Change, finances rattle MSPCA

As Angell Animal Medical Center celebrates the opening of its newly renovated facility, the public charity that oversees it is struggling with an abrupt leadership change and a difficult financial situation, which has been strained by the double threat of rising costs and an eroding endowment.

The president of the Massachusetts Society for the Prevention of Cruelty to Animals recently resigned from his $350,000-a-year job after only three years. Dr. Larry M. Hawk increased revenue and took a more businesslike approach to running the organization. But in interviews with the Globe, several former MSPCA employees said Hawk left after persistent concerns that his brusque management style had damaged morale without doing enough to improve the nonprofit group's finances, which had been deteriorating for several years.

Hawk also hired his wife and two children to do paid consulting work and outsourced fund-raising activities that resulted in donations not being acknowledged.

The MSPCA's endowment has lost nearly a third of its value since the late 1990s, and for years, the organization has been violating its own spending policy by bypassing limits on the percentage of endowment gains that may be used to pay operating expenses. Its Springfield hospital, rebuilt in 1999 for $9.5 million, had an $861,000 operating loss last year, and the MSPCA carries an $8.6 million debt, mainly on the Springfield building, according to Carter Luke , a long time MSPCA employee who became chief executive after Hawk's departure.

Luke, assessing the MSPCA's financial health, said, ``part of it looks bright and part of it needs careful looking at. Obviously we're a charitable organization, and we cannot sustain losses, so we have to make decisions about whether our practices need to be adjusted, and we need to be addressing anything that relates to our fiscal stability."

A public charity that solicits millions of dollars in donations each year, the MSPCA provides medical care to about 75,000 animals annually at three hospitals statewide, including the flagship Angell in Boston. It runs seven animal adoption centers, offers humane education services, lobbies and advocates for animals , and investigates and prosecutes animal abuse.

MSPCA officials said Hawk left in March for personal reasons. Reached last week at his Millis home, Hawk said he stepped down after clashing with the 14-member board of directors over his decision to replace two finance staff members. Calling himself ``an agent of change," Hawk, 50, said he is ``very proud of what I accomplished" at the MSPCA. ``I was hired to do a job, I did the job, and I did it in a way that I felt was needed in a time frame that was needed and with an urgency that was needed," he said.

Interviews with Hawk, board members, as well as current and former employees depict an organization that faced serious financial woes when Hawk arrived in March 2003, and that had difficulty adjusting to the immediate, sometimes dramatic changes he made. Hawk's tough-talking, business-minded demeanor contrasted sharply with the warm, personable style of former president Gus Thornton , who was famous for tearing up during speeches.

Thornton retired in 2002 after working at the charity for nearly a half-century but, according to several former employees, had become less engaged in his final years there as he battled poor health and grieved the death of his wife.

Hawk ``had great potential and all the right experience, but in the end he wasn't the best choice," said Dr. Peter Theran , a veterinarian and retired MSPCA vice president who consults for the group on animal welfare issues. ``He didn't have the interpersonal and relationship-building skills to be an effective leader, and he would make changes without preparation and kind of shoot from the hip. At first I figured we needed to give him a chance and help get him up to speed, but he was almost destructive with the lack of cohesiveness in the directions he took."

When Hawk was hired away from the American Society for the Prevention of Cruelty to Animals, where he was president and chief executive, the MSPCA touted him as having the business and marketing expertise to modernize the 138-year-old charity and strengthen its finances. A former veterinarian, he had also worked in administration and marketing for Hill's Pet Nutrition and as president of PetSmart Veterinary Services and PetSmart Charities.

Like many animal care groups, the MSPCA struggled with the growing cost of medical services, increased competition from private veterinary practices, and losses in the stock market, which had contributed to its endowment plummeting from $74 million in 1999 to $52 million when Hawk was hired. Operating costs had risen as the nonprofit expanded from 400 to 450 employees in the 1990s to around 600 in 2003, and it had launched extensive fund-raising to upgrade its aging facilities.

Hawk immediately began cost-reduction and marketing efforts. He reduced expenses for the Boston building, which reopened last Thursday, by about $3 million by deciding to renovate the facility rather than build a new one. He laid off 20 employees and eliminated 32 vacant positions, Luke said. Additional jobs were cut or reconfigured later. Several top executives left, too, including the vice president of development and the chief of the Boston hospital.

Hawk led a branding campaign that stamped every facility with the MSPCA-Angell name. Under his watch, the MSPCA raised nearly $4 million to renovate a Methuen shelter and about $6.5 million of the $16.6 million cost for the Boston project, which is now within $2 million of its goal.

He also created a marketing department while downsizing and reconfiguring the development office. Those changes, which were made during the capital campaigns, were jarring for some staff members and donors. In one case, several former employees said, gift-acknowledgement work was outsourced to a firm that bungled the job, upsetting numerous contributors who did not receive thank-you notes or tax receipts. The outsourcing ``did not go well," Luke acknowledged. That work is again done in-house.

At the same time, Hawk increased spending on consultants. In 2004, the MSPCA paid about $1.5 million to Greenhouse Direct for mailing and fund-raising services, more than double the $790,000 it paid the Newton firm the year before. That extra expense ``didn't pay off as we had wanted," Hawk said, because it didn't yield as many new donors as expected.

The MSPCA paid $430,000 for legal services in 2004, up from $270,000 the year before, to Nixon Peabody, the law firm where board chairman Robert S. Cummings was a long-time partner. Luke said the increase was largely attributable to litigation costs that arose after the MSPCA took possession of several horses it contends were being abused.

Hawk -- whose compensation, like his predecessor's, included a car and more than $50,000 in annual payments from several MSPCA subsidiaries such as a Morocco animal hospital that he said he visited twice during his three-year presidency -- also paid his wife $28,600 to serve as interim director of operations at the MSPCA's Nantucket hospital and his two children $4,200 each to edit the MSPCA's website.

Hawk defended his decision to hire family members, noting that his wife is a veterinary consultant. ``When you're faced with needing to do things quickly and efficiently you go to the resources you know can deliver those things cost-effectively, efficiently, and quickly, so that's what I did," he said. ``I can look myself in the mirror and say I made the right decision."

Children and spouses of other board members also worked for the MSPCA in the past, Hawk said.

Executive salaries at the MSPCA, which have risen dramatically in the past decade, have concerned many staff members, according to several former employees who asked not to be identified because they fear that criticizing the MSPCA could hurt them in their new jobs.

The charity's overall financial performance was mixed during Hawk's tenure, according to tax returns and annual reports. Capital campaign contributions declined on his watch, from $5.4 million in 2003 to $1.9 million in 2005. Hawk said that in 2002 capital contributions had dipped to $576,000 and that during his presidency total contributions, which include bequests and annual giving, averaged about 50 percent higher than during the three years before he took over as president.

However, the endowment, which was $54.4 million as of April 2006, continued to shrink during his tenure, to $49.5 million last year. Those declines were due in large part to poor performance on MSPCA investments during years when the stock market did relatively well. Last year, the MSPCA earned 4 percent on its investments, missing its 8.5 percent target. By comparison, operating charities earned an average 8.9 percent return in 2005, according to a study by Commonfund Institute, which tracks nonprofit finances. MSPCA investments earned 7.4 percent in 2004 and 22 percent in 2003.

In addition, although MSPCA policy states that no more than half its endowment gains may be spent on operating expenses, Luke said the charity has ``often gone over that" if bequests and investment returns were weak in a given year. The practice of spending more than half its endowment gains, which also took place during Thornton's tenure, led to internal debate over the wisdom of that, some former employees said.

Hawk said the endowment and investments are managed by the board of directors' finance committee, but said he found nothing inappropriate in overspending the gains. ``You do the best you can to try to keep things afloat," he said.

Cummings, the chairman of the board, downplayed concerns about the charity's finances. Of the endowment spending policy, which is outlined in its financial statements, Cummings said: ``I wouldn't say it's a policy; it's more of a goal."

Asked if board members are concerned about the Springfield hospital's financial performance, he said: ``It depends on what you mean by concerned. Do we pay attention to it? Sure. Are we afraid it's going to have dire consequences for us? Absolutely not."

Hawk said he resigned when the board disagreed with his decision to replace the MSPCA's vice president of finance and administration and its controller.

``A senior executive needs to know that their hiring decisions are supported by the board, and I could see those changes weren't going to receive the support they needed, so it was important to step aside," Hawk said.

Asked if the personnel dispute was the only reason he left, he replied: ``It's one of the pieces . .[but] I'll leave it at that."

``I'm all about results and accountability," Hawk said. ``When you've got a vision of where you've got to be and where you've got to head, you've got to be bold and make changes, because you know the path we were on led us to where we were, which was substantial red ink."

Beth Healy of the Globe staff contributed to this story. Sacha Pfeiffer can be reached at pfeiffer@globe.com.