After a long career spent in high-profile finance positions at companies like MasterCard and American Express, Michael Kennedy was ready for a change. For a time, he worked at midsize companies backed by private equity before moving into the nonprofit realm.
“Quite frankly, I was tired of making all their shareholders rich,” he told CFO Brew.
After becoming CFO of the Muscular Dystrophy Association (MDA) in 2018, he quickly found an opportunity to put the knowledge he gained in the corporate realm into practice. His experience and talent for change management helped the organization survive a 60% drop in revenue during the pandemic. Now, he’s focused on keeping it stable and streamlined well into the future.
A dire need for new tech: MDA, founded in 1950, has committed more than $1 billion dollars to research into muscular dystrophy and related disorders, and provides assistance to both patients and their families. For decades, it was well-known for its yearly telethon hosted by Jerry Lewis; after the telethon ended in 2014, it pivoted to other methods of raising funds.
Soon after joining MDA, Kennedy realized that its technology was out of date and that its financial systems needed streamlining.
“Like a lot of nonprofits, they did not invest in their underlying infrastructure,” he said, “which made them inefficient in transactional processing.” The organization had around “65 systems that were not talking to each other,” he recalled. Staff “had 400 call center codes and they were using one about 90% of the time.” He likened it to “a big shoebox” full of receipts.
Nonprofits can sometimes find themselves in this situation, Kennedy said, because they’re “so much more passion-driven versus efficiency-driven. Every new dollar goes for the mission.” But, after a time, they can get to a point where they’re “actually spending more money away from the mission by not investing in the back office.”
Kennedy convinced the executive team and the board to move to a single platform—in this case, Salesforce—and implemented a rollout over the next nine months. At first, he encountered resistance to the change. “I’ve learned that everybody complains about systems” until they’re asked to learn new ones, he said. It took several months for staff to start seeing the benefits of the new system, he said, but once they did, they started advocating for it. “Then the back end of that initiative really takes on a momentum of its own,” he said.
His advice for CFOs in similar situations is to be the ones leading the charge. “A mistake sometimes people make” during change management “is they delegate too low,” he said. Then, he added, change doesn’t get traction because it’s difficult for someone not highly placed “to have the authority to push it through when it gets hard.”
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“You need to be the owner of this change until the organization takes it off, until they understand it, they learn it, and they’re pushing it,” he said, at which point you can “pull back to an oversight” role.
The new system, which went live on January 1, 2019, created efficiency by eliminating handoffs (“every CFO knows that the more handoffs you have, the more errors you have,” Kennedy noted) and redundancies. It also gave Kennedy a “single read” on data from across the organization, allowing him and the CEO to “realign the organization and get it mission-focused in a much, much bigger way.”
Lessons from the pandemic: And it proved a lifesaver when Covid hit about a year later. At that time, much of MDA’s fundraising revolved around events, which had to be canceled due to the pandemic. The organization lost 60% of its revenue, according to Kennedy, and had to lay off staff. But the new system allowed the team to work remotely and regroup while coping with the loss of funds. MDA “wouldn’t be here if we hadn’t moved to that cloud-based platform,” Kennedy said.
The organization’s metrics demonstrate just how successful the move to the new platform was. In 2020, 52% of its expenses went towards its mission; in 2023, 70% did. MDA spent 58 cents to raise $1 in 2020; in 2023, that cost fell to 24 cents. And “that’s not just a one-off cost savings,” Kennedy pointed out. “This is a new way that MDA operates into the future.”
Last year, Kennedy became COO as well as CFO, putting him in charge of fundraising. He’s working on strengthening MDA’s fundraising efforts. The pandemic taught him and his team that being so event-focused was a “vulnerability.” In consequence, they diversified their fundraising efforts to focus more on foundations and major gifts.
Kennedy also encourages his staff to view donors as “partners” and to pay more attention to their motivation for giving. “Is it their own needs of being a good citizen? Or do they have…a family member with muscular dystrophy or ALS?” he said. “You need to understand that so you can keep the relationship strong and make sure you’re serving them in the right way.”