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Recently, UPMC announced plans to close its Braddock Hospital. The hospital staff and the community oppose the idea, and are fighting to keep the hospital open. UPMC is just one glaring example of the many nonprofits that are losing their focus and are hurting our communities. It's fashionable for nonprofits to think that they should operate like businesses. That's fine, to an extent, but it often goes too far.
A nonprofit is a corporation, just like General Motors, or Sears, or McDonald's. The incorporation documents are filed with the home state. There is an official address, by laws, a board of directors, board meetings, and minutes of those meetings. They are required to file formal reports on their financial activities with the state and federal governments. Certain records are open to public inspection.
The difference is that a nonprofit has no owner and no stock. When the nonprofit corporation brings in more money than it spends, the excess is called a "fund balance", instead of a "profit". The board decides whether to spend the fund balance on current activities or to save it for future projects or for lean times.
Nonprofits face thousands of state and federal regulations on their operations. There are rules about incorporation, tax exemption, soliciting funds from the public, financial management, lobbying, and record-keeping. The government can fine or shut down any agency that violates those rules.
Nonprofit agencies apply to foundations for funding. The foundations attach hoops and strings and swamps to that money. The management evaluation is one of their favorite hoops. The management consultants recommend that the agency be more business-like. They just love to tell little community groups that they have to behave like Wal-Mart. The foundation turns that hoop into a string. If the agency’s business management doesn’t please the foundation, it won’t get the money. And then it won’t be able to serve the public.
Sometimes, two or more foundations impose contradictory requirements, and the agency has to choose which hoops to jump through. Sometimes, the foundations obstruct the agency’s work to the point where the hoops and strings turn into a swamp. They really need to relax. Just because you can attach hoops and strings to your money doesn’t mean that it’s a good idea. Swamps don’t generate progress.
I’ve worked as volunteer, staff, manager, board member, board president, and consultant for nonprofits for nearly 30 years and I can tell you. It’s a delicate balance. Nonprofits that neglect their business are inefficient and hurt their own credibility and services. But nonprofits are not supposed to be just like Wal-Mart. They’re supposed to be better.
Some nonprofit managers are idealistic and naive and should function in a more business-like, professional manner. Regrettably, too many agencies take that too far. The purpose of a business is to make a profit. The purpose of a nonprofit is to provide a public service. The two are not mutually exclusive, but they aren’t necessarily linked either. When a nonprofit focuses too much on business, it loses sight of its mission and the quality of its service suffers. And then the public suffers.
UPMC is great at the business part. Their service needs work. A major organization like an international medical system should have a large fund balance. Six hundred million dollars a year is just greedy. UPMC is a major employer in southwestern Pennsylvania. They’ve pledged $100 million to Pittsburgh Promise and donated $23 millionto the city through the Pittsburgh Public Service Fund. But they’re about to close Braddock Hospital, leaving all of the employees and the entire Mon Valley in the lurch. They’ve obviously lost their focus. Hey, Jeffrey Romoff. It’s time to tell the business consultants to take a hike. Look at that “Mission, Vision, and Values” statement again. If you can’t live up to it, then go and apply for a job at Wal-Mart.
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Comments
I am glad to see someone says something about this. Noone will do anything about it, UPMC has too many politicians in the bag. They can do anything they want without repercussion.
Best option - move away before the disaster that will soon befall them and Pittsburgh happens.
The way UPMC conducts itself reminds me of the way enterprising corporations survived anti-trust legislation: instead of trying to dominate an entire industry, they got into a little bit of everything, giving rise to the "general service corporation" ala Halliburton and Bechtel.
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