Building Success

By the time Jonathan Reckford was 42, he'd crafted a corporate résumé that would inspire envy: he'd earned a Stanford M.B.A. and done stints at Goldman Sachs, Walt Disney and Best Buy. But life in the Fortune 500 hadn't proved completely fulfilling, and after a financial windfall from a merger, Reckford was working as a Presbyterian minister in Minnesota. So when a headhunter called a year ago wondering if he "knew anyone who might be interested" in becoming CEO of Habitat for Humanity International--in recruiter lingo, that often means "How about you?"--Reckford was intrigued. He concluded that running Habitat, the global home-building charity with $1.1 billion in revenue, might use both his business savvy and his do-gooder instincts. After a series of interviews and a final grilling by Habitat booster-in-chief Jimmy Carter, last August Habitat appointed Reckford its new CEO. Just in time: weeks later, Hurricane Katrina hit.

The historic storm was just the latest in a whirlwind series of changes hitting Habitat, which ranks as America's 20th largest charity (chart). Last year Habitat's board pushed out its founder, Millard Fuller, who'd led the charity for nearly three decades but faced a series of sexual-harassment charges; Fuller's now set up a rival nonprofit of his own. To replace him, directors hired Reckford to infuse Habitat with a dose of corporate-style management--without undercutting its identity as a Christian-based ministry. At the same time, the Asian tsunami and Katrina have led to an influx of donations, forcing Reckford's team to figure out how to divide resources between disaster recovery and Habitat's traditional mission of housing impoverished families.

Inside Habitat's headquarters in Americus, Ga., the new buzzword is "scale," the same term Internet start-ups used to describe plans to grow radically larger. Outsiders see an organization at an inflection point. Says University of Michigan business professor Len Middleton: "They're looking at their model, looking at their mission, asking, 'What are we trying to do? What are we trying to achieve?' "

Habitat was conceived on a Christian commune in rural Georgia more than three decades ago. Millard and Linda Fuller had founded a successful marketing business in the 1960s before giving up their riches to follow God. With other commune leaders, the Fullers created a ministry in which volunteers helped build simple homes for low-income families, who repaid the deed by helping with construction and making interest-free mortgage payments. By 1976 the Fullers had left the commune and formed Habitat, and in 1984 Jimmy and Rosalynn Carter became high- profile volunteers. Even today, each time the former president lifts a hammer on a Habitat job site--which he does for at least one week each year--TV cameras gather, raising the charity's visibility.

Then as now, Habitat featured a complicated structure. The organization is run as a confederation of thousands of semiautonomous Habitat chapters. The local chapters take in--and retain--the bulk of the donations, delivering just a slice of their revenues to Habitat headquarters. Reckford and the headquarters staff set policy, promote the brand (through partnerships with companies like Lowe's, which has featured Habitat in ads) and help fund overseas operations, but they have limited authority over affiliates. Despite the loose control, the system has worked well: since its founding, Habitat has built more than 200,000 homes around the world.

Those numbers are a source of pride to the founder. But in 2004, a Habitat staffer accused Fuller, then 69, of inappropriately touching her while she drove him to the Atlanta airport. Fuller, who'd faced sexual-harassment allegations by other staffers a decade earlier, denied wrongdoing in both cases, and Habitat's board concluded the latest charges were unproved. But the controversy led directors to force Fuller out. As the board considered replacements, it sought someone who'd do the CEO job differently.

That decision was in keeping with recent trends. Lately many charities have been trying to adopt the best practices of for-profit businesses, and the not-for-profit sector is increasingly filled with "social entrepreneurs" and "venture philanthropists" who demand more accountability and try to measure efficiency and return on investment. It's about time: in a 2003 study published in the Harvard Business Review, researchers estimated nonprofits could save $100 billion a year by adopting modern management practices. That's one reason that roughly half of the biggest U.S. charities are now run by leaders with significant corporate experience. "You're finding a whole cohort of executives who've been quite successful," says Susan Boren, the head of Spencer Stuart's nonprofit recruiting practice who lured Reckford to Habitat. "But there's a component missing for them--they see the not-for-profit sector as a way to give back."

Since Reckford's arrival, much of his work has been decidedly unsexy. He's overhauled HR practices to establish clearer career tracks. He's boosted salaries, albeit slightly. "We still pay badly, but we've gone from really, really bad to at least competitive with other Christian nonprofits," Reckford says. He's tried to focus the organization away from tallying the number of countries where Habitat has outposts--Fuller's pet obsession--toward metrics like how many houses are built and the cost per house.

Reckford has also moved to exert more control over Habitat affiliates. It's a management challenge similar to that faced by franchise giants like McDonald's. The upside of the decentralized system is that it leaves local Habitat volunteers energized. But it has its drawbacks. "The biggest problem with the current model is quality control," says Nicolas Retsinas, a Harvard housing professor and chair of Habitat's board. So Reckford has pushed local affiliates to implement better accounting and auditing practices. He's asked them all to use the same logos to leverage brand awareness. He's trying to use Habitat's buying power--and cut more deals like ones with Whirlpool and Dow Chemical, which provide free appliances and insulation for every home--to drive down home-building costs. And when necessary, he's played tough, closing down poorly performing operations in six countries, including Peru and Jamaica--a first for Habitat.

He's also had to contend with a nice dilemma: the influx of donations after the Asian tsunami and Hurricane Katrina. Historically, disaster relief hasn't been part of Habitat's mission, and the group has resisted building temporary shelters, telling donors it will take time before it can begin a full-scale rebuilding effort on the Gulf Coast. To avoid cannibalizing existing programs, it's set up a team of disaster-recovery specialists as a separate unit. It's already built 1,920 homes in the Asian tsunami region, and its goal is to build 1,000 permanent homes in the Gulf Coast by July 2007.

In his most controversial move, Reckford has announced plans to relocate many Habitat staffers out of the group's historic hometown. Americus is a picturesque small town, but it's a nearly three-hour drive from Atlanta, past Civil War landmarks and fresh boiled peanuts signs. That isolation creates big recruiting challenges and makes business travel inconvenient. This summer Reckford and about 50 staffers will relocate to an office in Atlanta, which should make it easier to hire the professionals needed to kick-start the organization's growth. Says Reckford: "We want to exponentially increase the number of families we serve."

Not everyone approves of the changes --especially Habitat's founder. Fuller has set up a rival housing charity and has an office within sight of the Habitat headquarters. "I'm not happy with the direction the new leadership is taking," Fuller says, dismissing Reckford for taking a "sinful" $210,000 salary (Fuller earned just $79,000), questioning his capacity for leadership and criticizing him for moving jobs to Atlanta. "Not-for-profits need to be run in a businesslike manner, but you don't need to be a corporate bureaucracy," Fuller says, suggesting that Habitat is showing more concern for employee comfort than for its ministry. For his part, Reckford refuses to criticize Fuller, though he admits the relationship is "awkward."

More changes are likely. Consultants who've studied Habitat have urged it to think about its mission more broadly. They've suggested it find partners to help with the actual building. In some places, says Booz Allen nonprofit consultant Reggie Van Lee, Habitat may eventually behave a little more like a bank and a little less like a contractor. Moving away from its traditional practices may be challenging: one of the reasons so many donors adore Habitat is that they get a chance to get their hands dirty and swing hammers, rather than just mailing checks. But eventually, Reckford acknowledges, "we're going to talk more about housing solutions than only building houses."

A few blocks from Habitat's headquarters lies a reminder of the size of the challenge. At Habitat's Global Village volunteers constructed a walk-through model of the slumlike conditions in which 1 billion people live around the world. Next to it are more than a dozen models of the simple homes Habitat is building. In the United States, they're commonly wood-frame houses of 1,200 square feet or less and cost, on average, about $60,000 (including land). Around the world, though, they're often three-room cabinlike structures, some with-out plumbing or glass windows. Many models are made of earthen blocks and can cost as little as $2,280 in the Philippines or $3,120 in Guatemala. In some countries, like Britain and Ireland, construction costs are so high that Habitat solicits donations but doesn't currently build houses.

The individuals moving into those new abodes care little whether Habitat's new CEO quotes management guru Jim Collins nearly as much as the Bible. And over time, Reckford expects that whatever tensions arise as nonprofits are pushed to run more efficiently will ease. "I think sometimes there's a false dichotomy, that either you're a grass-roots, faith-based ministry or you're professional," Reckford says. "My view is it's not an either-or situation." If he gets his way, Habitat will be better off when it's a little bit of both.