978-1259278211 Case 18 Solution Manual

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Teaching Note: Case 18 – United Way Worldwide

Case Objectives

1. To apply the concepts of strategic management to a nonprofit organization.

2. To evaluate the impact of negative publicity on a nonprofit organization and the implications for

strategic leadership in such a case.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The Teaching

Chapter Use Key Concepts Additional Readings or

Exercises

PRIMARY

1: Strategy Concept

Strategic management; vision,

See NOTE video interview with

2: External

Industry competition five forces;

SECONDARY

9: Strategic Control

Behavioral control; corporate

See NOTE United Way ratings by

10: Organizational

Design

Organizational structure

11: Strategic

Leadership capabilities; ethical

See additional articles, video

Case Synopsis

The United Way Case illustrates the problems that have been created due to a well-established business

model, in a challenging environment, facing the possibility of declining growth and competition from

new directions, all under the threat of eroding trust. This case shows how a mature brand, with a powerful

and mostly honorable history, can still stumble. Since the year 2000, United Way had seemingly reached a

In this environment, Brian Gallagher, United Way of America CEO since 2002, had established

membership standards to enhance the level of accountability and transparency in United Way affiliates’

was imperative for a nonprofit organization to get the necessary support at the local level in order to

achieve stated organizational goals. Was Gallagher’s shift in strategy sufficient to ensure the continued

viability of the United Way, or was its very mission perhaps no longer relevant?

Teaching Plan

This case is best used to illustrate the importance of a clear strategic mission in the face of external

environmental challenges. Since most students will be familiar with this organization, the instructor can

ask students for their personal impression of giving to United Way, and their attitude toward charitable

giving in general. This will position the discussion about strategy in a more personal context. If students

were trying to encourage giving for a cause they believed in, what might they have to do? Do these

umbrella charities still have a role to play in an environment where self-help services such as Go-Fund-

Me were gaining increased attention?

As a community service exercise, after discussing the case, the instructor can encourage students to make

themselves aware of the local charities supported by their community United Way. Students might be

encouraged to participate in community service activities as a result of this new knowledge.

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign, and also

This case can start with an icebreaker. Starting from the perspective of a customer may make it easier for

students to transition to a strategic analysis. All students should be able to identify with the concept of

nonprofit missions and charitable giving. Choosing any of the following questions can get students

thinking about their experiences with the products and the industry:

Have any of you ever given to United Way or know someone who has? Based on what you know, even

before reading the case, what is your opinion of United Way and other broad-based charities such as the

American Cancer Society and the Salvation Army? Have you ever used their services or do you know

someone who has? Do you trust them? If asked, would you donate to them? Would you rather donate to

some other charity? Why?

Discussion Questions:

1. What are the current challenges facing United Way? What are key issues in the general and

nonprofit charitable giving industry environments that affect United Way’s operations?

2. OPTIONAL QUESTION: What unique responsibilities does United Way have to its stakeholders,

and how successful has the organization been with its overall strategy? Is United Way’s mission

still viable?

Discussion Questions and Responses

1. What are the current challenges facing United Way? What are key issues in the general and

nonprofit charitable giving industry environments that affect United Way’s operations?

To start with, the instructor might want to position the discussion by reviewing what strategic

management really is:

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter 1, Exhibit

01: Strategic management consists of the analyses, decisions, and actions an organization undertakes in

order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●includes multiple stakeholders in decision making;

Leaders face a large number of complex challenges. Leaders must be proactive, anticipate change and

continually refine changes to their strategies. This requires a certain level of “ambidextrous behavior,”

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision, mission,

and strategic objectives. Leaders must communicate their initial vision of the organization’s purpose: what

was the original goal that evokes a powerful and compelling mental image of a shared future, one that

would be massively inspiring, overarching, and long-term, that represented a destination that is driven by

and evokes passion?

The organizational mission also needs to be considered: a mission encompasses both the purpose of the

company as well as the basis for competition and competitive advantages. In writing a mission statement,

Organizations must respond to multiple constituencies if they are to survive and prosper, and the mission

provides a means of communicating to diverse organizational stakeholders. Although vision statements

Anticipating that things might change, an organization’s leadership must then establish strategic

objectives to operationalize the mission statement. That is, objectives help to operationalize the mission

Is United Way’s mission effective? What is United Way’s mission, and does it inspire you? Would you be

willing to give, based on what you know about them? (Visit http://www.unitedway.org/our-

impact/mission to see the mission and goals.)

These vision and mission statements can lead to strategic objectives that have implications for how to

analyze opportunities, manage innovation, and provide leadership to encourage growth. It requires doing

During strategic analysis, the leader does “advance work” to anticipate unforeseen environmental

developments, identify unanticipated resource constraints, assess changes in his or her preferences for

In strategy implementation, depending on the type of organization structure, the leader might include key

individuals in a discussion around selecting which strategies might be best to implement at which level

The basic question strategic management tries to answer is: How can we create competitive advantages in

the marketplace that are not only unique and valuable but also difficult for competitors to copy or

substitute?

NOTE – ADDITIONAL EXERCISES:

In writing a mission statement, it is important to understand the definition of the business: 1) who are its

customers, 2) what customer need is the organization trying to fulfill, and 3) how does the business create

and deliver value to customers and satisfy their needs. Visit the United Way of America’s web-site to view

its mission and vision at:

http://www.unitedway.org/our-impact Watch the following video interview of CEO Brian Gallagher from

2008 on United Way’s 10-year goals – the strategy of working to advance the common good, through

education, income, and health. Does he inspire you? https://www.youtube.com/watch?v=vLmjjDZmUMw

What about this story from 2008 about what one family was willing to sacrifice?

https://www.youtube.com/watch?v=pm9AV5KOTPw

Would YOU be willing to do this? What is the “right” amount to give to charity? Most people give an

average of $250 or 2 percent of individual income, but is that enough?

Based on this, how do you feel about the mission of United Way? Would you feel willing to give, based

on what you know about them and the causes they support?

Referencing Chapter 2: Analyzing the External Environment of the Firm

Organizational leaders must become aware of factors in the overall environment that might affect their

ability to create a competitive advantage. So how do managers become environmentally aware? By doing

Environmental scanning involves surveillance of a firm’s external environment to predict environmental

changes and detect changes already under way. It is a BIG PICTURE viewpoint of the

Environmental monitoring is a firm’s analysis of the external environment that tracks the evolution of

environmental trends, sequences of events, or streams of activities. Leaders need to monitor the trends

What factors or trends might be most important to United Way? To assess how the external environment

might affect United Way’s strategy, it’s necessary to take a look at the factors in the general external

environment.

United Way must consider the political/legal, economic and global, sociocultural and demographic, and

technological forces that might affect the ability of the firm to deliver its services and sustain its business.

Demographic: Certainly the demographics had changed. Mergers and acquisitions were reducing the

number of corporate partners available in local areas, and, although these larger corporations had

significant assets and employees available for potential donations, many such corporations were

Sociocultural: Sociocultural issues included the traditional highly philanthropic nature of the average

American citizen (first noticed by Alexis de Tocqueville in 1831, who wrote “I must say that I have seen

Technological: Technology, especially the growth of the Internet had been a significant boon to all

Political-Legal: Political-legal issues had an effect not only on United Way, but also on the nonprofit

philanthropic industry as a whole. Changes in tax law, pension regulations, potential legislation of

To further answer the question about the key issues in the general and nonprofit charitable giving

industry environments that affect United Way’s operation, it’s also necessary to assess the segments of the

Help students apply Porter’s Five Forces of competition by drawing a diagram on the board similar to the

following, and having students fill in the details:

Suggested: Many rivals

compete for donors. Showing

Suggested: Donors can switch to

being program providers on their

Threat of

Substitutes

High

A look at the external environmental factor and industry analysis shows that the nonprofit charitable

What might CEO Gallagher be able to do to succeed in this industry? Based on this analysis, United Way

has some major challenges. There is no easy answer. In the current charitable giving environment,

especially when technology has removed barriers, it doesn’t matter if the organization is large or small.

NOTE – ADDITIONAL EXERCISES and OPTIONAL READINGS:

The ongoing challenge of philanthropic organizations is to maintain the pace of donations. Historical

context can be important here: In 2006, ABC’s 20/20 did an investigation into why people give, and who

gives the most. The full story is available at http://abcnews.go.com/2020/story?id=2682730&page=1.

With the U.S. economic downturn that began in 2008, what happened to charitable giving trends? See this

additional story from 2009 which includes an interesting graphic available in the left sidebar:

http://www.nytimes.com/2009/06/10/us/10charity.html And here listen to or read about how charitable

contributions dropped in 2008:

http://www.npr.org/templates/story/story.php?storyId=105178804

Rivalry

High

Buyers’

Bargaining

Power

Suppliers’

Bargaining

Suggested: Donors encounter

almost no switching costs, so

Suggested: There are no

traditional suppliers in the

Suggested: Almost no

In addition, students can be given an assignment to read the 1996 article by Michael Porter, “What is

strategy?,” Harvard Business Review, 74(6): 61-78, and the 1999 article by Porter and Kramer,

“Philanthropy’s New Agenda: Creating Value,” Harvard Business Review, 77(6): 121-130. Concepts from

these articles will allow the students to further develop their understanding of the issues facing United

Way Worldwide and its strategy.

Instructors might log onto HBR for an overview of the 2011 article “Creating Shared Value” by Michael

E. Porter and Mark R. Kramer, from Harvard Business Review, January 2011:

http://hbr.org/2011/01/the-big-idea-creating-shared-value

Here’s a video by Porter on “Rethinking Capitalism.” https://www.youtube.com/watch?v=LrsjLA2NGTU

This challenges for profit corporations to consider the needs of others. Is this a possible erosion of United

Way’s competitive advantage, or is this an opportunity for United Way to create more strategic alliances?

2. What unique responsibilities does United Way have to its stakeholders, and how successful has

the organization been with its overall strategy? Is United Way’s mission still viable?

NOTE: there are no PowerPoint slides to accompany the following.

Referencing Chapter 9: Strategic Control and Corporate Governance

Corporate governance involves the relationship among various participants in determining the direction

and performance of corporations. The primary participants are (1) the shareholders, (2) the management,

and (3) the Board of Directors. The strategic control mechanism known as corporate governance focuses

However, management cannot ignore the demands of other important firm stakeholders such as creditors,

suppliers, customers, employees, and government regulators. At times of financial duress, powerful

United Way is governed via a federation of affiliates, with each responsible for keeping its own relevant

stakeholders happy. How might this be monitored and controlled by the United Way Worldwide corporate

structure?

Strategic control involves the process of monitoring and correcting a firm’s strategy and performance. It

Informational control is concerned with whether or not the organization is “doing the right things,” while

behavioral control is concerned with whether or not the organization is “doing things right” in the

implementation of its strategy. United Way needs to make sure enough information of the right kind is

United Way has a unique challenge because of its structure of affiliates. To what degree do the role

models at United Way Worldwide seem to affect the behavior at the local affiliates? United Way needs to

make sure enough information of the right kind is available to monitor activities – this is where things

NOTE – ADDITIONAL EXERCISES

United Way is governed via a federation of affiliates. To see how the United Way in your area is rated,

search below: http://www.charitynavigator.org/index.cfm?

keyword_list=united+way&Submit2=GO&bay=search.results

Note that different affiliates receive different ratings! What might that mean for the overall reputation of

United Way Worldwide?

United Way Worldwide is rated per below:

http://www.charitynavigator.org/index.cfm/bay/search.summary/orgid/4629.htm

The Better Business Bureau publishes standards for charitable accountability, available here:

http://www.bbb.org/us/Standards-Charity/ United Way meets these standards, per below:

http://charityreports.bbb.org/Public/Report.aspx?CharityID=1994

Perhaps contrast United Way’s ratings with that of another charity that serves your student’s local needs.

How do they compare?

Based on the reports from these watchdog groups, how does the United Way of America appear to handle

its financial responsibility? Does it increase its long-term value in the eyes of its various stakeholders?

Referencing Chapter 10: Creating Effective Organizational Designs

Strategy consists of analysis (setting goals, assessing the internal and external environment of the firm),

formulation (deciding which industries to compete in and how to compete in those industries), and

Chapter 10 stresses that organizational strategy has implications for a firm’s structure. Students should

relate concepts from Chapter 10, such as the differences between various structures and the effectiveness

of each possible structure for United Way’s possible choices of strategy. Organizational structure refers to

Structure identifies the executive, managerial, and administrative organization of a firm and indicates

Factors that facilitate the effective coordination and integration of key activities include having a

An effective organizational design can encourage the flow of information and enhance working

relationships between functional departments and activities. However, achieving the coordination and

integration necessary to maximize the potential of an organization’s human capital involves much more

United Way has a loosely coupled system, more a modular than a divisional structure, with every chapter

unit operating in a semi-autonomous fashion. Organizational structures should help improve decision

An organizational structure is meant to integrate the various organizational groupings in a way that leads

to efficiency and effectiveness by coordinating and integrating key activities. With no required oversight,

each chapter affiliate is free to engage in its own activities. Although this might be effective for local

constituencies, is it an efficient use of United Way Worldwide resources?

Might a more consistent vision across chapters increase donations? Strategy should lead to structure, so

more increase in accountability should suggest a clearer more controlling structure, and that should then

increase donations. But what does that do to the culture of autonomy that chapters currently experience?

Might a tighter structure affect the existing culture at the affiliate level, and have a negative affect on local

leadership and volunteerism?

Regarding what can happen at the local level, here’s a news story from 2009 about how Washington DC

area charities were suspending their memberships with the local United Way and partnering with another

fundraising group, America’s Charities, partly as a result of United Way’s past financial scandals at that

local chapter:

http://www.washingtonpost.com/wp-dyn/content/article/2009/04/28/AR2009042803701.html

What should nonprofits do to ensure that temptation doesn’t result in inappropriate behavior from

individuals in leadership positions in chapter affiliates and create subsequent reputational problems for

United Way Worldwide?

In 2012, United Way Worldwide announced it was restructuring to better “leverage operational resources”

and “foster a model of distributed leadership where the network leads the organization.” Other than

Referencing Chapter 11: Strategic Leadership

See the concept of leadership, the process of transforming organizations from what they are to what the

leader would have them become. Leadership is proactive, goal oriented, and focused on the creation and

implementation of the creative vision. This definition implies dissatisfaction with the status quo, a vision

of what should be, and suggests a process for bringing about change. Leaders are change agents whose

success is measured by how effectively they formulate and implement a strategic vision and mission. See

Exhibit 11.1. This involves:

●Setting a direction

The interdependent nature of these three activities is self-evident. Consider an organization with a great

mission and a superb organizational structure, but a culture that implicitly encourages shirking and

Leaders need to continually scan the environment to develop knowledge of all stakeholders, and

knowledge of salient environmental trends and events. Then leaders must integrate that knowledge into a

Difficulties in implementing the leader’s vision and strategies include a lack of understanding of

responsibility and accountability among managers, reward systems that do not motivate individuals and

Leaders, especially those who have responsibility for some degree of public trust, as United Way does,

must also maintain at least the outward appearance of an ethical business culture. See the definition of

organizational ethics toward the end of Chapter 11: organizational ethics are the values, attitudes, and

Organizational ethics helps to define what a company is and what it stands for. The ethical orientation of

The practices that a firm can use to promote an ethical business culture include providing ethical role

CEO Brian Gallagher has acknowledged the potential difficulties of his plan to change the way both the

national United Way and its local affiliates plan for and deliver service in this interview with Boston

Consulting Group:

https://www.bcgperspectives.com/content/videos/leadership_transformation_brian_gallagher_uniting_uni

ted_way/ (registration may be necessary, but it’s worth it for Gallagher’s take on the challenges he

inherited and what he tried to do at the local level to achieve a common vision around the issues of

education, income and health…see the embedded video)

From this 2011 interview, when asked about how to sustain the momentum of change, Gallagher had this

advice for a new CEO: “Understand your environment. Take the time to know the organization’s history,

know the industry’s history, and know the national and global history as it relates to your organization. Be

Here’s an interview from 2012 where CEO Brain Gallagher reflects on the progress of his vision and

strategy first announced in 2008. This interview is over an hour, but the beginning gives context:

https://www.youtube.com/watch?v=hejpY7ZjYNw

Here is an article with the highlights from that talk:

http://www.today.mccombs.utexas.edu/2011/09/united-way-ceo-offers-inside-look-at-non-profit-

management

What strategies might Gallagher use to get everyone to buy into his strategic vision?

Let students know that at this point, it is not clear whether Brian Gallagher’s strategy is sufficient for

enlisting the local affiliates’ long-term support, especially given the history of ethical violations. Students

don’t have to identify one best strategy, just use this discussion to explore the implications of how

In the current charitable giving environment, especially when technology has removed barriers, it doesn’t

matter if the organization is large or small. It’s the organizational mission and vision that can attract

One interesting discussion might be regarding United Way’s international outreach. The mission and role

of United Way in developing countries was more of a consultancy model, which might be more relevant