YMCA adopting business model

Area nonprofit develops `product segments,' marketing plan to double size in 10 years

March 09, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

The Baltimore metro area keeps growing, but at the YMCA of Central Maryland, membership is fairly flat. Donations are flat. The streams of money critical for expanding services, updating old centers and reaching more people - flat, flat, flat.

It's not an unusual story for charities, which are struggling to meet mounting needs at a time when there's more competition for donors, for government grants and - in the Y's case - from snazzy private health clubs. So the Y's new chief executive is opting for a game plan that an increasing number of large nonprofits are following:

Be more like a for-profit.

Hoping to double its size in the next 10 years, the Central Maryland Y expects to announce today that it has reorganized into "product segments" such as health and wellness to aim for more consistent services at its nine branches; is in talks with businesses around the region about corporate partnerships; and will soon launch a marketing campaign to "brand" itself in potential customers' and donors' minds.

The Y - whose revenues have hovered around $30 million in the past few years - is turning away from the old model of buy-land/build-center, and is now looking to manage outposts in hospitals, industrial parks, universities and the like.

"I think any successful nonprofit these days has to run itself, from a management and strategy standpoint, like a business," said John K. Hoey, chief executive of the local Y, who took the job in July after a career with public companies.

The Y, which is among the largest private child care and Head Start providers in the state, hastens to note that it will remain a charity in more ways than its tax-exempt status.

The Y says almost a third of its budget goes to cover the costs of people who cannot pay the full price - or anything at all - for the fitness facilities, day care or children's programs. Though it serves more than 150,000 people a year, many of those are not paying customers. It says it has no intention of turning away from that mission.

But inevitably, there are tensions when nonprofits take a page out of corporate playbooks. Particularly when they have corporate competitors.

This is already true of the YMCA, which in the U.S. is a collection of about 2,600 independently run organizations. Health clubs across the country have filed lawsuits to try to keep Ys from opening new centers, arguing that these nonprofits are indistinguishable from for-profits - except for the tax advantage.

The International Health, Racquet and Sportsclub Association, an industry trade group, thinks the money the Y makes on fitness services ought to be taxed.

A few years ago, Dick Thomson, owner of Windwood Health & Sports Club, unsuccessfully fought a Y opening a mile away from him in Franklin Park, Pa. - a well-to-do suburb of Pittsburgh.

"I don't see the YMCA any longer addressing the real charitable needs of the communities that need to be served, that are difficult to be served by private enterprise," Thomson said. And, he added, "I don't know of any ... privately owned clubs that do not do a tremendous amount of community outreach."

The rush for nonprofits to be more businesslike is a search for new revenue at a time when charitable giving, though rising, can't keep up with growing needs and government has shifted much of its funding into vouchers to individuals, forcing nonprofits to market themselves, said Lester M. Salamon, director of the Johns Hopkins University's Center for Civil Society Studies.

From a bottom-line perspective, it's working. Half the income nonprofits pull in now is coming from fees for services paid by consumers, he said. Even human-services charities, who rely heavily on government funding, have increased their fee revenue substantially.

Some nonprofits, such as Columbia-based Enterprise Community Partners, have for-profit subsidiaries. A growing number are looking to see which services recover their costs, so they can drop the ones that don't.

The downside: "It places enormous pressures on nonprofits to surrender their missions," Salamon said. He said charities need to remember, "The goal is not to maximize the income of your organization, the goal is to maximize the mission."

Greg Phillips, who has worked in the YMCA system for 28 years, thinks mission-maximizing is what the new focus will allow.

"I'm just supercharged up about this direction," said Phillips, whose new title under the reorganization is director of health and wellness in Baltimore City. (The Y's other "lines of business," as Hoey puts it, are child care and family services, and sports and camping.)

Part of the Y's challenge is branding itself in the minds of residents who haven't stepped into a branch for years, if at all, Hoey believes.

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