Nonprofits Hurt More by Bad Publicity Than For-Profits

Because they depend on the goodwill of donors and the public at large, nonprofit organizations caught up in scandal may experience greater damage to their reputations than do their for-profit counterparts, reports.

Last week, two Cleveland-based nonprofits were engulfed by bad publicity: the director of the resigned in connection with an extramarital affair with a museum employee who subsequently committed suicide; and a professor at sued the university and dean of the law school, alleging he was the victim of retaliation for informing university officials about the dean's alleged sexual harassment of women. Both organizations reacted swiftly to stem constituents' concerns, with the museum trustee Fred Bidwell as interim director and announcing that a search for a new director would begin immediately, while Case Western Reserve stated unequivocally that its situation was "categorically not an instance of retaliation."

According to several nonprofit experts interviewed by Crain's, leadership and communications are key to weathering a public relations storm. "In these situations, there's usually an information vacuum, and the public, including donors and important segments of the community, are left to speculate....[T]he best way to deal with that is get the information out," said Tom Andrzejewski, president of public relations agency Oppidan Group, Inc. "Second is to take the appropriate action [to] make sure the continuity of services is maintained." Lori Sheets, who heads the nonprofit practice at accounting firm Bober Markey Fedorovich, seconded that advice. If a nonprofit fails to react appropriately, she told Crain's, it risks losing donors, volunteers, and referrals. "I have seen it over the years, and I've seen the impact it has, especially on contributions and support for the agency. It takes a while to get it back to where it was."

"These nonprofits, they're really fragile," Stuart Mendel, who directs the at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, told Crain's. "Their whole ability to succeed is based on people's desire to trust them, and they have to appear that they know what they're doing," said Mendel. "There is a direct connection of the leadership and the perceived competency of the organization and its ability to raise money. If they didn't handle it right, their fundraising campaigns would be in jeopardy."

Michelle Park Lazette. "." Crain's Cleveland Business 10/27/2013.