United Way CEO’s Fate Uncertain Amid Growing Crisis At The Nonprofit

01/29/2021

Fed up with mismanagement at the top, as many as 220 local chapters of the United Way have stopped paying dues to the organization’s home office, United Way Worldwide, cutting off a crucial source of funding at a time of layoffs and uncertainty for the major nonprofit, where CEO Brian Gallagher has been accused of fostering a “boys club” that’s led to allegations of sexual harassment and retaliation.

Current and former United Way employees who spoke with HuffPost and are familiar with the discussions said that Gallagher’s fate is uncertain. The United Way Worldwide board was scheduled to meet Thursday to discuss whether it was time for him to exit, according to a current employee at a major branch of the nonprofit.

“That he hasn’t already been dismissed says a lot,” the employee said, pointing to complaints about the culture inside the organization. He asked that HuffPost not reveal his name out of concerns for his job.

“He should’ve gone a long time ago,” a former employee told HuffPost. “Patriarchy doing what patriarchy gonna do: Dig their heels in.”

Allegations about a “boys club” culture at the charity were first reported by HuffPost in November. In the previous 18 months, three female former employees had filed complaints with the Equal Employment Opportunity Commission, alleging that they were fired or ostracized after reporting misconduct to United Way Worldwide’s human resources department. A report in Business Insider the next month surfaced more complaints. Earlier in January, HuffPost reported that more than 20 women employees sent a letter to the board saying they had also experienced harassment and discrimination during their time at the organization.

The charity said that it had hired a law firm to investigate the culture and claims, but has not yet released any findings.

In a statement to HuffPost, United Way Worldwide said that the investigation into the harassment allegations is “scheduled to conclude shortly.”

But impatience is mounting within its ranks.

“It shows a lack of leadership on the part of the board. It’s been well over a month; it’s not like they haven’t had the opportunity to fix it,” said the current employee.

Layoffs Just Last Week

The troubles at United Way Worldwide, a storied organization founded in 1887, go beyond culture. The nonprofit is facing financial challenges and an existential crisis, due to a business model that’s a holdover from the pre-internet era.

Last week, United Way Worldwide laid off staff and announced pay cuts for higher-level positions. The nonprofit told HuffPost that salary reductions are “temporary” for senior staff.

There will be more layoffs next month, according to someone familiar with the situation.

Employees were also told that some might be able to voluntarily resign and get severance, according to current employees.

“United Way Worldwide has not been immune to the impacts of the COVID-19 pandemic and the resulting economic fallout; and the protracted nature of this downturn has forced us to make difficult decisions,” the nonprofit said in a statement.

The layoffs came despite the $4.8 million loan that United Way Worldwide was able to get in April 2020 through the Payment Protection Program, part of the federal government’s COVID-19 relief package. The loans were meant to help firms avoid firing employees.

The pandemic isn’t actually the issue for United Way, according to an email obtained by HuffPost that was sent to communications staff by a local United Way branch executive, who called the COVID-19 talking point “untrue.”

The core issue is the business model, according to current and former employees, and a botched effort to modernize that they blame on Gallagher.

A Sprawling Behemoth

United Way Worldwide is just the home office for a large network of local branches: There are 1,800 throughout the world. Each local has its own CEO and board of directors. They pay the worldwide office an annual fee to be part of the network: 1% of revenue, with some exceptions for the smallest branches.

All together the branches and the worldwide office, which Gallagher runs, comprise one of the largest charities in the U.S., with $3.7 billion in donations coming in annually, according to a 2019 tally. The worldwide office took in $249 million in revenue in 2019, according to its latest public filing. Of that, at least $30 million was in fees from the locals.

At the end of 2019, before COVID-19 hit and before harassment allegations were made public, Gallagher abruptly decided to increase the fees that local branches pay, seeking to double them — which was a big ask, former and current employees said.

His decision came out of nowhere, said a former employee. All the executives at the worldwide office had to start calling branch CEOs to explain what was happening. There was an uproar, the former employee said. The whole move was a “disaster.”

“It just speaks to Brian [Gallagher’s] ineptitude as a business person,” they said.

In a statement, United Way Worldwide said that the dues increase was to “support our ongoing digital and Network transformation work” — presumably corporate-speak for efforts to adapt to the times.

The increase was set to take effect in July 2020.

Then the pandemic hit and branches were busy: They were working in communities, dealing with rising levels of hunger, homelessness and joblessness due to the coronavirus crisis. Though donations soared throughout the network, it was not exactly the ideal moment to send cash to the home office. United Way Worldwide postponed the increase, according to one former employee. Instead, it would come due January 2021.

But when allegations started swirling, raising questions about the culture of the organization in late 2020, branches wondered: What were they even paying for?

“Gallagher was not anyone’s favorite anyway,” the former employee said. “It’s just bad business decisions, and it all comes back to one person.”

Just over 20% of local branches declined to pay their 2020 dues to United Way Worldwide, according to the statement it sent to HuffPost, and “some, but not all, of the remaining United Ways have indicated that they would await the results of the investigation before paying their dues.”

(As the investigation draws to an apparent conclusion, none of the three women who filed EEOC complaints said they’ve been contacted by investigators on behalf of the company.)

United Way didn’t say which branches haven’t paid, with is an important detail. The United Ways in large metro areas like Los Angeles and Chicago bring in far more revenue than smaller locals, but only represent a fraction of the overall number of outposts.

An Attempt To Modernize Fundraising

One reason Gallagher needed to double fees, insiders said, is a deal United Way Worldwide struck with Salesforce, the cloud computing company, in 2019.

The deal was part of a much needed effort for United Way to update the way it raises money in a digital world.

But so far it’s proven to be a debacle. The idea was that Salesforce would build an app called Philanthropy Cloud that would revolutionize the way United Way raises money. The nonprofit was responsible for selling the app to its corporate partners; it even hired extra staff at the worldwide office to do sales.

But there are major problems: The app it paid Salesforce to create is not yet up and running, and United Way hasn’t sold enough software, according to one person familiar with the deal.

“It is a mess,” this person said of the deal.

If United Way can’t reach its sales goals, it could be on the hook to pay Salesforce around $50 million, this person said.

Salesforce did not immediately provide a comment.

So in late 2019, facing a cash crunch, in part because of that Salesforce deal, Gallagher turned to the locals.

They were not happy.

“Doubling everyone’s dues in a short amount of time is not good,” the current employee told HuffPost.

One former employee familiar with the situation said the idea the fee increase was simply to modernize is nonsense. “You’re trying to sell this [app] nobody wants because your business model is dying, so you make a bad deal and ask the network to pay for your problem — and then take people’s jobs.”

Plus, the fee increase came in a year where nonprofits and charities were seeing both increased donations and need, as the coronavirus crisis has left so many hungry and without jobs.

Current and former employees point to Gallagher’s high salary — his compensation came in at $1.2 million in 2019 ― and wonder what kind of charity they’re working for. Branches wonder why they need to keep sending cash to a worldwide office that is plagued by a culture crisis and taking more money from them in a time of great need.

“There’s a lot of disillusionment right now,” said the current employee.

The board of directors at the current employee’s local branch, one of the larger ones that brings in millions of dollars in revenue, is now considering leaving the organization altogether.

But there is a way forward for United Way Worldwide: The nonprofit’s employees are a dedicated group of individuals committed to doing good work, former staffers have said.

“They need new leadership and accountability,” one said. “And to treat people with respect.”

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