American Red Cross

My sense is that containing the costs was probably necessary. It is always painful and the short term consequences aren’t fun.

How will it work out in the long run? The move forward strategy, the culture and constituent experience will probably dictate that.

By closing local chapters and alienating longtime volunteers, executives at the American Red Cross have hampered the nonprofit’s ability to deliver emergency services, according to ProPublica.

The highly visible charity’s finances have suffered recently because of declining demand for the donated blood it sells to hospitals and the absence of high-profile disasters, which typically bring in big donations.

But Red Cross efforts to increase revenue by raising the prices of its CPR classes and swimming lessons backfired when customers switched to cheaper options, ProPublica reports. And efforts to cut costs through layoffs and branch closings have hurt morale and left some parts of the country without the emergency services the Red Cross has historically provided.

Chief executive Gail McGovern declined to be interviewed for the story, but the Red Cross released a statement defending her tenure, saying she took over the “antiquated organization” that allowed individual chapters to create their own bookkeeping, personnel, and technology systems. It said the layoffs and closures were “painful but essential for an organization that was both inefficient and financially unsustainable.”

Source: Red Cross Cost-Cutting Backfired, Says Report – The Chronicle of Philanthropy