THE SALVATION ARMY ONE BILLION DOLLAR KROC GIFT

THE SALVATION ARMY ONE BILLION DOLLAR KROC GIFT

CASE STUDY

Summary

It was in the course of 2003, when the wife of the founder of McDonald’s Corp., died and wanted to bequeath $1.5 billion to The Salvation Army, this was her philanthropic vision. Neither the Army officials nor public had previous knowledge of the gift. She specified that the donation was to be used only for planning and building community centers similar to the one a previous $70 million donation had funded in San Diego. Her vision was to build centers across the nation where low-income people could have access to libraries, sports facilities, training, daycare and other services sorely missing from their communities.

However, she wanted each community receiving a center to be bound to the center’s success and longevity. To accomplish this, she stipulated that the gift could only be used to plan and build the centers, but that on-going operational funds had to be raised by The Army. This stipulation of Mrs. Kroc created an enormous future financial commitment; for example, the San Diego center had an annual operating expenses of over $6 million. Finally, she ordered that none of her bequest be spent on operational activities of The Army.  This meant that the Army had to continue sourcing for its own funding parallel to the foundation funds.

Moreover the Salvation Army valued the work done by Xenophon Strategies that in the spring of 2004, they hired Xenophon to manage a highly visible ACLU lawsuit in New York City and then to manage communications around their relief efforts stemming from the string of hurricanes that hit Florida during August. This was so because of its marvelous plans and executions which saw the success of the  Mrs. Kroc vision.

Research

From the research that was undertaken from within, it was found that the gift created an enormous opportunity for The Salvation Army, but it also created a significant financial challenge. The fear was that Army donors would hear of the gift and believe that The Army didn’t need their money because they had just received $1.5 billion from the Kroc estate. This was meant that Kroc gift that would manage the story without hurting on-going fund raising efforts.

Also the Senior Army officials were humbled by Mrs. Kroc’s unprecedented gift, but  from their own research they knew that it would present a series of difficult challenges. Some of the challenges were to include:

1. a) Timing.

The Salvation Army having been informed of the gift during the holiday season, announcement having been made prematurely, it saw this to have significant impact on the most important fund-raising period of the year. News of a $1.5 billion gift could have potentially confused traditional donors into believing that The Army no longer needed donations because of a windfall. Thus need to plan this strategic so as the organization could be in position to realize the dreams of the vision bearer.

1. b) National versus regional outreach.

The Army in the United States is comprised of four independently operated corporations, called territories. In the days before Xenophon was contacted, there were on-going discussions among senior Army leadership about the merits of announcing the gift regionally in key territorial cities such as San Diego, or Atlanta or nationally from the Army’s U.S. headquarters in Alexandria, VA. This was undertaken so that all formalities and was to be observed in the whole process so as the who process looked official.

1. Messaging

The Army needed to be clear in its message about this gift that Mrs. Kroc’s donation was for planning and construction of community centers and perhaps more importantly, that the organization’s local fund-raising would be challenged to uphold Mrs. Kroc’s vision. By accepting the gift, The Army committed itself to annually raising millions in operating funds for the centers after they were built. The collected funds was to budget for all the needs of the organization and its day to day operational activities. Because of this, the Kroc gift did not reduce The Army’s fund raising needs, but increased the need for charitable contributions.

Some of the causes of challenges include

(Noelle Barton, Caroline Bermudez, Maria Di Mento, Candie Jones, Heather Joslyn, and Cassie Moore. The Chronicle of Philanthropy Friday August 4, 2006.)

• As the Salvation Army opens new recreation and social-services centers with the help of a $1.5- billion gift, the nonprofit organization is struggling to stay true to its mission( The New York Times). The core activities of the organization was to be upholded, neither the organization nor the Army was expected to divert attention from the objectives.
• While the new Kroc centers continue to provide traditional Salvation Army services like collecting and distributing food to the needy, providing referrals to social-services programs, and offering child-rearing classes, the centers are becoming popular in the neighborhoods they serve because they also offer visitors swimming pools, indoor ice skating and skateboarding, sports fields, and theaters. The neighbors and the needy people see the organizational charitable activities as the only hope for tomorrow, because its through it that their basic needs are meet.
• Officials at the charity now worry that the centers will give donors the impression that it is a wealthy organization that runs high-end recreation centers, rather than a thrifty church group devoted to helping needy people.
• Running the centers is also forcing the organization to find new sources of revenue.
• The money Ms. Kroc earmarked for the centers covers only about half of what they cost to operate, so the charity now must find ways to raise close to $70-million a year for the centers.

Planning.............