Dreading the Mailbox

The mailbox is a foreboding place these days. Like a 4:00 a.m. phone call, you know it’s not going to be good news. There was a time when I might look forward to a letter from a distant friend. Now friends just email me the latest YouTube link. Is it just me, or are you beginning to wonder if Susan Boyle knows a song other than “I Dream a Dream?”

Publisher’s Clearinghouse Sweepstakes could be informing me that “I may already be a winner!” But I doubt it. Ed McMahon died and my hopes of an oversized check with my name on it died with him.

Nonetheless, I reluctantly trudged out to the mailbox this morning and here’s what I found:
3 magazines (I actually subscribe to one of them)
3 catalogs
2 ads
1 Christmas Card (from my insurance agent)
15 pleas for donations from nonprofits

‘Tis the season.

So I go through the stack. I pull out the “mailing labels enclosed” because I can always use more return address labels. OK, actually I can’t use more. I already have so many that I don’t know what to do with them. But I feel guilty throwing them out. Of course, that’s exactly what the nonprofit is hoping. That I’ll feel guilty about their having made up these lovely personalized labels.

The thing is: Lots of times they don’t get the name correct. Kay Lorraine. Sometimes they decide that my name must really be Lorraine Kay. Like I wouldn’t know my own name just because I’m blonde. And how do they know that I’m blonde? Worrisome.

Furthermore, my husband’s name is Brad Bate. Mostly, I don’t use his name. I use my husband a lot but his name, not so much. So I get Lorraine Bate, Kay Bate, Mrs. Kay Bate, Mr. Kay Bate, and – my own personal favorite – Mr. Brad Lorraine.

Anyway, I have too many labels. But my packrat mind keeps them all – just in case! Even the Christmas labels which, as a practicing Jew, are probably inappropriate for me, but the gas company doesn’t know that I’m Jewish so I use them to pay bills. I think of it as “Festive.” The Christmas Cards with the snow scenes are another story. As a Jew in Hawai‘i, they just don’t say “Happy Holidays” for me. But I keep the envelopes to pay bills with.

The only labels I don’t feel bad about tossing are the Jerry Lewis MD labels. Not because of Jerry or his kids. I give money every year to Jerry. But those are hands-down the most ugly labels known to man. Year after year, they never get any better. Horsy bold typeface set too close together. Yuk! Doesn’t the MD marketing department have an art director? Or someone with some esthetic sensitivity that can look at those suckers and say, “Guys, this is just crap.” It costs the same amount of money to print a nice serif typeface with decent kerning and leading as it does to print crap. Hello! So I throw those directly into the trash with no remorse.

But then there are the groups who send you a nickel. Do you peel off the nickels? Me, too. I just do it so that the metal doesn’t screw up the shreader at the city dump. That’s the only reason – I’m not really greedy; It’s an ecology thing. Sure.

At least it’s not as bad as the Indian Reservation that sends me blankets made from toilet paper byproducts.

Who knows better than I do how desperate nonprofits are these days? Each time I pass the empty building where the Hawai‘i Women’s Business Center stood, a pain shoots through my heart. They closed the doors over a year ago. I was the Executive Director. My husband says, “You have to move on.” Of course, he’s right.

In this economy, nobody has any money. So the nonprofits are glutting the mail. Can this possibly be profitable? I now own eleven free calendars for next year, filled with lovely pictures of polar bears and homeless children and whales-worth-saving. If those nonprofits took all of the money they spend on mailing labels, calendars, Christmas cards, Tibetan peace flags, and Indian blankets and did good instead, wouldn’t we all be better off? Or does no one give money to any charity anymore unless they get something or are guilted into it? Maybe that’s what we did wrong at the Business Center. Too much free counseling – not enough mailing labels. Sure.

Everyone is scrambling for every nickel these days. Not me, of course. I’m just trying to do my part to save the shreader.

The Sadness of the Hawai‘i Women’s Business Center

Brief disclaimer: Feel free to skip this. It isn't funny. It isn't even very interesting to anyone but a handful of people. It's just that occasionally you have to get something off your chest and say what needs to be said. That doesn't make it important to anyone other than me. I understand that.

I haven’t written anything lately because, frankly, I just don’t feel very funny. My heart is heavy as I mourn the closing of the Hawai‘i Women’s Business Center (HWBC).

I have been careful not to speak about the Center since leaving as its Executive Director last summer. But with its passing, I think that there are a few pretty serious problems that should be brought to light and discussed. They have to do with Washington bureaucracy run amok, the failure of community support on the most fundamental of levels and a political circumstance that makes it impossible for a federal agency to go to bat for a local not-for-profit organization that it helped parent.

The Hawai‘i District Director of the Small Business Administration (SBA), Jane Sawyer, was one of the founders of the HWBC. She and co-founder Cherylle Morrow, HWBC’s final program director have both done superlative jobs in holding things together through the devastating economic storm of the past couple of years. As far as I know, HWBC was the only free economic development center in the state whose mission was assistance to Moderate to Low Income (MLI) women.

This is a loss to me, personally, because I worked so hard to build the Center up and I have so much invested in it. The loss is overwhelming to clients who depended on the Center to assist them in becoming self-sustaining. But it is an even greater loss to small business in Hawai‘i and the community as a whole, whose government and financial industry have let them down once again.

(I hate acronyms and it pains my fingers to type them but there are going to be a lot of them in this article because the federal government is an organization that has never met an acronym it didn’t like.)

The Structure of the Operation: The HWBC had two funding mechanisms:

1. a national component, as part of the U.S. Small Business Administration (SBA)
2. a local component, as the Center is required to match all federal funding with local dollars

Congress created and funds the federal Women’s Business Center (WBC) program through an earmarked line in the SBA budget, much like the federal Small Business Development Center (SBDC). The SBDC is similar but much older and better supported.

The Hawai‘i Women’s Business Center was funded in part through matching funds from the Office of Women Business Owners (OWBO), the division of the SBA that oversees the WBC program. Unfortunately, only about 30% of our funding came from the SBA and all of that was in “matching dollars,” which meant that we had to find outside funding for every dollar that was “matched” by the SBA – and then only for a limited amount each year. That still left approximately 70% of the HWBC operating budget coming from outside resources.

The Hawai‘i Women’s Business Center was unusual in several ways, all of which have to do with community support. Many WBCs are attached to their local Chamber of Commerce or other local economic development organization that provides on-site staffing. The Department of Economic Development in the administration of Mayor Mufi Hannemann was generous in allowing us space within a city-owned building at a substantially reduced rent. As much as that was appreciated, HWBC was one of the few stand-alone centers with no assistance from an on-site partner. (We did not share a receptionist, an accounting staff, pooled record-keeping resources, etc.).

Community Investment: Additionally, many WBCs enjoy strong economic support from their local banks, often as a part of the financial institution’s federally mandated Community Reinvestment Act (CRA) requirements. Much has been made of the fact that the Center opened in 1998 with startup money from American Savings Bank. True and appreciated. But it has been years since any local financial institution has made a substantial donation or grant to the Hawai‘i Women’s Business Center. This was always a mystery to me since all banks are required to reinvest in their communities by federal law. It is also to the advantage of financial institutions to see that entrepreneurs applying for SBA-guaranteed loans have been nurtured to a degree that their success is better assured.

How the CRA Works: The CRA was created by Congress in 1977 to prevent banks from excluding or “redlining” low-income or minority communities from access to credit. It was designed to encourage banks to meet the credit needs of the “entire” community in which they operate. In 1997 the ways in which banks could meet the CRA mandate were broadened to include investments in the community as well as loans. There were also provisions for special consideration of minority and female owned institutions and partnerships as well as broader interpretation of community investments aimed at economic development of LMI segments of society.

So What? As Dr. Seuss once said, “Things like this are important to know – and that’s why I’m bothering telling you so.”

At virtually every other WBC, they enjoy a partnership with a variety of local financial institutions through grants and donations. Some are programs to support a bank's CRA performance evaluation, others are donations from the banks' foundations. Either way, this makes sense to me, since non-profit WBCs help women start businesses (which will need a bank), improve financial literacy (good for banks), become self-sufficient and increase family assets (also good for banks and S&Ls). Additionally, the HWBC assisted clients with a variety of SBA loan applications as well as working to obtaining traditional financing through a local banks or other lending institutions by helping to develop a workable business plan, raise credit scores, and fill out complicated paperwork and other forms of assistance. All of this is good for banks both directly in the formation of services and indirectly by creating a stronger community economic base.

So why did Hawai‘i banks fail to support the HWBC in ways that other communities were able to take for granted? I don’t know. I never figured it out. This is not a criticism of the local banking industry. It’s just what’s so.

State funds: Unlike our sister-organization, the SBDC, which receives funding from the Hawai‘i Legislature through a line-item in the state budget, the HWBC has never been part of the state’s funding plans. Many other states have included WBCs in their economic development budgets or fund the WBCs through grants-in-aid. The state of Hawai‘i, however, has never given the HWBC a grant-in-aid, despite many requests. Why doesn’t the state support the HWBC in ways that many other WBCs are able to take for granted? I don’t know. I do know that money is tight and there have been practically no grants-in-aid given over the past several years. But even before the current economic crisis, the State of Hawai‘i has never seen fit to award a grant-in-aid to the HWBC. This is not a criticism of the state legislature. Once again, it’s just what’s so.

Federal Funding: When the SBA began funding the WBCs through OWBO, the allocation was $150,000 per year. In the two years that I was Executive Director of the HWBC, we faced significant and steady annual cuts in the per-center program budget. Annual allocations have now fallen from an average of $150,000 per year per center to as low as $80,000 per center.

During this same period, the demand for services increased wildly. Historically, small business creation runs in a counter-cyclical fashion to overall national economic health. When the economy is running well at “full employment,” fewer people are thinking of starting their own businesses. When economic conditions deteriorate and layoffs increase, people launch their own ventures in increasing numbers. WBCs are on the front lines of this situation; as the economy tanked, women turned to entrepreneurship as a way to provide for their families. Walk-in traffic increased dramatically at the very time when our funding was being cut.

Loan Programs: Between the initial funding pool enacted in February 2009 and three additional appropriations, the American Reinvestment and Recovery Act (ARRA) funneled a total of approximately $730 million to temporarily eliminate fees for SBA loans and increase the portion of each loan that the government guarantees, up to 90%. That has supported more than $27.5 billion in lending to more than 60,000 small businesses nationwide.

This was terrific news for small businesses in America, but it created a serious problem for already under-funded Technical Assistance Providers (TAPs) such as the Hawai‘i Women’s Business Center. TAPs are vital to the SBA program because small businesses such as one and two-man operations often need extra help in putting together a workable business plan, a fiscally responsible cash flow chart, an accessible back-up strategy and other tools required to guarantee that the borrower will be able to replay the loan in a timely manner. This is a labor intensive process on the part of the TAP and it is often accompanied by stringent time deadlines.

TAPs are required to attend seminars, participate in phone conferences and review reams of written information in order to learn the specifications of each different SBA loan program (I believe there are somewhere between five and seven different ones currently, including ARC). The TAPS then work with clients from helping them find the right program for their needs to actually submitting the paperwork. When the ARRA was first passed, it contained $25 million for staffing-up to meet demands for new programs. Unfortunately, not a cent of that money trickled down to the WBAs. The result was a LOT more work with another cut in funding.

Anyone who understands physics knows that you can’t cram 10 lbs of work in a 5 lb. bag. And, anyone who understands finances will appreciate how important the Technical Assistance Providers are to the program: A government-backed loan reduces the risk for the lender because if the small business borrower defaults, the government eats the guaranteed portion of the loan (in some circumstances, that’s up to 90% of the entire loan amount). So the less assistance small business folks are getting, the more likely they are to default on the loan. This would be a disaster for the federal government. This is federal bureaucracy at its most inept.

Buried in Paperwork: While we are on the subject of federal bureaucracy, let me point out that because of its legislated structure and funding, the WBC Program is complex. The paperwork is overly complicated and inefficient. In report after report, huge chunks of the exact same information is required to be typed into forms, in defiance of the federal Paperwork Reduction Act of 1980. During my period at the HWBC, I can honestly say that there were large periods when I was so inundated with redundant federal paperwork, I didn’t have time to do my job.

Untimely Payments: SBA grant payments are supposed to be made to the WBCs in quarterly installments (more or less). When I first came to the center in the summer of 2007, it was not uncommon for a Center to go four to six months (or more) without a payment. OWBO recognized that they had a problem and instituted new procedures designed to fix the problem. On September 20, 2007, Anoop Prakash, Associate Administrator of the SBA’s Office of Entrepreneurial Development testified before the Senate Committee on Small Business & Entrepreneurship. Prakash talked about “…grant disbursement backlogs and delays, and other customer service issues that have affected at least one-third of Women's Business Centers and have periodically placed them in difficult financial circumstances.”

Even after the restructuring that was intended to fix the system, testimony related to SBA Entrepreneurial Development Programs and the Role of Women’s Business Centers in an Economic Recovery submitted to the U.S. House Committee on Small Business on February 11, 2009, admitted that huge problems remained. “While there has been some significant improvement in the speed with which grant monies are disbursed, the paperwork burden remains exceedingly high – especially when compared with other federal, state and local procurement procedures that WBCs follow – and the program grant disbursements are not always made in a timely manner. In recent years many WBCs have waited months before they received the funds for the services that they were delivering throughout the course of the year.”

Can you imagine how difficult it would be to maintain reasonable cash flow in your business if your primary client regularly withheld all payments for half a year at a time? How would you meet rent and payroll? How would you continue to provide your services and products to your clients? How can any federal agency that purports to “provide business training, counseling and other resources to help women start and grow successful businesses,” withhold payments and behave in such an un-businesslike and unconscionable manner?

In the end, the loss of the HWBC is more than just unfortunate. It is a blow to small business in Hawai‘i and should be a serious concern, as it is indicative of several significant problems in both Washington, D.C. and in our community.

Shame.

We're Not Limping - We Just Walk Funny

Long, long ago in a Galaxy far, far away (OK, Chicago in the late 1970’s) my husband, the marketing guru, had a coffee client. McDonald’s was introducing their new coffee standard to the country and this high-end coffee client was the anointed supplier. In the end, Brad (the husband du jour) wrote a heck of a darn strong campaign that spelled out, in plain terms, just exactly what it was that made his client’s coffee so superior to the competition that McDonald’s would be proudly featuring this coffee exclusively. And the client just shit.

“You can’t say that,” was their response.

“Why not? Isn’t it true?” Brad retorted.

“Of course it’s true. But nobody outside the industry understands that this is the way the industry has traditionally processed coffee beans. If we tell the public, our peers in the coffee business will be furious.”

They were dead serious. In the end, they chose to go with a much weaker campaign that sounded more like puffery than truth, because they would rather keep peace in the industry than sell more coffee.

I’ll bet you think that this is an unusual case. Not necessarily. I’m always surprised at clients who will pay good money to shoot themselves in the foot and then pretend that they are not limping.

Back when I was in the film production business, we were casting a spot for a water heater company. (Hey, they can’t all be big, glamorous clients. Some days it’s United Airlines and some days it’s water heaters; the bank just doesn’t care.) Anyway, we looked at a lot of actresses to play the nagging, harpy wife. In the end our client insisted on casting an inexperienced newcomer who, frankly, gave a crappy audition. We were mystified and none too pleased.

On the day of the shoot, the actress was so nervous that it took nearly two hours to get a decent reading of one lousy line. It wasted time and cost us thousands. But the client didn’t care because when she first appeared on set, ready to shoot her scene with her hair in curlers, cold cream all over her face, wardrobed in an unattractive bathrobe and ratty pink slippers, our client stood up and proudly declared in a loud voice that carried across the whole soundstage, “Yes! She looks just like my ex-wife. I hate her!!”

How that helped sell water heaters I will never know, but the client was thrilled and we all limped to the bank.

I used to have a wonderful friend, Susan Gillette, who was President of DDB Needham, a big Chicago advertising agency. One day at lunch, Susan admitted that, “We agency people award a million-dollar-spot to a director based on what he can bring to the party. We then proceed to spend the rest of the project trying to protect our egos and thwart his efforts.” Thank you, Susan. At last, truth in advertising.

I wonder if there are other businesses where clients pay good money to shoot themselves in the foot?

Sure there are: I recently worked for a nonprofit that was sinking deeper and deeper into financial trouble. Part of what I was paid for was the ability to raise money. But the Board of Directors refused to allow me to tell anyone of our problems. “Keep a positive attitude,” insisted the Board. “We have to look like a winner.” If we had been a high-profile player on the New York stock exchange, that attitude might make sense. But when you are a nonprofit that depends on grants and contributions for your sustainability, it’s hard to go to a grantor and say, “We’re just great. Everything’s terrific. Couldn’t be better. And by the way, could you please give us a big sweaty wad of money? Please? Not that we need it or anything……”

Bang bang, they shot me down
Bang bang, I hit the ground
Bang bang, that awful sound
Bang bang, my client shot me down...

(with apologies to Sonny Bono, as I limp slowly into the sunset)

The Biggest Mistake Employers Make When Filling a Top Job

Job Opening: Looking for an Executive Director. Must have minimum of 5 years top management experience. Prefer candidate be aprox. 5’7” 155 lbs. with dark red hair and a deep, throaty laugh. Send resume to: Blah, blah, blah.

Would anyone really place an ad like this in the Jobs Section? No. But they might just as well, because subconsciously that’s what they want.

There’s a mistake made by employers nearly 100% of the time when looking for a new hire. They seldom think of themselves as hiring a new employee. Instead, they seek to “replace” the old employee with a clone. They do this because:

1. That’s the way we’ve always done it (official company motto: “Live and Don’t Learn.”)

2. It’s easier that way.

3. If things go badly, the responsibility is easily diffused.

But I disagree with this philosophy. (You knew that I would.) And here’s my rationale: When an employee leaves, for whatever reason, if the employer just thinks in terms of replacing that employee they deprive themselves of an chance to wipe the state clean and begin anew. Perhaps, 12 years ago, when that position was first created, there was an excellent job description written. In fact, I’ll bet that they are still working from an updated version of that same job description to this day! Maybe that’s swell. I doubt it.

Nonprofits are particularly bad about this, by the way. Small staffs and volunteer board members who can’t afford to “waste their valuable time” tend to think in terms of the immediate problem rather than the big picture.

We all know the definition of insanity: continuing to do the same thing and expecting a different result. During this current lousy economy, everybody has to start thinking outside the box. What worked in 2007 probably won’t work in 2010. When a person leaves, it creates a remarkable opportunity to re-think the job with something that is more appropriate with the changing world of doing business.

By the way, this same axiom is true with Board members as well. There are a startling array of lousy practices that are used when replacing an exiting board member. But one of the worst (and most popular) among female-heavy boards is to let the person who is leaving nominate her friend or co-worker to replace her slot. That would work well if this were a sewing circle, but with a Board of Directors, not so much. Men do this to some extent, too, but with men the nominee is more likely to be someone that the outgoing member has worked with on another board. Men are more incestuous; women more friend-driven.

Frankly, ladies, it’s just this sort of thing that is holding us back in business. A Board of Directors isn’t about “friends.” It’s about who can do the job. A vacancy on the board is an opportunity to look at where the organization is at that moment and define what is required to take it where it needs to go. If an organization is having governance problems, then maybe a strong HR person is needed. If funding is the overriding issue, then the board needs to understand that each member has a responsibility to give or raise a certain amount each year. (This is a very common procedure in nonprofit boards.) If the organization is having branding and image difficulties, then you need to pack the board with high profile, heavy-hitters to create credibility within the community.

Whether it is an employee or a board member, the company must have a really clear picture of what it needs today, as opposed to what was needed three years ago; because the likelihood of them being the same is very low. And what better opportunity to reassess that situation than when an opening occurs.

Now where did I put that dark red hair dye?

Why We Don’t Need Another Nonprofit

Those of you who have been following me for the past couple of months know that I recently lost my job as the Executive Director of the Hawaii Women’s Business Center. It was nothing personal. Federal funds were cut to such a point that they could no longer pay my salary, or that of our office manager. I was sad to leave the Center, because I am still passionate about their mission, but the board and I were in agreement. In a dwindling economy, you can’t squeeze blood from a turnip.

Since then, a surprising number of friends and colleagues have suggested that I should start a competing non-profit. Bless their hearts, I know that they mean well. But I consider this to be a mistake of astonishing proportions on a number of levels.

First of all, frankly there are just too many non-profits already out there in the marketplace. They often have similar goals and even though the work that they are doing is altruistic and necessary, the administrative costs involved in overlapping services ultimately hurts those who need them the most. As an example, I googled “drug treatment youth Hawaii” and quickly found 124 separate rehabilitation facilities and programs – and I didn’t even try very hard.

Let me be clear about this: I am not suggesting that we need fewer addiction programs in the state. I haven’t studied this situation enough to make a judgment such as that. But I do strongly suspect that we don’t need any more programs. I believe that we would get better ROI by putting additional funding into the programs already in place rather than by starting yet another.

Funds are dwindling – everywhere. There’s just not enough money to go around. The pie is smaller; the need is greater. In the past, it has been difficult for moderate and small-sized nonprofits to recruit suitable leadership, simply because nonprofits traditionally pay substantially less than their counterparts in the for-profit marketplace for positions of equal responsibility. Often the best candidates don’t even bother to apply. Of course, there will always be those of us (particularly baby boomers) who feel a calling for working in the nonprofit industry, despite the monetary downside. But the hard fact is that resources are diminishing, even for those of us committed to the altruistic goals.

In April of 2009, a survey of over 1,100 nonprofit leaders in markets nationwide was released by Nonprofit Finance Fund (NFF). The key findings were pretty bleak:

• Only 12% of nonprofits expect to operate above break-even this year.

• Just 16% anticipate being able to cover their operating expenses in both 2009 and 2010.

• 31% don't have enough operating cash in hand to cover more than one month of expenses, and another 31% have less than three months' worth.

• 52% of respondents expect the recession to have a long-term (2+ years) or permanent negative financial effect on their organizations.

• 93% of lifeline organizations that provide essential services anticipate an increase in demand in 2009.

According to the Washington Post, a recent survey of member nonprofits by the D.C.-based Center for Nonprofit Advancement revealed that:

• one-third have no operating reserves or endowment

• 41 % are suspending or closing down programs

• and 44% are laying off staff.

So where will the nonprofits that do survive get their funding?
Oh, oh….more bad news:

It probably won’t be from foundations. On November 4th, The Foundation Center located in New York City reported that their latest survey shows foundation giving will likely decline in 2009 by 10%, slightly worse than their 8% estimated earlier this year. And as if that isn’t bad enough, the Center predicts further declines in 2010.

The extra money needed probably won’t be coming from the public either. According to a November 16, 2009 Associated Press report, only 38 % of Americans say they are likely to give at least one charitable gift as a holiday present this year, compared to 49 percent last year.

Looks like Santa is going to be skipping a lot of 501(c)(3) chimneys this year.

So will nonprofits fold up their tents and close their doors? Some will. But the smart ones will quickly discover that there is safety in numbers. Savvy nonprofits will band together with like-minded organizations and share costs. They will disclose strategic planning information so as not to cannibalize each other’s programming and educational bases. I predict that the ones who will succeed are the ones who understand their clients’ needs and allocate their budgets to doing one thing really well rather than trying to be all things to all people.

Those who sit tight and pray for a white knight to gallop in and save them won’t stand a chance in this economy.

So, to all of my dear friends who have encouraged me to start a women’s business center, bless your hearts but don’t hold your breath. I may be neurotic but I’m not stupid. The world doesn’t need another nonprofit right now. Let’s just support the ones we already have, OK?

P.S. This holiday season, the world probably doesn’t need another $16 scented candle, either. But there are families around the globe whose lives would be changed by the gift of a goat or a chicken. May I suggest that you check out Heifer.org or Oxfam.org, two nonprofits that help families in third world countries become self sufficient while providing nutrients for their children. Or give the gift of a smile – The Smile Train performs free cleft palate surgery on children around the world, changing their lives in societies who shun those born with deformities. With nonprofit organizations like Doctors Without Borders, Project Hope, Mercy Ships or your local Shriners Hospital for Children, there is very little excuse to spend money on candy (it rots your teeth and makes your butt fat), knickknacks (they collect dust) or jewelry. Do something good this holiday season. Please. Thus endeth the lesson