The Executive Education of a Novice Politician

Arnold Schwarzenegger had a theory about how his national youth program should be run.

One of Schwarzenegger’s intimates, environmental activist Bonnie Reiss, argued in a 1995 brainstorming session that tight central controls were needed to protect the movie star from any mistakes in a venture that would be closely associated with his name.

“That’s your Democratic way of thinking,” Reiss remembers Schwarzenegger correcting her. “Who are we in Los Angeles to tell Miami or New York or Atlanta how best to run their programs?”

Schwarzenegger insisted on what he saw as a more Republican model. His small, Santa Monica-based Inner-City Games Foundation would provide seed money, guidance and celebrity support to what became a relatively loose network of 15 separate though similarly named nonprofits around the country.

The results were mixed, according to some program administrators. The alliance quickly reached hundreds of thousands of youths with sports competitions and summer events. But its effectiveness, according to program’s own administrators, was uneven. Sometimes, the big numbers reflected nothing more than a mass visit by deprived kids to a local Sea World.

The youth initiative, recently renamed “After-School All-Stars,” has been a rare test of Schwarzenegger’s management philosophy and skills -- issues that have moved center stage as the actor campaigns for the California governor’s seat.

Although many of the candidate’s business ventures are investments that don’t require his direct supervision, he has been a key decision maker and driving force behind the foundation, of which he is chairman. The program may be the truest representation of Schwarzenegger’s ability to execute his vision on a matter of public importance.

Without acknowledging missteps, Schwarzenegger said in an interview Monday: “I always believe we have to improve. I do not like to stand still.”

In fact, Schwarzenegger is shifting his organization’s direction, stressing accountability, tougher academics with daily after-school instruction and a measure of “Democratic”-style central control largely missing in the last eight years.

He said he continued to believe in decentralized management -- “we don’t tell them what to do,” he said of the foundation’s affiliates. But he also said he expected more discipline from his group as it competed for scarce public funds.

“We have to now concentrate on accountability,” he said. “Otherwise, we will not get the federal funding.”

Next week, top All-Star executives will meet to hear Schwarzenegger and the Santa Monica foundation’s new chief executive, American Red Cross veteran Frank Donoghue, review their performance and describe a new licensing agreement under which the affiliates will operate. Beginning Nov. 1, the associated groups will be required to focus on much smaller numbers of children, providing them with highly structured after-school programs geared to show measurable results.

Donoghue, who was handpicked by Schwarzenegger, acknowledged in an interview that the After-School network was short of its targets. “No, they’re not reaching maximum capacity,” he said.

Many of the local organizations needed to strengthen their own boards to raise money for the deeper, five-day-a-week after-school sessions Schwarzenegger is demanding from each of them and to comply with the foundation’s new insistence on measurement, Donoghue said.

“We know there needs to be more responsibility, more evaluation,” said Roberto Gonzalez, executive director of the Houston affiliate. “You can’t just ask for money because you have good intentions.”

The reorientation, in the making for more than a year, is said to reflect Schwarzenegger’s acknowledgment that the earlier system wasn’t accomplishing enough, and a growing belief that deprived children will rise through society if they are pointed toward the kind of disciplined self-improvement that made the Austrian immigrant a champion and star.

“The national office is catching up,” said Philadelphia affiliate Executive Director Donna Frisby-Greenwood, who describes her own program as having pioneered that more disciplined approach. “I’m glad to see they’re strengthening things in Santa Monica.”

According to associates, Schwarzenegger is frustrated that new funding for after-school programs hasn’t become available despite last year’s passage of Proposition 49, which he championed, as a weak economy kept state revenue from expanding by $1.5 billion -- a threshold that must be met before the added school funds flow.

On Monday, Schwarzenegger said he had no quarrel with the statutory threshold, which, in his view, keeps the after-school initiative from putting a dent in emergency services.

The actor’s Santa Monica foundation won’t receive any of that money when it does materialize because it doesn’t directly operate a program. But its affiliates in San Diego, San Jose and Los Angeles (where the group is uniquely called “Arnold’s All-Stars”) may eventually see a boost in funding from the measure.

In recent years, the central foundation has disbursed about $200,000 a year to each of its regional affiliates, along with an annual gift to each affiliate of one Hummer, which can be auctioned or used in fund-raising. In its 2001 financial report to the federal government, the latest on file, the foundation showed assets of $17.3 million at year’s end.

Most of that figure, according to foundation executives, reflects a five-year, $15-million funding commitment from General Motors Corp.’s Hummer division, which donates cash and vehicles under a plan that runs for two more years.

The second-largest block of funding has come from Todd Wagner, a Dallas-based technology impresario who serves on the All-Stars board and pegs his contributions at more than $10 million.

Along with cash, Wagner has donated the use of his Miracles digital education system, which helps at-risk children build technology, learning and life skills. It will become mandatory in the Schwarzenegger-sponsored programs -- and brings with it a proprietary database that monitors student progress.

“We should have certain standards and, as we say in the for-profit business world, some people are going to fall off the train,” said Wagner, who reaped a fortune when he and partners sold Broadcast.com to Yahoo Inc. for $5.7 billion in 1999.

If Wagner has made things more systematic, the foundation’s recent search for a new CEO was vintage Schwarzenegger management. It began with an appeal to trained professionals and ended with his gut call.

Initially, executive recruiters from the headhunting firm Korn/Ferry International Inc. sent a list of several dozen candidates to replace Harley Frankel, a former Head Start director. Frankel ran the foundation for three years after his predecessor, Reiss, resigned as CEO in late 1999 but remained on the board.

Frankel declined to discuss his tenure. Wagner said of Frankel’s departure: “It was a decision by all of us on the board that we needed someone who would push a little harder on programs.”

According to Reiss, a long interview process yielded only one viable prospect, who received an offer but dropped out at the last minute. Schwarzenegger then asked Reiss to return as interim CEO and join him in the search. Ultimately, they met Donoghue, who was running Philadelphia’s branch of the Red Cross -- larger than all of Schwarzenegger’s national affiliates combined -- after having held major posts with the national organization.

Donoghue said his decision to join Schwarzenegger crystallized in a face-to-face encounter with the star.

“He said, ‘Frank, I hope you know I want somebody to run this who is as hungry about the program as I am.’ He held my hand and looked in my eye as he said that,” Donoghue said.

That highly personal approach has been the program’s hallmark since Schwarzenegger, a longtime advocate for the Special Olympics and a former chairman of the President’s Council on Physical Fitness under George H.W. Bush, first became involved with East Los Angeles’ Hollenbeck Youth Center.

After the 1992 riots, Schwarzenegger tapped several movie studios for $250,000 and joined the youth center’s director, Danny Hernandez, in sponsoring a sports competition called the Inner City Los Angeles Games.

By year’s end, the two had incorporated an Inner-City Games Foundation aimed at enlisting other cities. Real growth didn’t occur, however, until three years later when the actor put up $500,000 to cover overhead and enlisted family friend Reiss, a former entertainment attorney, to run the program.

The promotion-minded Schwarzenegger, according to Reiss, required target cities to have a big population and poverty problems -- and a Planet Hollywood restaurant on the verge of opening. The actor, who then owned a stake in the subsequently bankrupt chain, used celebrity-studded restaurant openings to raise start-up funds for the independently incorporated local foundations.

Schwarzenegger said the program’s shift toward academics was shaped in part by its participants. “We said, ‘Let’s include kids in the decision-making process. Let’s not make up their minds for them,’ ” he recalled.

By the star’s account, digital education became a priority after a summer workshop co-sponsored by its New York City affiliate found, in a survey, that computers were as popular as sports with its middle-school-aged participants.

By 1998, Orlando, Fla.; Miami and Houston were operating computer camps with machines from Dell Inc. and software from Cendant Corp.

Eventually, that changing emphasis prompted a decision to change the organization’s name. Once again, Schwarzenegger backed away from his own professionals. Last year, corporate branding firm Siegelgale, after a three-month review conducted without a fee, provided a list of names, none of which appealed to Schwarzenegger and his associates.

Schwarzenegger, said Reiss, decided instead to hold a contest among kids in the program cities. Of about 100 names that appeared viable, only one proved to be available, and it was submitted by contestants in both Atlanta and New York. Each received the prize: $5,000 and a laptop computer, along with a visit from Arnold -- who kept his New York date last week, even though political handlers had urged him to cancel in the interest of his recall campaign.

Asked whether the All-Stars program, a decade in the making, was reaching its maximum potential, Schwarzenegger was clear.

“No! No. No, not yet,” he said. “I would say, with a year or two, we are there.”

Times staff writers James Bates and Gary Cohn contributed to this report.