In the last few years nonprofits have become increasingly open to examining their relationships with other community nonprofits as a strategic tool for either growth or enhanced sustainability. As discussed in this column before, realignment can be anything from partnering on shared services or collaboration or one or more client programs to a joint venture or creation of a parent-subsidiary structure.
The increased activity around these explorations is creating a strong body of knowledge we can all use in thinking through alignments that will give us stronger business models and save or increase our services to clients.
Frank Forsberg, senior vice president for systems change and innovation at Twin Cities United Way shared with me how he came to his unique role coaching and supporting nonprofits in examining and effecting various realignments:
“Our concern was that economic downturn is fueling long term structural deficits in all units of government — federal, state, county and city. These units all provide funding and some direct human services to nonprofits.
“As the baby boomers retire, economists are projecting a slower rate of growth in the economy, which translates to a lower rate of growth in tax revenue and an increased demand for services to this population. While not the only issue, this dynamic is a driver of the problem, since most of the health and human services nonprofit we work with are on average funded about 50 percent by government.
“We therefore must build ways to realign and interconnect these support systems, so that we can utilize their resources most effectively.”
Twin Cities United Way’s partner for most of these efforts has been MAP for Nonprofits in Minnesota, a leader in helping nonprofits think through such strategies and steps and in collecting data on predictors for success. Over a 10-year period MAP has assisted over 41 nonprofits in completing mergers and advises on other possibilities along the realignment continuum.
Renae Oswald-Anderson, director of redesign services for MAP, warns that examining such options is best done before a nonprofit has become “financially fragile.” Most of MAP’s clients seek outside funding to pay for this consulting service; so a year or more may go by before discussions of various options can begin in earnest.
The far end of the realignment spectrum is mergers and acquisitions. The reasons this option is considered reluctantly are obvious, but some nonprofits consider it to increase their geographic span or for efficiencies obtained by scaling up.
Others use it to obtain greater administrative efficiencies or to preserve community services that might otherwise disappear.
I asked Cindy Murphy Kelley, director, of the MBA Program at Savannah State University, for her thoughts on nonprofit mergers:
“As an executive director who has led four nonprofit organizations and served as a nonprofit board member at various organizations for 20 years, I’ve personally experienced seven merger/acquisitions within the sector. Each one was different and yet all shared some commonalities and themes.”
This fact helps consultants focus on the potential dangers and facilitate a smoother process of what can often be a tough road. Kelley cited the attitudes of the executive directors and the support of the boards as key factors that can make or break a merger project. She also emphasized the due diligence process as a critical piece.
A merger or acquisition may help with the financial side of the equation. But it can also improve public image, increase service quality and enhance the organization’s culture per MAP’s Success Factors in Nonprofit Mergers research and publication, conducted by Wilder Research of the Greater Twin Cities area.
Nonprofits interested in exploring how to plan partnerships, alliances and other realignments with local nonprofits can contact any of the above for advice or can contact Change Pioneers for more resource information.
Sarah Todd is founder and principal of Change Pioneers, an information source on effective change leadership. She can be reached at changepioneers@gmail.com or 912-224-2120.