Lessons from the Turnaround

Before I share my experience and the lessons I learned from leading a turnaround, which was what I needed to do when I first got to the American Red Cross, I’m going to talk about the Red Cross mission, which is to prevent and alleviate suffering in the face of emergencies.

One in five people in the us have been touched by the American Red Cross in some way, but most people don’t truly understand the depth and breadth of everything that we do. People know we respond to disasters—60,000 every single year—most of which are home fires. Many of the injuries and deaths from home fires are preventable if you have smoke alarms. So we are going into vulnerable communities with a box of smoke alarms and a ladder and a drill. We’ve installed 2.2 million smoke alarms so far, and as a result we’ve saved more than 1,000 lives.

We also distribute about 6.4 million units of blood to hospitals every single year. To do that, 13,000 people have to show up every single day to roll up their sleeves and give the gift of life to someone they will likely never meet.

Something most people don’t know about is our services to the armed forces. We handle emergency calls, half a million of them a year, from people who are calling our hotlines to get emergency messages to members of the military. We also have volunteers in all the Veterans Affairs hospitals and on all the military bases, not only in the United States but also abroad.

And how many of you have ever taken first-aid or CPR or babysitting classes? We teach about 4.5 million classes every single year. It’s amazing how often I meet ordinary people who have saved the life of somebody who’s in distress using skills they learned from the Red Cross.

We do international work. We’re in 10 different countries teaching about disaster preparedness and response and how to build resilient communities.

We’re also working on preventing the spread of disease. In partnership with the UN Foundation, UNICEF, the World Health Organization, and the CDC, we’ve vaccinated more than 2 billion children against measles and rubella.

Right the Ship

The mission of the American Red Cross is amazing. It was part of what drew me to the organization. But when I showed up in 2008, the Red Cross was suffering from deep financial problems. We had a $209 million operating deficit, and we had taken on about $600 million of debt on top of that. We had hundreds of chapters all over the country, and they were all doing their own thing: They had their own HR and IT functions and their own communications strategy. They had separate procurement functions, so every single chapter was purchasing independently. Chapters even had their own websites. As a result, there was a lot of duplication.

But even more distressing to me was that there was no way to share best practices. In fact, chapters were not incented to help each other because folks at headquarters ranked and rated the chapters, so everybody was vying to get to the top. There was truly a lack of teamwork.

Fast forward two years. We took all those back-office operations and brought them into headquarters. We centralized procurement. We reduced our headquarters staff by quite a lot, and we made reductions out in the field as well. We centralized marketing. We made one website with drop-down capabilities so visitors could find out what’s going on in their local Red Cross chapters.

We have professional IT people now, and we are doing the coolest things. We have geospatial technology that can see what’s happening on the ground during a disaster so that we know where we need to go. We taught smart speakers how to help people perform first aid and CPR. We have a chatbot named Clara that can help you figure out if you’re eligible to donate blood. For blood drives, we’re using AI to figure out how many donors are going to attend so that we can send the right number of phlebotomists to draw blood. All of this IT has helped us to be truly efficient.

In two years we managed to break even and build a foundation that would enable us to do great things going forward. And I have to tell you, every Red Crosser stepped up and helped right the ship.

So what did I learn from all of this?

Best of the Best

First: The biggest thing you should focus on is staff. Attract, retain, and motivate the best people. I picked that word best on purpose. Not good. Not really, really good. The best. I always look for two things—super smart and super nice. I’m fussy about this because I’ve learned over time that if you staff for expediency, it feels good in the moment, but you spend time digging out of your personnel problem. In the end, it’s better and faster to pick the right person.
I also look for chemistry on my team. I make every one of my direct reports interview the people who I’m considering bringing in. If one of them gives the person a thumbs down, I won’t hire that person because I want everyone to get along.

Having said that, I also staff for diversity of thought. You want a strategist, a tactician, an optimist, a pessimist, a contrarian. You want to hear different points of view from people with different backgrounds.

I can throw a problem in the middle of our leadership table, and collectively they will solve it. They argue and they debate—it’s a glorious, beautiful thing. And at the end, we come up with something that’s better than anybody could have done individually. So remember the word staffing.

Creating Champions

Another thing I’ve learned is you’ve got to be inclusive, and you’ve got to seek out champions. When we were doing this turnaround, I did a back-of-the-envelope calculation, and I thought we might be able to turn this thing around in only a couple of years because there was so much duplication. The hard part of it was bringing people along. It was so important for them to feel like their fingerprints were on the solution.

So we brought in 30 chapter execs, and we said, “How can we save the American Red Cross?” And they worked on it. Then we said, “This is good. Let’s bring in another 50 chapter execs.” Then that group worked on it, and it got even better. Then we brought in more people, and they worked on it.

The process was slow. It took six months before we made the first move. But in the end, people went back to their home offices, and they said, “This is going to be great.” So you want to be inclusive when you’re making change, and you want to create champions who can carry the word for you.

Also, listen generously. I kept saying, “Why don’t people want to make these changes?” I figured out that they loved the Red Cross mission so much they were afraid of the changes. They weren’t trying to be mean-spirited.

So listen with an open heart. Assume the best about the person who is talking to you. You will feel better about life when you listen generously.

Next, communicate incessantly. I mean communicate and communicate and communicate and communicate. And when you think you’ve communicated enough, communicate again. I learned this when I was at AT&T. The average person has to see a commercial three times before they know who the sponsor is. It takes much longer than that for people to understand strategy. So communicate a lot.

Course Correct

One more thing: the world is changing—technology, geopolitics, economics, consumer behavior. If you don’t embrace change, you’re going to get left behind.

In this world of constant change, you’re going to make mistakes. Admit those mistakes quickly and correct course.

Let me give you an example. Back when every Red Cross chapter was doing their own thing, one was charging $40 for training and the chapter right next door was charging $70. I thought, We can close this gap. Let’s all just charge $70.

The chapters weren’t happy. They said enrollment was going to go down. But I said, “No, people are paying $70 for it already. We’re doing this.”

Guess what happened? Enrollment started tanking in the first week. When we next got together, everyone was yelling at me, “Enrollment, enrollment!”

I said, “Yeah, sorry about that. That was a mistake. We’re taking the price down to $50.”

You could have heard a pin drop. They were shocked. But after that, they started trusting.

If you make a mistake and admit it and course correct quickly, it’s better than if you hadn’t made the mistake. People will try new things if they know the leadership team will course correct.

A Higher Purpose

The last thing: When I was in the for-profit world, I would look at data and solicit input, but at the end of the day, I would say, “Here’s what we’re doing.” I’d say “jump,” and everybody would ask, “How high?”

Then I came to the Red Cross. I listened and I processed and when I said, “Here’s what we’re doing,” our 300,000 volunteers would say, “No.”
What do you do? I mean, we’re not paying them a salary. I learned to lead from the power of my ideas, not the power of my office. I also started learning to lead from my heart.

When I was at AT&T and everybody would get wound up, I would say, “People, calm down. We’re not saving lives here. It’s just telephone service.” Then I went to Fidelity, and I’d say, “Calm down, people. We’re just managing money. We’re not saving lives here.”

When I came to the Red Cross, I couldn’t say that anymore. It got me thinking that when I was at AT&T, I should have said, “We can’t get this wrong because we are connecting people with the people who they love and the information that they need. We have a higher purpose.” And at Fidelity, we weren’t just managing money: We were making people’s financial dreams come true—putting kids through college, helping prepare for retirement. We had a higher purpose.

Everyone wants a higher purpose. As a leader, when you find that, it makes all the difference. People are way more engaged.

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Q&A with the CEO Gail J. McGovern

You talked about how the chapters weren’t collaborating and then they transitioned to helping each other. How do you find the balance between teamwork and using incentives to motivate people?

In the beginning, it was a little rocky. The turning point came when we organized the chapters into divisions and gave them financial objectives. They were all reticent about taking on these objectives.

One chapter lost a million-dollar funder, and there was no way the chapter was going to dig out of that hole. Everybody was sitting in the room not saying anything, and a person finally raised their hand and said, “I can raise my objective a little bit and cover part of that.” And then the next person said, “I can do that too.”

I watched this unfold. They were so proud that they were lending a hand, and that spirit of teamwork started permeating everything we did. The feeling of teamwork genuinely incented people.

People like competition. They love being the top fundraiser or the top salesperson. You can be a good team player and still have friendly competition. If you hire people who are smart and nice, they’re not going to try to climb on somebody’s shoulders to get ahead. They’re going to try to work together.

How do you know when to take criticism and improve or when to just go forward with confidence?

That is a good question because in this day and age, between social media and public relations, not many outlets want to report on a good news story. I see this when we have big disasters. The media love us, they love us, they love us. And then one day they say, “This is getting boring. Let’s look under every rock and see if we can find something that they’re doing wrong.” I learned over time that you just have to roll with those kinds of punches.

I’ll tell you a personal story. When I became the head of the consumer markets division at AT&T, it was a big breaking-the-glass-ceiling story. There was a huge write-up about me and my career on the front page of the Wall Street Journal. I went to work, and everybody was saying, “Gail, what a great story.” I was feeling pretty good about myself.

I went into my office and in walked the chief financial officer of AT&T. He said, “I want to give you some advice. Never believe the good press they write about you and never believe the bad press they write about you.” I thought, Well, that was kind of a snarky remark.

But after he left, I grabbed the paper and read the article. It really was over the top. I said to myself, “He’s absolutely right. I don’t bend steel with my bare hands. I am going to remember that.” Later, when some critical story inevitably came out, I thought to myself, Okay, never believe the great stuff. Never believe the bad stuff. Just keep moving forward.

It’s hard in the beginning. It hurts. But with experience, it gets a lot easier. Don’t be hard on yourselves. I know that’s so easy for me to say, but really: be kind to yourselves. You’ll feel a lot better. My mantra is “I did the best I could” or “It seemed like a good idea at the time.” That helps.

When you were going through those high-stress, high-change times at the beginning of your tenure as CEO and president, how were you able to maintain morale, focus, and performance?

At AT&T and at Fidelity, I was used to doing layoffs. That’s what happens in big organizations. I hated it, but you get through it. At a nonprofit? Oh, my goodness. We stopped the 401K match for a year to get solvent. We froze merit increases and the pension fund for a year. No one complained because we explained to them over and over that we had to do this to save the American Red Cross. They understood.

But when we did the first layoffs, that’s when my inbox started filling up—not with “How dare you?” and not with “Why are you doing this?” Instead, the emails said things like “Alfredo is a single dad, and he’s going to get laid off. Can I work for half my salary to give him the other half?” The Red Cross is a place filled with people who have heart, and it was really, really difficult.

My advice when you’re in a position like that is to communicate again and again why you’re doing what you’re doing. The first time I started leading from the heart was when we were making all these changes. I could see employees and volunteers weren’t really understanding the changes, so I kept reminding people of their mission. I tried to elevate them to the point where they understood the steps. The worst thing you can do when you’re going through change is to have uncertainty. You keep morale going by explaining the changes.

From your experience, what skills are valuable for someone going into nonprofit management? What other advice would you offer to someone interested in a position similar to yours?

There are some nonprofits where people have huge hearts, but they don’t understand business concepts—and they usually don’t do well. Learn how to read a financial statement. Be able to recognize where the pitfalls are and what to do to mitigate them. Focus on tools that will help you fulfill the mission of the organization, such as understanding fundraising and managing expenses.

As for planning for your future, I’m going to give you some advice that may be counter to everything you’ve heard: Don’t overplan it. Things are going to happen. I’m a two-time breast cancer survivor. That was not in my life plan. If you’re going to have a plan, embrace the fact that it may not work the way you think. And don’t stress about it.

Life is a glorious adventure, and you’ve got to enjoy the off-road parts of it as much as you enjoy the on-road parts of it. The curveballs that life throws you make you stronger and better equipped to deal with what comes next.

About the Speaker
Gail J. McGovern has served as president and CEO of the American Red Cross since 2008. During her tenure, her transformational initiatives have improved the financial stability of the Red Cross and expanded the reach of its lifesaving services. Prior to joining the Red Cross, McGovern was a faculty member at Harvard Business School, president of Fidelity Investments, and executive vice president for the Consumer Markets Division at AT&T. BYU Marriott honored McGovern with the 2021 International Executive of the Year Award. This text is adapted from a speech she gave on campus on September 24, 2021.