Nonprofit Mergers: More Than One Option
Challenging economic conditions are not only changing the way nonprofit organizations raise funds and asses their programs, but also forcing them to consider strategic reorganizations. Funders are applying direct and indirect pressure on the same topic, questioning the viability of multiple organizations in a single community with similar missions. At first glance, pursuing a merger like some of their for-profit cousins seems to make economic sense. However, a number of current and proposed nonprofit mergers are not seeing the advantages they hoped for, in part because of an assumption that a full merger is the only answer.
As we work with organizations of all sizes and types, one of the seven fundamental topics we address in an engagement is to find your alliances. This certainly does not mean a merger is required, but nonproifits do need to assess the possibilities for collaboration as funders are sure to ask, particularly if there are potential partners in the same community. One of the best resources I have read lately on this topic is David La Piana’s book Strategic Restructuring for Nonprofit Organizations. Widely regarded as one of the national leaders on this subject, La Piana Consulting has both engineered many successful mergers as well as studied the issue on a national level.
Perhaps the key point La Piana makes through the study of 192 strategic restructuring partnerships is these opportunities are not an “all or nothing” proposition. In fact, he suggests there are six types of partnerships that fall in two major categories: alliances and integrations.
1. Joint Programming. The first of the alliances that consists of an ongoing commitment where one or more programs are jointly managed.
2. Administrative Consolidation. An alliance where one or more back-office functions are shared, but the organizations are otherwise independent.
3. Management Service Organization. An integration where nonprofit partners create a new organization to manage some or all of their back office functions.
4. Joint Venture. An integration where nonprofit partners create an organization to manage a new administrative or programmatic objective.
5. Parent-Subsidiary. An integration where one nonprofit oversees the other.
6. Merger. A complete integration between two previously independent organizations combining administrative, programmatic and governance functions.
It is interesting to see both the opportunities for collaboration as well as the variety of ways a successful partnership can manifest itself. Perhaps there are collaborative opportunities for your organization that you have not yet considered? Contact Patton McDowell & Associates and we’ll ponder that exact question.