By: Jeremy Mullman

February 23, 2004, Crain's Chicago Business

Business schools say enrollment in non-profit management programs is surging. Graduates of those programs may come in handy.

A fraud scandal engulfed the national United Way more than a decade ago. Critics questioned the American Red Cross' allocation of resources following the Sept. 11 terrorist attacks. Fund raising in both cases suffered.

The mismanagement theme has hardly subsided since. An article last May in the Harvard Business Review estimated that, nationwide, the non-profit industry is squandering as much as $100 billion a year.

And increasingly, major funders are tracking how well their cash is being used. Not having a profit motive, they believe, isn't an excuse for inefficient management.

That message drove a massive restructuring at the United Way of Metropolitan Chicago, where new CEO Janet Froetscher — herself an MBA — led a dramatic overhaul.

Ms. Froetscher's seven-person executive team, which includes three MBAs and a certified public accountant, took a machete to an outfit that had 54 separate financial management systems. By the time they'd finished, an organization with $70 million in annual revenues was saving $3 million a year in administrative costs.

"It was incredibly helpful to have people with that kind of training," says Ms. Froetscher.

Back to school

Michael Mulqueen, CEO of the Greater Chicago Food Depository, has long railed against inefficient management. He's done more than grouse: The depository is preparing to open a "Pantry University" to improve efficiency at every food pantry to which it distributes food. And Mr. Mulqueen has taken steps to improve efficiency internally, sending six of his staffers to a non-profit management certificate program at Chicago's North Park University and three others to a "performance management" seminar at Harvard. Mr. Mulqueen already has employees on staff with MBAs from Harvard and Northwestern University's Kellogg School of Management.

"You need to have some kind of a (professional background) if you have the philosophy that we do, that we're going to run it like a business," says Mr. Mulqueen.

Do-good school: Liz Livingston Howard is associate director of the Center for Nonprofit Management at Northwestern University's Kellogg School of Management. The number of Kellogg students majoring in non-profit management has tripled since 2001. Photo: Brett Kramer

Doing the math The price tag for an MBA can be high — especially relative to the kind of salary a graduate can expect to earn at a typical non-profit. "Obviously, the salaries non-profit executives make aren't exactly commensurate with what it costs to go here," says Liz Livingston Howard, associate director of the Center for Nonprofit Management at Northwestern University's Kellogg School of Management. "Some go back into the private sector for a little while. Others just realize that this is a cost." A two-year Kellogg MBA in non-profit management costs close to $120,000, nearly twice the average non-profit salary for the school's 2003 graduates. The class of 2003 — including a handful of low-skewing non-profit workers — averaged $88,000 in annual salary straight out of school. And two-thirds of graduates received a signing bonus averaging $16,000. Northwestern offers a loan-easement plan to graduates making less than $60,000 a year in the non-profit sector.

For non-profit employers like Mr. Mulqueen, that sort of help is getting easier to find. This year, 92 Stanford University business students — 25% of the graduating class — will earn certificates in non-profit management. Closer to home, North Park has seen the number of students enrolled in graduate-level non-profit programs double since 2001, to 150 from 75. The number of Kellogg students majoring in the field has tripled in that period, to 22 from seven.

It's clear there's demand for graduates with MBA-style training in the non-profit world. What's less clear is why so many more students are willing to pursue a degree that's often expensive in order to get a job in such a modest-paying field.

"My mother's reaction was, 'You're supposed to go to business school to make more money, not less,' " says Sarah Zehr, a former Arthur Andersen consultant who used the Kellogg program as a springboard into an executive job at the Chicago Public Education Fund. "But when I was consulting, I was helping companies that make lots of money make more money, and now I help schools."

Most of the students aren't quite so selfless. According to Liz Livingston Howard, associate director of the Center for Nonprofit Management, about 70% of the 200-plus students who enroll in non-profit-related courses each year have no intention of seeking jobs in the non-profit sector. Most, she says, envision themselves as future board members or volunteers.

Financial concerns

Of the 30% who do plan to work in the non-profit world, most go first into the private sector, where they can earn enough to pay down student loans.

At Ms. Howard's Tuesday night class on "Marketing and Fund-raising for Non-profits," the mix of khaki-clad, business card-swapping, laptop-toting students probably doesn't differ much from those in any other course at the school.

This night, the class discussion is about the merits of various styles of solicitation letters. Ms. Howard tells the students they're "the best people to evaluate these letters because you are the potential donors, the targets."

One letter begins generically: "Dear friends."

"If I get one like that, I just throw it in the garbage," says Jesse Kane, a night student whose day job is with the corporate giving arm of GATX Corp., a Chicago-based railcar-leasing firm.

For some students, the discussion is hardly theoretical.

"Every day, it's like, 'Oh God, if we only did this, or knew about that,' " says Isabelle A. Bibbler, a second-year MBA student who spent four years at a Bay Area educational non-profit before enrolling at Kellogg. She intends to re-enter the sector as soon as she graduates.

It's clear she'll have choices: Kellogg recently forwarded 13 non-profit job listings — ranging from charitable-minded venture funds to the Nature Conservancy — to her e-mail box.

While Ms. Bibbler finds Kellogg's seven non-profit-related courses compelling — they range from "Board Governance" to "Mission, Strategy and Finance" — she's more interested in traditional MBA fields, like finance and marketing.

So, why bother with a program that specializes in non-profit management?

"I wanted to be sure I was going to a place with like-minded people," she says.