Mission + Strategy = Social Value

A New Post from Mission + Strategy Consulting
Not long ago, a new shared service alliance, or administrative partnership was considered a major event - not any more. Back office collaborations are popping up all over the place. One of the stronger examples is Chicago's own... (continue reading at: http://ow.ly/ftYwv )

Nonprofit Merger Secrets to Success

A new report called "Success Factors in Nonprofit Mergers" was published last month by MAP for Nonprofits, a capacity building organization for nonprofits based here in the Midwest in Minneapolis, MN. The multi-year study completed by Wilder Research identifies what factors lead to successful nonprofit mergers, and analyzes what happens after a merger is implemented. The study examined 41 mergers between January 1999 and June 2010, and included interviews with 201 individuals - three to eight people per merger, including at least one executive director, board member, and representative from the dissolved nonprofit. It also looked at financial data obtained from publicly available 990 tax returns and accessed through Guidestar.

The researchers were ablet to identify a variety of success indicators for a merger in areas such as outcomes, reasons for merging, merging process, and financial analysis.  Here are just a few of the interesting highlights:

Ninety-five percent of respondents believed that the merger would not have happened if one of the executive directors had not driven it. Also, in 80 percent of the mergers, the executive director of one of the pre-merger organizations had recently left or was soon to retire.

When the board of each pre-merger organization was very involved in the merger process, respondents were more likely to report that the merged entity had a positive image, reputation, or public support three years following the merger.

Mergers may work best when the nonprofits have a history of partnering together and openness, and when there is transparency in both legal and financial matters.

Merger success is associated with how well non-administrative staff members are informed about the progress of the merger and the involvement of non-administrative staff members in the planning and implementation of the merger.

The study supports many best practices for facilitating a merger as well. It also confirms that organizations feel they should use consultants; 96 percent of respondents said they would involve a consultant in future mergers.

There is much more information in the study than I've shared here, and I encourage you to either read the full study or the shorter synopsis, particularly if you are considering doing a merger yourself. I am grateful to MAP for Nonprofits, Wilder REsearch, the Greater Twin Cities United Way, and their partners for making this research possible and for sharing it with the entire nonprofit sector. I also wish to acknowlege my good friend an dmentor, Ron Reed, who was integraal to making the study possible. Ron helped launch Project Re-Design, the mergers and collaborations practice at MAP for Nonprofits, and co-wrote "MergeMinnesota," a merger how-to manual that is available for free on-line, a really great resource.

 

Local Library or Management Service Organization?

 
Many foundations believe their grantees could be more effective by partnering and merging resources with other organizations such as sharing back office services between two or more organizations, or having a small nonprofit consolidating into a larger nonprofit in order to spread their costs more effectively. When nonprofit leaders seem uncertain or scared to try these strategies, what can a foundation do to make them relevant to nonprofits? Cheryl Taylor, President and CEO of the Foellinger Foundation in Fort Wayne Allen County, Indiana decided to make an example of her own foundation to show the benefits of collaborations.

In 1999, the foundation was looking for a way to mark its millennium anniversary. "We don't do parties," said Cheryl, so the foundation determined that it wanted to make a gift to the Allen County Public Library and make a positive impact on the nonprofit sector in some way. "We decided that the library is really like a freestanding management service organization (MSO)," said Cheryl. A Jointly Held MSO is usually an umbrella nonprofit that provides services - facilities management, accounting, human resources, IT, fundraising, etc. - on a  fee-for-service basis to the individual organizations that are its members and customers. The members compose the board of directors and in that manner, control the mission and activities of the MSO in the same way any board governs a nonprofit organization. MSOs are very customer-service oriented and achieve economies of scale through pooling budgets. Examples of MSOs abound in the healthcare industry but lately, have begun to spread into other areas of the nonprofit sector. One interesting example is the Glasser-Schoenbaum Human Services Center in  Sarasota, Florida known as the Campus of Caring. This unique MSO focuses on shared occupancy costs, housing 17 health and human service agencies completely rent-free on a campus with 13 buildings. With an emphasis on shared services among the partners, The Campus of Caring partnership also includes advanced academic training for staff through the University of South Florida, and soon a children's health facility will be built on the campus.

The Foellinger Foundation realized that nonprofits might be able to use the library in a similar way to an MSO. A library is customer service oriented; it specializes in managing and distributing information and training to a wide variety of people and institutions; it is a center for learning which people are already accustomed to. The library budget covers the overhead and infrastructure and with some additional funding, could expand its offerings, so there would be no need to fund an independent nonprofit. A year later, the Nonprofit Resource Center (now the Paul Clarke Nonprofit Resource Center) was born. Staffed Monday through Friday, the center offers a wide variety of completely free sources to nonprofit organizations in Allen County, including:

• Monthly classes on basic grantwriting
• Philanthropy Funders' forums to bring together donors and grantees
• Collaborative workshops and seminars on a variety of topics of interest to the broader nonprofit community
• Board governance and youth leader training
• Electronic dissemination of information to nonprofit leaders for proposal deadlines and upcoming presentations at the Center
• Consulting services for Nonprofits provided by the Center
• Reference and circulation services specificially for the publications related to the nonprofit sector

This is a great example of what can be done with some creativity and a collaborative approach. Have you ever thought of your library as an MSO? What existing institutions or resources are in our communities that we could better leverage and use to innovate?

Shared Space Strategies: An Interview with China Brotsky

There are many ways that nonprofit organizations can collaborate to expand the impact of their missions. One that I've been writing a lot about is nonprofit centers, or shared space, such as the Children and Families Services Center (CFSC), in Charlotte, North Carolina - a 100,000 square foot building that houses 9 nonprofit organizations. Peggy Egan, CFSC's executive director, estimates that her members are saving a collective $1 million each year through co-location. (To continue reading the rest of this posting, go here.)

Sharing Nonprofit Collaboration Knowledge and Experience

One of the best outcomes of the Lodestar Foundation's Collaboration Prize (a competition to identify the best nonprofit collaboration) is the Nonprofit Collaboration Database, a searchable database of nonprofit collaboration models in the US that were submitted through the competition. There are currently 670 collaboration examples in the database, which was recently upgraded and is now housed on (click here for the full story)

(A picture of the Nonprofit Collaboration Twitter widget, which is great!)

Just moments ago, Illinois Governor Pat Quinn proposed in his 2012 State-of-the-State address that we eliminate $425M in general revenue spending, and take the budget back to 2008 spending levels. To do this, he is proposing significant cuts to social service, healthcare and prison budgets, among other items. With all of the cuts that human service agencies have already experienced since the start of the recession, can we really say we have an intact safety net? Chicago Community Trust CEO Terry Mazany identified the Jane Addams Hull House Association bankruptcy as the canary in the coal mines - if these cuts happen, will many other nonprofit agencies be joining Hull House as Mr. Mazany predicted?

Announcing a New Blog Series on Nonprofit Co-Location by Mission + Strategy

There is a lot of exciting and creative work occurring with nonprofit co-locations around the country and I thought I would write a series on the topic in my Stanford Social Innovation Review blog. The first posting was published Jan. 11th. It's about a really interesting co-location project in Charlotte, North Carolina which houses nine separate nonprofit organizations called the Children and Family Services Center of Charlotte. Here is a link to the article.  Watch for future postings on this topic coming out in the next few weeks including  an interview with China Brotsky from the Tides Foundation.

There's a very interesting article about the Chicago-based shared service alliance called the Back Office Collaborative, or BOC, in the winter issue of the Stanford Social Innovation Review (http://www.ssireview.org/articles/entry/case_study_change_comes_at_a_cost), summarizing what BOC and its members have been able to accomplish since it was formed in 2008. I recommend that you read it. The article does a nice job of highlighting BOC's significant successes, as well as detailing the pain that the organizations have undergone to get there. To date BOC has created net savings to its members of almost $1.5M. The typical member of BOC gets a 488 percent return on their $6,375 membership fee, quite astounding. Yet, some of BOC's success has come at a significant price, in some instances. After consolidating financial services departments, 35 people lost their jobs which generated over $700,000 in savings. And yes some of those jobs went to India. The founding organizations have been able to re-invest those savings back into the organizations' programs and services, which is what this shared service alliance is all about. Future plans call for continuing this consolidation process, by sharing health insurance, I.T. and Human Resources. There are other examples out there about shared service alliances to give you perspective on how this can be done differently (check out my blog for postings on this subject), but none have achieved the results that BOC has, in this short time. I know that Bryan Preston and his members have agonized over this process; it is never easy to decide to lay anyone off. But if the organizations are more stable, and able to invest more in their services as a result of these changes, isn't that a good thing? Read the article and decide for yourself, and then write me a comment and let me know your thoughts.

Changing the Way Nonprofits do Business by Funding Collaboration

Recently, I wrote a piece about an exciting new funding source for nonprofit strategic restructuring called the Sea Change-Lodestar Fund, which has a national geographic focus. One of my readers informed me about another funding source called the Catalyst Fund, administered by the Nonprofit Finance Fund. The Catalyst Fund also finances nonprofit collaborations, and although it restricts its giving to the Boston area  the founders believe it could be a national model for funding nonprofit collaborations by creating a replicable resource infrastructure to support nonprofit collaborations.

I recently spoke with the Catalyst Fund's Manager Peter Kramer and asked him to explain their goal. "Ultimately, we want to see nonprofits meaningfully change the way they do business in order to further their missions." Peter said that the Catalyst Fund began in September 2010, with a five-year commitment to invest a total of $1.725M by four key investors: the Boston Foundation, Boston Local Initiatives Support Corporation, The Hyams Foundation, and United Way of Massachusetts Bay and Merrimack Valley. The choice of a five-year horizon, he said, was because "This is a new approach. We are taking an active role in providing resources for collaborations and mergers through a central vehicle and in a unified way. If this doesn't end up working how we anticipate it will, then we want the flexibility to be able to try something else."

Peter explained the Fund's unified proces this way. They have a simplified intake and application process, much like a venture philanthropy that is an interative diligence process, with lots of conversations with the applicants to hone their thinking around their venture. "We try to get a good feel for where they are trying to go," said Peter. In these early conversations, the Fund is looking for signs of "seriousness of intent" by the applicants, by which Peter meant, "Have the boards passed some type of resolution for the initiative?" Uninvolved boards are a sign to Peter that there isn't a meaningful change in business occurring and therefore may not fit with the Catalyst Fund.

The Fund also has a pool of pre-qualified technical assistance consultants. "We wanted to be able to pre-qualify consultants so we know that consultants aren't cutting their teeth on the Fund; also we wanted to assure a level of quality going into the engagements." The consultant pool includes various kinds of expertise including facilitation, finance, legal, and governance.

But how do they measure success? "We want to know," explained Peter, "Has the actual technical assistance engagement led to real improvement, expansion, or preservation of participating nonprofits' programs or services? And, we want to know if the nonprofits have made a meaningful change in their business model. But at the end of the five years of the Fund, we want to be sure that more people know about collaboration strategies, and that collaboration is a more accessible and positive tool to nonprofit leaders, whether in good economic times or bad."

During the past year, the Catalyst Fund has made its first round of investments in nine collaborations, totaling $280,000. It's a diverse pool of mergers, alliances, and partnerships from a variety of nonprofits. The Catalyst Fund is underway, and we look forward to learning from its model and if it can meaningfully change the way nonprofits do business by funding collaboration.

Is there a fund to underwrite nonprofit mergers and collaborations in your community? If so, please write a note to this posting and I will try to write about it in the future.

Merger Client Announces New Identity

My client, the Badger Asn. of the Blind & Visually Impaired, of Milwaukee, WI., which merged in 2009 with the Center for Blind & Visually Impaired Children, is launching their new identity today: they are now known as Vision Forward Association. Congratulations! http://www.badgerassoc.org/whatsnew/launch-party-open-house/ .