Mission + Strategy = Social Value

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?

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.

A New Source for Funding Nonprofit Mergers and Integrations

It isn't often that a funder calls me up to introduce himself, but that's what John MacIntosh of Sea Change Capital Partners did when he heard that I was active in nonprofit collaborations in the Midwest. John wanted to learn what I was up to and make sure I knew about a unique philanthropic fund dedicated to enabling nonprofit collaborations. The Sea Change-Lodestar Fund for Nonprofit Collaboration is itself a collaboration between the Lodestar Foundation and Sea Change Capital Partners.

The Sea Change-Lodestar Fund's mission is to facilitate and fund sensible collaborations among nonprofit organizations. it is prepared to help cover a portion of the one-time ocsts associated with nonprofit mergers and collaborations. It makes two main types of grants:

• Exploratory grants (generally $25,000 or less) to explore and evaluate a potential collaboration

• Implementation grants (up to $250,000) to cover a portion of the one-time costs associated with implementing a collaboration

John explained: Implementation grants are always made alongside funders of the collaborating organizations, often specialized in sector or from the local geography where the merger or collaboration is happening. Our fund believes in having a high engagement level with the leadership of the collaborating nonprofits, quick turnaround, and a thorough evaluation and approval process.

When I asked John why Sea Chanage was collaborating with the Lodestar Foundation on this fund, he replied, We each bring different things to the table. Lodestar is unique amongst foundations in its focus on collaboration. We were thrilled when they approached Sea Change about working together, and put the issue of nonprofit mergers and collaboration on our radar screen. The team at Sea Change has deep financial and transactional experience in both the nonprofit and for-profit worlds, so this was a very natural step for us to take in our effort to help nonprofits have more impact while also seeking opportunities to make leveraged grants. Sea Change does much of the front-end work, the analysis, the site visits, and speaking to the leadership. We have raised some outside funding for this work, though Lodestar remains the biggest funder and Sea Change the second biggest.

But I wondered how the fund defines "sensible collaboration." John explained that is when two or more nonprofits combine some or all of their important activities in a formal, long-term, or permanent way. It can take many different forms, including mergers, acquisitions, and various forms of alliances and partnerships. A sensible collaboration is one that has the potential to increase the efficiency, effectiveness, or sustainability with which they pursue their missions. We want to help organizations that have gotten to the point of exploring something or consumating a collaboration, to do it.

The really nice thing about this fund is that it is set-up to pay for what they call the "unavoidable but uninspiring" costs of collaboration, such as IT integration, re-branding, severance costs, and lease-breaking - costs that many funders would find an anathema. The fund is not a passive donor, however; it gets intimately involved in some of the transactions when it feels it can add value as an outside party. If the fund feels it cannot add any value it is less likely to fund the transaction. Guidelines state: Our due diligence process is intensive..." - so be sure you want a partner if you approach the fund for support.

And in this age of focus on cost-cutting and efficiencies in nonprofit mergers and integrations, MacIntosh had this to say: The whole question of cost-savings is more nuanced than many people believe. In our experience, saving money is neither necessary nor sufficient motivation for collaboration. Often the level of potential cost savings wouldn't be enough to justify the collaboration, but it's often enough to put the transaction costs in a healthy context. The ability to save money doesn't mean you actually save it, but instead you reallocate your resources to the program side. After all, the goal is not to reduce the budget, but to produce great contemporary dance, educate more children, etc.

The Sea Change-Lodestar Fund for Nonprofit Collaboration, based in New York City, takes proposals on a continuous basis from across the country. Are you aware of other new funds like this one? If so, send me a note so I can post something about it.

 

Nonprofit Mergers: New Donor Quality Metric? No. Carolina Story May Indicate So

A very interesting story popped up in my Google search engine dated Sept. 28, 2009 from the Charlotte Observer. A county commission of very prestigious government and foundation institutions including the United Way of Central Carolinas and the Foundation for the Carolinas, have formed to identify strategies for addressing the funding losses for the  Charlotte-Mecklenberg community. There simply isn't enough money to support the same number of nonprofits today as there was in the past; one estimate is that funding is down $171M for nonprofits. The most popular suggestion from Charlotte residents and commission members is for nonprofits to merge; "There are absolutely too many nonprofits in Charlotte," says Jennifer Roberts who chairs the commission. With area unemployment at 12%, local experts expect donations to continue to decline. "Given where we are in our community, and where we are in our society, it does make sense for the nonprofit sector to look at ways it can restructure itself, County Manager Harry Jones says. "As a donor, I'm going to want to know that an agency I'm giving money to is not duplicating." Is this the beginning of donors looking for evidence of collaboration strategy in a nonprofit's portfolio as a quality metric? Will the evidence of multiple nonprofits doing the same kinds of work in the same community turn off donors and make them feel like it's a duplication of effort? Time will tell.

And the Semi-Finalists Are...Lodestar Foundation Announces 8 Finalists for Collaboration Prize

This is an update to an earlier entry I wrote about The Collaboration Prize, being offered jointly by the Lodestar Foundation and the Arizona-Indiana-Michigan Alliance (AIM). This unique competition will award a cash prize of $250,000 to the best nonprofit collaboration in the country. Out of a total of 644 entries received for The Collaboration Prize,the blue ribbon selection committee narrowed the list down to the top thirty collaborations last December. Today the Lodestar Foundation and AIM announced the top eight finalists for the award, out of which the eventual winner will be chosen on Mar. 5th. The eight finalists are:

1. Cancer Vaccine Collaborative, New York, New York, cancer research collaboration promoting learning over competition

2. Chattanooga Museums Collaboration, Chattanooga, Tennessee, Administrative collabortion among The Creative Discovery Museum, The Hunter Museum of American Art, and the Tennessee Aquarium

3. Crittenton Women's Union, Boston, Massachusetts, Merger of two organizations serving low-income women

4. Museum of Nature and Science, Dallas, Texas, Merger among the Dallas Children's Museum, The Science Place, and Dallas Museum of Natural History

5. New York Law Help Consortium, New York, New York, Collaboration among legal services organizations serving at-risk new parents

6. Ready, Set, Parent, Buffalo and Lackawanna, New York, Collaboration between organizations supporting at-risk new parents

7. ShoreBank Enterprise Cascadia, Ilwaco, Washington, Merger of two community development financial institutions

8. YMCA/JCC Integration, Sylvania, Ohio, (Greater Toledo), Merger of Jewish Community Center and Young Men's Christian Association in Greater Toledo 

Congratulations to all the finalists!