Hadassah Changing the Way It Does Business

Madoff: A Year Later

By Gal Beckerman

Published December 02, 2009, issue of December 11, 2009.
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A persistent stereotype attaches itself to Hadassah: sweet, elderly ladies holding tea socials and collecting money in tin boxes for Israel.

The Boss: Nancy Falchuk is Hadassah’s national president.
Leo Sorel
The Boss: Nancy Falchuk is Hadassah’s national president.

But it takes no more than five minutes with Nancy Falchuk, the organization’s national president, to dispel this image. Her Hadassah sounds like it has been processed through the meat grinder of business consultants. The organization’s many chapters — some in nursing homes scattered across the country — are “units.” Falchuk wants to institute “central banking” and “service centers.” And her main concern, by far, is a deep “restructuring,” one that would alter, in important ways, how the 98-year-old Zionist women’s organization functions.

Falchuk, the unpaid lay leader and self-described “boss” of the organization, has a steely demeanor — not even blinking as she described eliminating 97 of its 320 staff positions this past year — that it might just make her the ideal person to head up a charity that has recently faced a blizzard of crises and is looking to remake itself.

The collapse a year ago of Bernard Madoff’s Ponzi scheme, in which Hadassah had invested $40 million and assumed it had $90 million to withdraw, was actually the second blow to an organization dependent on donations for its survival. The global financial crisis was the first and more significant, making it increasingly hard to pull in the tens of millions of dollars that Hadassah is accustomed to collecting every year, money that pays for maintaining its hospitals in Israel and other international programs. But it was Madoff who brought the organization a certain amount of infamy and smeared it with more bad news than it has had in decades.

First there was the salacious revelation, in a book published in August, that Hadassah’s one-time chief financial officer, Sheryl Weinstein, had an affair with Madoff while sitting on the committee charged with investing the charity’s money. Then came the announcement, also last summer, by the lawyer tasked with resolving the Madoff bankruptcy, that he would look to recoup money for the victims from any organization that had made a profit from the Madoff fund. Falchuk has confirmed that Hadassah withdrew as much as $130 million since its initial investment in 1988.

In an interview with the Forward, Falchuk declined to talk about Madoff or the state of the “clawback” efforts. She did, however, want to dispute any notion that Hadassah had been at fault for its Madoff problems.

“We hired a special committee. We hired an outside counsel to evaluate everything that we’d done,” Falchuk said. “And they came back with the conclusion that we were very much a role model for other nonprofits. We were very diversified. The kind of policies and procedures that were put in place were very good. After their findings, we made some changes, but they were very minor.”

But the taint of Madoff has been only part of the problem. There is also the practical issue of raising money, which has become more difficult. In November, The Chronicle of Philanthropy released its list of the 400 biggest not-for-profits. Hadassah was at number 237, with its donations down 49.9% since last year, to $85.6 million. Falchuk and others inside Hadassah contend that this gave an inaccurate picture of their financial situation, since in the previous year, the charity received an unprecedented $75 million gift from glass magnate Bill Davidson on behalf of his mother, who started the Hadassah chapter in Detroit. Along with 40 donations of $1 million each, Falchuk said that 2007 was an exceptional year, too out of the ordinary to compare with this past one. According to its own figures, Hadassah has brought in on average about $7.5 million a month from July to October 2009.

Hadassah’s largest project is building a 19-story, 100,000 square-meter complex as an addition to its main Ein Kerem hospital campus near Jerusalem. It is slated to be completed by 2012, when the organization celebrates its centennial. The Sarah Wetsman Davidson Tower, as it will be known — named for its largest donor — costs $318 million, without equipment. As of November, Hadassah was $100 million short of that goal.

Falchuk, however, does not seem overwhelmed by the economic environment.

“Every crisis is an opportunity,” Falchuk said. “It’s given us the license to take bold steps, to change the way we do business. We are now doing things people have been trying to do for the past 15 years.”

When she was inaugurated in July 2007, Falchuk handed the executive board copies of management guru Jim Collins’s 2001 book “Good to Great,” which presents a cutthroat approach to refocusing a company’s resources. The book advises business leaders of failing companies to think of themselves as bus drivers on a stalled bus. The first job for a leader, Collins writes, is figuring out not where to go, but who is coming along. “They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats,” the book counsels.

In January of this year, Falchuk laid off 80 people, 25% of Hadassah’s staff. A further 17 were let go in November. It was all part of a restructuring plan drawn up by the consulting firm McKinsey & Company that was approved by Hadassah’s executive committee the week before the Madoff scandal broke. What was supposed to be an 18-month process was immediately sped up.

Part of the restructuring meant losing the executive director, Morlie Hammer Levin, who had filled the position in 2005 and was laid off in May. She did not return calls for comment. Falchuk said that Levin’s departure was amicable and that she is not even sure there will be an executive director position any longer.

Some have not taken these big changes so lightly. Staff at local Hadassah chapters complained to the Forward about Falchuk’s leadership style, which one woman described as “dictatorial.” All refused to speak on the record, for fear of incurring retribution. Many were worried about the speed of the restructuring, arguing that Falchuk took advantage of a turbulent economic situation to implement destructive changes.

Falchuk said that the disgruntlement is normal, a side effect of all change.

“To the volunteer, they want to know what it means to their leadership role,” Falchuk said. “Our leadership is all over the country, and what we’re doing is impacting on them, impacting on their role.”

Falchuk thinks that Hadassah had spread itself too thin, with its various chapters involved in too many causes. She wants to return to what she calls the “core mission” of Jewish education and to raising money for Israel. This also means slimming down budgets at local levels. Too much energy had been spent, she said, on raising money in order to pay for rent or administrative assistants. She feels there is no need for so many offices.

“When I was president of a 5,000-women chapter, I worked out of a room in a synagogue,” Falchuk said. “There is nothing wrong with that. You had the whole community involved because you were there. It’s a matter of looking at how you do things differently. If we still want to work on organ-donation issues, or we want to do osteoporosis or anything else, we should join forces with other organizations.”

Her next moves, which she described to the Forward, and which were approved by the 240-member board in November, might add to the anger of those at the local level who already feel their power being stripped.

Falchuk is going to implement what she calls “central banking.” In order to avoid wasteful spending, money raised by local Hadassah chapters will be funneled to eight “resource centers” around the country. They will be in charge of much of the administration, and distribute money back to local chapters. According to Falchuk, this change should be completed within 18 months.

“It’s going to be a lot of it incentive-based: the more money you raise, the best programs you create, the most membership you draw. There is a formula for how we will then support that unit,” Falchuk said.

With her term running out in 2011 (presidents can be re-elected for four one-year terms), Falchuk wants to see the restructuring completed.

She doesn’t mask her ambition. Her other goals include finally seeing Hadassah win a Nobel Peace Prize.

Contact Gal Beckerman at beckerman@forward.com

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