With over one million employees, the Catholic Church in the United States is comparable in size to Wal-Mart, but it still follows a feudal model of governance and management. This may be adequate to protect religious orthodoxy, but it is not equal to the task of managing a worldwide enterprise that claims one billion members and operates in every corner of the world. While Wal-Mart can be legitimately criticized for some of its policies, that does not mean that the Catholic Church has nothing to learn from it.

In an earlier article in America, Crisis Management in the Church (12/01/03), I examined the state of the Catholic Church in the United States from the standpoint of an outside observer looking at it from the perspective of organizational effectiveness, and I gave the church a failing grade. I also made a number of suggestions as to how the U.S. Conference of Catholic Bishops might move to improve the efficiency of its governance and management. Since I believe so strongly that there is a promising opportunity to improve the governance and management of the church without interfering in any way with its spiritual and pastoral mission, I want to make the case again from a somewhat different perspective.

The Catholic Church operates as a feudal system with specific geographic areas under the control of a feudal lord (the bishop), who serves at the pleasure of the king (the pope) and is responsible and accountable only to him. Once appointed, each bishop has nearly absolute power over the operations of the church in his bailiwick (diocese), subject only to the lightest of oversight from the pope, unless he attempts to depart dramatically from church teachings (e.g., on divorce, celibacy, birth control or the role of women in the church).

Light oversight is necessarily the case since the pope has thousands of bishops reporting directly to him. The pope has, of course, the Roman Curia available to him as staff. Its members jealously guard their prerogatives and can wield immense power (exercised at great distance from the action), when they perceive that the authority of the pope is being challenged on matters of faith or morals or even the management of church affairs. But such a feudal approach misses the benefits of modern management. In these days of modern communications and management, the benefits of capitalizing on economies of scale and learning in the management of human, financial and physical (land, buildings and equipment) resources are available to any enterprise with the leadership, courage and skill to make use of them.

The church could save hundreds of millions or even billions of dollars, for example, by using centralized purchasing techniques for such things as air transportation, telephone service, Internet service, accounting services, computers and related equipment, paper, pencils, automobiles, medical supplies, medical insurance, pension benefits and myriad other goods and services. The church in the United States spends almost $100 billion per year when all parish, diocesan, school, hospital, social services and administrative expenditures are included. If we assume that between 20 percent and 40 percent of that amount is for the purchase of goods and services and that a concerted effort to professionalize purchasing at all levels in the organization could achieve a 15 percent overall saving (a number frequently used in making such estimates for well-managed corporations), the church could save from $3 to $6 billion in expenditures annually. This opportunity could easily be studied, the benefits estimated, decisions made and operations begun within a year. But no one is responsible for managing this aspect of the church’s operations, so billions of dollars of unnecessary expense are incurred each year.

But the opportunities are not limited simply to the management of purchasing.

Taken as a whole, the Catholic Church in the United States would rank near the top of the list of the Fortune 500 companies in number of employees. With over a million employees, it is comparable to Wal-Mart, but most of its employees are not professionally managed. No organization of comparable size to the church could survive in today’s world without an effective human resources office, headed by a chief personnel officer. The responsibilities of such an office include recruiting, development, retention, career planning, training, executive development and support in evaluation and compensation systems and deployment of managerial resources. These responsibilities are carried out at different levels (e.g., plant, division, corporate) with policy making at the highest level and execution at the lower levels. The corporate levels have responsibility for ensuring the quality of the function throughout the organization.

Similarly, the church controls financial resources comparable to those of the very largest U.S. corporationson the order of $100 billion in annual operating expenditures and an equally daunting hoard of capitalmuch of which is managed by very small, highly autonomous units with little supervision and very little transparency. No modern large enterprise could hope to succeed without very strong financial management at all levels of the organization under the overall direction of a chief financial officer. Financial management responsibilities include both the treasury function and the controller function. As in the area of human resources, different aspects of these jobs are carried out at different levels of the organization, with the C.F.O. responsible for ensuring sound financial management at all levels. With the use of these and other modern business approaches, it would be possible to save 15 percent, or $15 billion out of the total budget.

But it is not only a question of hard cash. The absence of organization and leadership for these functions hinders human resource development at all levels. The result is hugely expensive in both financial and human terms and limits the career and personal development of all members of the church’s work forceboth clerical and lay.

Leadership, Decision Making and Responsiveness

Another highly desirable feature of a modern, well-designed and well-managed organization is the ability to make management decisions in a timely manner, responsive to needs and conditions at all levels of the organization. The ability to make such decisions depends on good information and requires effective systems for measuring and tracking performance in critical aspects of an organization’s operations. Developing and implementing such systems is largely the province of the functional organizations described above, which are notably lacking in the church’s structure.

But the ability to deal with problems before they get out of control also depends on a clearly defined decision-making process, as well as on effective leaders who are willing to make tough decisions. More often than not, these problems are personnel decisions that can be made only by a responsible general manager. Unfortunately, very little of this kind of process or leadership exists either within the dioceses or at the national level. There is, for example, no systematic review of performance of the clergy at any level and probably very little review of lay people involved in the ministry or administration of the church. Two important exceptions to this pattern are hospitals and higher education, which have outside, independent boards and must compete in the marketplace with secular institutions for patients, students and staff.

The shortcomings of the church leadership’s current approach to dealing with personnel problems were highlighted by the sexual misconduct crisis and the painful consequences of failing to deal with it quickly and decisively. What would we think of a bank that discovered that 5 percent of its tellers were embezzling money and simply moved them from branch to branch without acknowledging the problem to their customers, exposing the offenders to the criminal justice system or even informing their new supervisors of the employees’ past problems?

With no established guidelines for behavior or rigorously enforced sanctions for misbehavior, the problem festered over many years, damaged many innocent people, ruined untold lives and led to the disgrace and downfall of many well-intentioned people. These people were asked to handle situations for which they were untrained and where sensible procedures to deal with personnel problems had not been developed or promulgated. If there had been a nationwide professional personnel function in place, with regular performance reviews and good reporting and record-keeping at both the diocesan and the national level, decisive action could have been taken much sooner.

Because of the media spotlight and the report of the National Review Board, we now know how the sexual abuse crisis was mismanaged. It is sobering to imagine what a critical assessment of the church’s performance in managing its human, financial and physical resources might reveal.

As I noted in my previous article in America, the deleterious consequences of inattention to effective management are much more pervasive and serious than simple failure to capitalize on economies of scale or the inability to respond to crises. Other symptoms of failures in governance, management and, yes, leadership include:

the increasing inability of the church to attract, motivate, retain and govern a talented and committed work force;

serious problems in raising money for capital and operating expenses and inefficient management of financial and physical resources;

the loss of reputation and standing among all its constituencies (clergy, laity, the world of power), which is dramatically undermining its ability to carry out its mission and care for its flock;

increasing indifference, laxity and even rejection of church doctrine by practicing Catholics and large increases in the numbers of nonpracticing Catholics;

increasing impatience on the part of the faithful with the arrogant, defensive and secretive stance of church leaders.

In a word, the church is in crisis and, most certainly, in a managerial crisis. The church will not be capable of exercising effective leadership until it acknowledges the immense challenge of leading and managing a worldwide church encompassing almost a fifth of a shrinking world’s population and rejects its addiction to a feudal system that was developed in a time when life was local and transportation and communication were extremely primitive. Church leaders must recognize the need to modernize governance and management in the church.

Next Steps

The church is not, of course, a corporation. For the most part its services are delivered locally, and local pastors need a great deal of autonomy to deal effectively with the pastoral needs of their parishioners. Hospitals and schools, which account for major portions of the church’s expenditures and capital requirements, also require exceptional local leadership and a good deal of autonomy. In general, they are managed more professionally than the parishes. The bishops also provide a degree of management at the diocesan level but generally do not attempt to evaluate systematically the performance of the operating units in their dioceses or to provide professional functional leadership to them in the way that other highly decentralized (and highly successful) organizations like McDonald’s or Wal-Mart do. And almost nothing of a management nature is done at the national level. As a result, enormous opportunities to capitalize on a wide variety of economies of scale are lost. Effectively addressing these problems will require a great deal more thinking and analysis, but as a famous leader of another billion-person organization once said: The longest journey begins with a single step.

To do this, exceptional leadership will be required. The U.S.C.C.B., as currently constituted, is probably not adequate to the task that will require C.E.O.-type authority and leadership to create and operate the necessary financial and human resource infrastructures. Either the pope will have to designate someone to be in charge, or the bishops will need to elect someone. In any case, here’s what the person selected will have to do:

make a strong public commitment to managerial change that will address shortcomings in the governance and management of the church in the United States;

develop a blueprint for change;

recruit and empower an experienced C.F.O. and C.P.O. (and probably a top purchasing executive) to help lead the development of the financial and human resource functions in the church in the United States;

begin to reshape the role of the U.S.C.C.B. and its staffs to support him in his leadership role;

start slowly to exercise leadership of the church in America as the infrastructure (people, systems and processes) is developed.

The many problems faced by the church in the United States cannot be solved by better management alone. But they will never be solved without good management. The church in America has changed dramatically in the decades since the Second Vatican Council. Out of necessity laypeople have played an increasingly important role in many areas, most notably in schools and hospitals and in the delivery of other social services. Many of the skills required to accomplish the reorganization of the church’s management and governance structure can be found in the ranks of lay church professionals and among others not currently at work in the church.

If the church is prepared to welcome the laity as full partners in important positions of authority and in key policy and decision-making bodies, the challenges of effective management will quickly be met. If the current conviction that only the clergy can play primary roles in the management of church affairs persists and the all too obvious shortcomings in the church’s capability to manage its affairs continues, the current decline in effectiveness and relevance of the church will undoubtedly continue and accelerate as the clergy continues to age and replacements of equal capability and commitment are not forthcoming.

The Catholic Church in the United States continues to have an enormously positive impact on our society. Because of the size of its operations, it has a huge opportunity to manage itself more efficiently and to deliver its services more effectively. The millions of people who support the church through the collection basket have every right to expect that their money will be spent wisely and well. And its million-plus employees have every right to expect that they will be paid fairly, receive competitive benefits and be evaluated, trained and deployed fairly and effectively. Meeting these expectations will require far-reaching changes and exceptional courage from the hierarchy. Anything less will be another failure of leadership and a great disappointment to more than 63 million loyal Catholics.