, last spring, submitted DTH's application for a "small business makeover" project sponsored by Allbusiness.com, which helps small organizations deal with real-world business issues. The prize was free technology consulting from a leading small-business expert. So Trapp assumed responsibility for the effort when the dance company was selected. "Because I applied for the consulting opportunity, I took the initiative to see the project to completion," Trapp says. "If we had technology people on staff, I certainly would have handed this project over to them."

Trapp and his task force identified 35 wish-list items. They then narrowed them down to the top four critical projects, with a combined cost of only about $60,000. The fairly modest technology road map consisted of a query-rich database for school administration; computer and network interface upgrades to unify various department databases; video and electronic surveillance systems for building and parking-lot security; and digital recording equipment to create an online digital library of DTH historical archives, including video recordings, for marketing as well as public access.

The task force included key staff from human resources, the school administration and DTH's outside IT support contractor, plus Trapp and the company's resident choreographer (who also doubles as Web site manager). But it didn't include Director of Finance Bertis Bangaree, who'd opposed the effort from the outset on the grounds that DTH still couldn't afford IT investments, no matter how modest.

In July, Bangaree nixed everything except the top-priority database, as long as it could be developed for $1,000. "While I was very excited that there was the initiative, when the hard decisions had to be made about how much of that we could actually implement, good portions of it got shut down in the near term," laments Executive Director Laveen Naidu. "And those decisions were largely because of capacity and resources. I think the challenge that nonprofits face, and certainly we do, is balancing technology need—what you're told you need—with what you'd like to have."

ZIFFPAGE TITLEAccounting for Accountability

Accounting for Accountability

Nonprofit doesn't mean noncompetitive. In fact, some sectors of the nonprofit world are as competitive as any profit-driven business. As an example: international children's relief agencies. Search the Charity Navigator database of 5,000 public charities and no fewer than 87 international children's charities appear. Most are dwarfed by the Richmond, Va.-based Christian Children's Fund, with 2005 revenues of $191 million. And yet CCF's largest competitor, World Vision, based in Federal Way, Wash., is more than four times its size.

Such fierce competition in the nonprofit world seldom means deploying cutting-edge technology to gain advantage, however. The corollary is generally true: Keep administrative and overhead expenses low to demonstrate good stewardship and "accountability" in competing for donor dollars. There has always been pressure at nonprofits to keep overhead low, but recent corporate scandals have heightened the scrutiny on expenses, notes CCF's interactive communications manager, Bill Cavender.

"The current culture of accountability has really helped generate an assessment of how everybody does business," Cavender says. "Certainly when it comes to spending money that we're getting through the generosity of others, accountability has always been very important."

That's why CCF is only now getting around to developing a new intranet application to improve document sharing and collaboration among its 800 employees throughout its headquarters and international offices in 33 countries. The organization looked longingly at the Microsoft Sharepoint software three years ago, when it built its first generation intranet, but couldn't swallow the cost of the license.

Like many technology vendors, however (including Hewlett-Packard Co. and Cisco Systems Inc.), Microsoft Corp. does offer grants to nonprofits that include cash, technical support and software. Only after qualifying for a Microsoft grant that provided the software for free did CCF decide it could afford an upgrade. "We were looking to improve our existing intranet system, and having a six-figure piece of software given to us made it pretty appealing," Cavender says.

ZIFFPAGE TITLEWell Endowed

Well Endowed

Private foundations are one nonprofit group that aren't whipsawed by volatile revenue streams, or hamstrung by strict accountability guidelines. Unlike public charities, or community foundations that live off contributions from a broad base of donors, private foundations are typically endowed by a single individual, family or corporation—such as the Rockefeller Foundation, the Bill and Melinda Gates Foundation, or the Avon Foundation—and distribute grants supporting various social or charitable causes using the income generated by those endowments.

The Heinz Endowments in Pittsburgh, established by the Henry J. Heinz family (yes, the ketchup fortune), has net assets of $1.4 billion and distributes about $55 million annually throughout southwestern Pennsylvania. Its five programs—arts and culture; children, youth and families; economic opportunity; education; and the environment—attempt to use the region as a laboratory to find "community-managed solutions" to problems that are national in scope.

With a staff of only 32, the Heinz Endowments shares with its smaller nonprofit siblings the lack of dedicated IT resources. Cheryl Dabat, operations manager, is responsible for the computer systems and network, along with other facilities and operational functions. On average she spends roughly 40 percent of her time managing IT, including the contract techie who is onsite two days a week.

But unlike Dance Theatre of Harlem and other small nonprofits, the organization has state-of the-art hardware and the latest version of most of its software, largely Microsoft Office, Exchange and SQL Server. Heinz Endowments uses Gifts for Windows from New York City-based MicroEdge Inc., the most popular commercial application for grant management, and is eagerly awaiting the new version of its online grant application module. "We're looking at products to help us work better with technology and use it to its fullest," Dabat says, citing non-tech-savvy users as more of an obstacle to IT deployment than top management buy-in. "Probably the biggest challenge in the organization is that we have different levels of users. Some are very computer literate, very computer knowledgeable. Others prefer the status quo and don't like change," she says.

"There is a core group here that thrives on technology and is interested in what might come along to help them do their jobs better," agrees Heinz Endowments Communications Director Douglas Root. "There's probably a slightly larger group that is very comfortable with what they have. They make do, and they're not as proactive."

ZIFFPAGE TITLEApologies of Scale

Apologies of Scale

Though the American Red Cross probably has more in common with a $4 billion public company than it does with its 1.4 million fellow nonprofits, it shares their struggle between investing in technology infrastructure and spending donors' money on the mission.

"We do have very a similar challenge," insists CIO Steven Cooper. "In fact, this is true of every place I've been, in the corporate sector, in the government and in a not-for-profit. Everybody is resource constrained. It's just a question of how much, before you have to draw a line and say, 'I'm out of resources.'"

This may sound odd coming from an organization that spends about $200 million on central IT, Cooper says, plus an estimated $50 million more that's spent across the organization's local chapter network. But as is now clear with hindsight, those resources weren't enough when Hurricane Katrina hit the Gulf Coast last year.

"We set up an emergency financial assistance call center for the first time in our history, and we apologize," Cooper says. The call center was "virtualized," in that calls coming into the 800-number were distributed to volunteers throughout the U.S., many working out of their homes. A database was also set up to track the calls and payments issued. "We now know it could not scale to handle 1.4 million families. It was brand new. We created it in 10 days. We're not going to do that again."

The scale of the Gulf Coast catastrophe was beyond anything the Red Cross had ever encountered, Cooper notes. The organization is now moving rapidly to multitier architectures and Web-enabling as much infrastructure as possible, he says, to make it scalable in real time. "When we run out of capacity, we've engineered our IT so we can bring additional Web, application and database servers online, both to expand capacity and performance," he says. But as a nonprofit, the American Red Cross can't afford to have reserve capacity sitting unused, so it is working with vendor donors to help give the relief agency "surge capacity," he adds.

The organization now has a peak capacity to process 100,000 cases—families in need of disaster assistance—per day, with a goal or reaching 1 million cases per day, Cooper adds. "We're going to do it in an economically viable way. And we absolutely are hoping that we never have to demonstrate that capability. But we need to be prepared, just in case."