How to Succeed by Being A Nonprofit Organization

Along with the proud or privileged aspects of his new job, incoming Air Force Secretary Harold Brown last week inherited a problem that has caused the Air Force considerable embarrassment. One of Brown's first tasks was to meet with outgoing Secretary Eugene M. Zuckert and 13 distinguished businessmen and educators--trustees all of the embattled Aerospace Corp. Subject: how to mend the firm's badly shredded reputation. Five years ago, convinced that no private corporation could capably handle the overall systems engineering and technical direction of its missile-development program, the Air Force set up California-based Aerospace as a Government-financed, nonprofit corporation. Some of the things that went on thereafter would make profit-minded businessmen apoplectic, and were enough to set off an investigation by the General Accounting Office and a House Armed Services subcommittee.

Best Treated. The report on Aerospace's activities, a product of eleven months' work, touches very little on technological activities. Secretary Zuckert credits Aerospace with guiding the development of the Titan III and Minuteman II missiles; Air Force Systems Commander General Bernard A. Schriever says that its engineers saved $100 million by improving the reliability of Atlas and Thor boosters. Aerospace has grown to be the 45th largest defense contractor, in the course of working on $309 million in military contracts has collected $15.9 million in fees. What seemed to bother the investigators was how the taxpayers' money was disposed of, largely in ways that have made the company's 4,300 employees probably the best paid, best treated in the aerospace industry.

Among the expenditures turned up by auditors:

> Although it worked solely at Air Force direction, Aerospace spent $1,100,000 over a four-year period to maintain its own public relations staff in California and Washington, also kept a Manhattan public relations firm on a $2,000 monthly retainer to advise it and create an independent image. In addition, it paid a Washington newsman $100 monthly, later $150, to pass on such information as advance texts of speeches by General Schriever.

> At a fee of $240 a day, Aerospace retained a consulting psychologist to counsel employees and assist in management procedures. The psychologist drew up one outline for personnel interviewing that reminded interviewers to grunt "uh-huh" occasionally, instead of talking, in order to draw out applicants. He also advised Aerospace President Dr. Ivan A. Getting that his staff included an unusually large number of "insufficiently adequate personnel."

> Aerospace spent more than $200,000 on recruiting advertisements, paid some new employees as much as 100% more than they had been receiving in other jobs. Moving expenses were handsome: Dr. Getting was allowed $3,133.02 to truck his 40-ft. boat from Gloucester, Mass., to San Pedro, Calif., and one engineer was allowed $3,900 for moving 21 miles closer to his job from a house 80 miles from the plant.

> The company not only paid country-club dues for its executives, but also paid in full for courses in religion, marketing and physical education, some taken on company time. It also allowed unlimited sick leave at full pay.

"No Big Bad Things." Aerospace is now working on a score of projects that include the MOL (for Manned Orbiting Laboratory) program and Defense Department communication satellites. Such services as the psychologist and public relations counselors have been dropped, and the Air Force's auditing has been tightened up. "There have been no big bad things," insists Secretary Zuckert. The little bad things, however, took on enlarged significance simply because Defense has contracts with 300 other nonprofit organizations. Stunned by what it found at Aerospace, the House Armed Services subcommittee intends to look into spending and allowances at some of these.

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