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When Howard Taylor started as CEO of Capital Area United Way on Jan. 1, 2007, the former telecommunications executive arrived to find an agency at a crossroads.

“It was in bad shape,” says Taylor, a New Jersey native who arrived in Baton Rouge from Connecticut.

Donations to the local chapter, which bottomed out in 2004, had made only a slight recovery since then. By 2006, the board realized it had to make a fundamental decision: Either accept that donations would remain flat, and cut back to accommodate the new reality, or invest in new ways to raise money and hope it pays off in the long run.

The board chose the latter, and it was largely Taylor’s job to make it happen.

“You can turn it into a cash cow, and run it at the lowest bottom-line level from an expense standpoint, or you can try to invest for growth, and put a plan in place so that growth will stimulate additional revenue,” Taylor says. “That’s the course I put the Capital Area United Way on.”

CAUW remains on that course, although Taylor is no longer at the helm. He resigned amidst internal criticism in April, though he says an illness in his family prompted the move. But it hasn’t been painless; payments to member agencies continue to drop, down an average of more than 30% in the last round.

Member agencies are learning, if they haven’t already, not to depend too much on United Way. Whoever takes Taylor’s place will inherit an agency entering perhaps the most crucial 12 months in its history.

How did we get here?

CAUW collects money from 10 parishes in the Greater Baton Rouge area, then distributes funds to smaller nonprofits, 49 at last count, which rely on that money to varying degrees.

Traditionally, United Way kicked off its yearly fundraising campaign in August, while member agencies tended to run on a calendar year. That meant the United Way was guessing in November how much money would be collected, based on maybe 20% of the final tally, then making allocations to member agencies based on that estimate.

That worked OK until 2004, when a downturn in the petrochemical industry, CAUW’s primary funding source, caused the announced campaign total to drop from $13.1 million to $11.4 million. Donations have since picked up, but only slightly.

Allocations to member agencies over the past few years were made based on overly rosy predictions. When the real numbers came in, the United Way ate the difference from its reserves, hoping to soften the blow.

“In hindsight, the best way would have been not to use the reserves so much,” says Jeff Wright, chair of the marketing and communications division. “We kept anticipating the campaign would pick up.”

Stan Vanderleeuw, CAUW’s 2006 board president and a current board member, defends the decision, since the years after hurricanes Katrina and Rita in 2005 were extraordinary times.

“You stand back a little bit from this and say, ‘What are reserves for?’” says Vanderleeuw, who is leaving his job as ExxonMobil’s Baton Rouge refinery manager to become manufacturing director of ExxonMobil Petroleum and Chemical for the Europe/Middle East/Africa operation.

At the moment, CAUW has about one-tenth of the 90 days’ worth of operating expenses they’d prefer to have on hand. The deficit spending had to stop.

Meanwhile, CAUW started spending more money internally. Taylor says there were 21 full-time employees when he arrived, with a budget for 28. He increased that total to 31 and significantly upgraded the technology. Taylor says the agency had never processed credit card payments, had never worked over the Internet and didn’t have a database for keeping track of users and donors.

The board also recognizes a need to reach out to more donors, particularly those who work for small businesses, to broaden the funding base. But that takes manpower. Companies are no longer willing to loan executives to CAUW to help at the height of fundraising season. Vanderleeuw says ramping up spending was the right idea, but admits expenses got ahead of funds.

“I don’t know what good it would do to speculate on something that’s not in front of us,” Vanderleeuw says, when asked if he thinks the board would now want to retain Taylor.

“[Taylor] was very effective in building a team,” says Jay O’Brien, an attorney with McGlinchey Stafford and chairman of the community partnership division. “He was also very effective, I thought, in keeping some of the board informed about where he was going.” But there might have been a disconnect with other board members and, in hindsight, there should have been more of a firm plan and timeline for all that new spending, O’Brien says.

Taylor, for his part, says he regrets not being able to finish the job he started, and says he received a strongly positive yearly performance review. He plans to stay in the nonprofit world, and hints his next job might allow him to help Capital Area United Way and Baton Rouge in the future.

Where does the money go?

The most recent campaign raised $11.8 million in pledges. About $1 million never walks in the door; some donors retire and some back out of their promises. The agency’s operating budget is about $3.1 million; $125,000 went back into the reserves.

A little over $400,000 goes to various service contracts with Catholic Charities and others. About $350,000 went to plug an unfunded liability in the retirement plan, which was changed from a defined benefit plan to a defined contribution plan.

Nearly a million was designated for specific recipients by donors, and never made it into the general funding pool. About $2.9 million went to the agencies last year as a stopgap funding measure to cover Jan. 1 through June 30, allowing for a switch from calendar year to fiscal year funding.

That left about $5.3 million to divide among member agencies for 2008-09, and those allocations were determined as usual. The “community partnership” volunteers divide into five subcommittees, each of which visits about 10 agencies. Volunteers are selected in various ways. Some approach CAUW, others are approached by other volunteers or board members and asked for their help.

From each subcommittee, four people are among the 24 placed on the funding committee, along with other volunteers from the community at large. Each agency has been visited by at least two people on the funding committee, each is audited and each is given the chance to make its case, board members say.

Every agency is evaluated and ranked at the subcommittee wrap up meetings. A key factor is measured impact: How does an agency affect its clients’ lives and help provide the social safety net? Within that broad guideline fall a number of other questions: How efficient is the agency? Does it benefit the entire 10-parish area served by CAUW? Is it the only agency that provides a given service?

The funding committee comes up with a spreadsheet, which goes to the board’s community partnership division, then to the executive committee and then to the full board, which must give the whole list an up-or-down vote. It’s a subjective process, and there’s never a simple explanation of why Agency A receives more money than Agency B. One agency, the local chapter of the American Diabetes Association, actually received more money for 2008-09—$29,156, up from $23,947 last year—because of a targeted donation.

“Sometimes [the funding process] doesn’t make sense,” says Barry Meyer, executive director of The Arc Baton Rouge, which works to the improve quality of life of developmentally and intellectually disabled people. “But not having been part of the decision-making process, I don’t know how it could to the outsider, because it’s complicated.”

Meyer says the United Way likely gets some pressure from the community to favor the more well-known agencies. “We’re not a household name,” he says.

“It’s not like a math problem,” O’Brien says. “You can’t just feed in numbers.”

But he says he’s never received one phone call from someone attempting to curry favor for one agency or another. Even if public pressure was a problem, the diversity and sheer number of volunteers involved would make it difficult to sway the process, Wright argues.

“It’s very difficult to keep secrets with that many people,” Wright says.

“I have to have faith it was done in a fair and equitable manner,” Meyer says. “It’s not blind faith. It’s measured.”

Now what?

As Wright puts it, this year represents a call to arms. He says the United Way is the only organization with the ability to conduct payroll deduction campaigns, allowing it to direct millions to worthy causes that would otherwise struggle.

“If the agencies and community choose not to support United Way in the upcoming campaign, all of Baton Rouge loses,” he says.

Three senior vice presidents are running the CAUW’s daily operations, with expectations that a new CEO will be identified in September. A hiring freeze is in place. New fundraising methods are being tested, like Campaign in a Box, which allows a small company to hold a quick meeting for two to four employees. What they really need is a way to reach the younger donors, beyond the obligatory Facebook and MySpace pages.

“The younger generation of workers need to be educated on the value of philanthropy,” says board chairwoman Phyllis Coleman Mouton, vice chancellor of Baton Rouge Community College.

Michael Williamson, vice president of field leadership with United Way of America, says the Capital Area chapter was right not to downsize.

“That would begin the phase of putting the United Way out of business in Baton Rouge,” he said, speaking to representatives of local member agencies at a June 23 meeting. He says CAUW’s overhead is slightly higher than normal for an operation its size, but says that could be from a temporary spike in expenses related to the recent growth.

Williamson was in town in part to help the board create a plan to get expenses in line with revenue. He says the traditional fundraising federation, whereby the United Way rakes in money and doles it out according to its own system, might not be as viable as it once was. Big donors treat giving like they treat their business, and they want to choose where their money goes. At the same time, there’s more competition for the fundraising dollar. If you want to help children with cancer, for example, you can easily go online and do so without the middleman.

That doesn’t mean the current model is completely obsolete, but it might mean CAUW needs a better message. Sure, you have to reach out to the broader community, but what are you going to talk to them about? Find out what your potential donors care most about, tell them what you’re going to do about it, set measurable benchmarks, and hold yourself accountable, Williamson says. Hopefully, people respond by opening their wallets.

“There’s always untapped potential in any community,” he says.