Reference no: EM131015849

During late 2003, National Public Radio (NPR) announced a $200-million bequest from the estate of Joan B. Kroc. Mrs. Kroc, widow of McDonald'sfounder Ray A. Kroc, was a long-time supporter of public radio. NPR is a not-for-profit organization that produces and distributes news, talk, and entertainment programming for a worldwide network of more than 770 independent public radio stations.

At the time of the announcement, NPR management stated that most of the bequest would be placed in an endowment fund, and only the annual earnings would be spent. However, NPR's board of directors had not yet made specific plans about how the funds would be used. The bequest would significantly affect NPR's finances. The current endowment fund contained $35 million, and the organization's annual budget was around $104 million. NPR and its affiliate stations were continually faced with tight operating budgets.

The announcement triggered speculations about how NPR would spend the money. Some people argued that NPR should re-evaluate its strategies, with possible expansion into the Internet or other platforms. A number of public radio station managers wanted part of the funds to support their operations, perhaps through a reduction in NPR programming fees. Approximately half of NPR's annual budget was financed through programming fees. An independent producer wanted to see pay increases for the freelance workers who create NPR programming. Various groups voiced opinions about ways to improve the quality of NPR programming. Some observers were concerned that the large bequest might cause the organization's management to become overly conservative, reducing the likelihood of innovative new programming.

Some people were concerned that the bequest would discourage listener and other support to NPR and its affiliate stations. Others believed that the bequest would have the opposite effect.

SOURCES: What Is NPR? www.npr.org (click "About NPR"); NPR Receives a Record Bequest of More Than $200 Million, November 6, 2003, www.npr.org/about/press/031106.kroc.html; M. Jurkowitz, "Extraordinary' $200M Bequest Stuns, Elates NPR Staff," The Boston Globe, November 7, 2003; M. Janssen, Kroc's $200 Million Gift Frees PubRadio's Dreams, November 17, 2003, www.current.org/npr/npr0309kroc.shtml; and T. Lowry, J. Weber, and C. Yang, "Can NPR Bear the Burden of Wealth?" BusinessWeek, December 15, 2003, p. 77.). di

iscuss why NPR's management should clarify the organization's vision, core competencies, and strategies (see Chapter 1 and Exhibit 1.1) before deciding how to budget the bequest funds.