February 27, 2003
MTA Should Meet Union Demands on Wages and Benefits
The MTA (Los Angeles Region) and labor union negotiations process continues to be flawed. Besides a fundamental lack of trust and respect between the parties, the current process used to negotiate solutions increases the likelihood of a strike. The negotiating process has three distinct steps - wage negotiations, followed by benefits negotiations, followed by work standards (hours, shifts, and reimbursement) negotiations. The process should be changed to have all three items on the table at same time. When a strike occurs, riders will be the first ones to feel the effects. If past history repeats itself the short-term impacts will be painful, but riders will adjust by finding and sharing rides. The bigger state and local issue is that public transportation growth trends in the metropolitan area will have to restart at zero. Taxpayers will end up paying a higher price for a system that is not growing fast enough to be fiscally solvent. Meeting the union's wage and benefit requests with a downsized mechanics force and higher work standards is a package that spreads the pain and could force needed fundamental improvements.
Donald M. Atwater, Ph.D.
Visiting Professor of Economics
On the Road and in the Sky, Gasoline Prices Jump
The airlines continue to struggle with cost control. American Airlines has warned its employees it needs concessions to match the advantages that USAir and United Airlines have because they are skipping out on most debt service while in bankruptcy. Northwest Airlines is floating a test balloon to charge a $10 one way fuel surcharge, and United, who is struggling much more in bankruptcy than most predicted, is suggesting it may close hubs in Los Angeles, Denver, and Washington. The expected increase in fuel prices as the threat of war with Iraq looms makes the confused airline situation even more complex and suggests that the neo-consolidation of the past six months has been insufficient to cure the industry's overcapacity issues. Now is the time for someone, maybe even United, to leave the party and allow the industry to find a new, lower equilibrium.
W. Scott Sherman, Ph.D.
Assistant Professor of Management
Cheap Canadian Web Prescription Drugs a Concern
The availability of cheaper prescription drugs on the Internet reveals the most important long-term impact of the World Wide Web. Consumers now have worlds of new information and choices that will reduce the margins of most businesses. Direct (or more direct) distribution for products ranging from drugs to CDs will give consumers more information, more choices, and lower prices. Online distribution will force manufacturers to sell direct, wholesalers to lower prices or go out of business, and force lower margins on everyone. The consumer will win big time, until his/her employer has to downsize to remain competitive.
Robert M. Fulmer, Ph.D.
Distinguished Visiting Professor
Perspectives: With the economy in a continuing downturn and corporate budgets being strained, what must nonprofit executives do to maintain corporate involvement and funding?
Ten Nonprofit Funding Strategies in Trying Times
- Turn to corporations that are profitable and also have a history of charitable giving
- Seek state, federal and municipal funding sources.
- Request donated information technology equipment from high-tech firms.
- Appeal to those who have benefited from your organization to help. For example, patients who benefit from a non-profit are now running fund-raising events.
- Broaden your appeal to additional foundations whose missions blend with yours.
- Get grants to provide education for your staff.
- Enhance the "Donor Services" section of your website. Expand on such things as tax benefits, levels of recognition for donors, featured "Donor of the Month," success stories, etc.
- Partner with local businesses to co-produce fund-raising events, with publicity for the co-producers.
- Find established groups (such as the National Charity League) to raise funds for you.
- Get professionals to donate their time. The author of this piece served without remuneration for a year as Executive Director of Hospice of the Conejo.
Edward Rockey, Ph.D.
Professor of Behavioral Science
Creativity and Leadership Needed
Nonprofit organizations are facing a crisis in terms of funding. Many nonprofits have relied on government programs and grants, as well as funding from foundations, corporations, and organizations such as the United Way. During the 1990s, stocks were increasing in value at rates that did not reflect the true value of their companies. With higher incomes, governments were receiving more tax revenue and foundations were experiencing large increases in the value of their portfolios. Many of these foundations were required to "donate" specific amounts each year to avoid tax penalties. With the downturn in the economy and the stock market, these traditional sources of funding are being reduced. In California, for instance, the budget crisis, caused both by reduced tax revenues and excess spending by the State, is forcing cutbacks in many agencies such as the Department of Rehabilitation. These cutbacks reduce the ability of nonprofit organizations to provide services to their clients.
At the same time, there is reduced funding available from the private sector due to decreases in income and investments. Nonprofit executives must now battle for resources in a highly competitive environment. They must "make the case" that their organizations have a higher priority for funding than other organizations. This must take place in all forums including the government (local, state and federal), foundations, corporations, and individuals. Nonprofit executives must now review all aspects of their respective organizations to assure that they are delivering what their missions promise and that their revenues exceed expenses. To supplement their budgets increased volunteerism may be required. Many nonprofit organizations may be forced to go out of business. Increased creativity and leadership will determine the difference between success and failure.
Jack C. Green, Ph.D.
Associate Professor of Strategy
Strategic Social Investment Trend
The nonprofit sector is populated by a very diverse set of organizations whose mission and major sources of funding vary widely. Even among nonreligious organizations, who receive a larger proportion of donations, corporations have accounted for only about 10% of total giving in recent years. The first trend is a shift from a corporate philanthropy perspective to a corporate social investing perspective. This shift is significant because it should make corporate involvement with nonprofit organizations through monetary donations or support for employee voluntarism less vulnerable to the caprices of the business cycle. Corporate social investing means making more selective but long-term and substantial commitments to assist nonprofits whose efforts address a social issue relevant to the core values and mission of a firm and/or its brand(s).
Second, big successful brands are the most vulnerable targets of activist campaigns and media attention to any ethical breaches by managers. Between the discontents about certain aspects of the global economic system and the most recent wave of scandals, big business is about as popular as George Bush in the Middle East. This crisis of confidence means that corporations need to burnish their image and need to do it in a way that will be seen as an authentic commitment to make corporate influence and power serve a positive purpose. Thus, giving may actually increase, but will need to be seen as being invested in organizations that are more than pet projects of the CEO. Taking advantage of these trends means that nonprofit managers will need to understand what makes their cause and organization attractive as a strategic social investment. It also means making a decision about when and how to interact with corporate donors as strategic partners given likely differences in organization cultures.
Kathryn A. Fitzgerald, Ph.D.
Visiting Assistant Professor of Marketing
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