Mergers Shmergers: The Truth About STRATEGIC RESTRUCTURING
Here’s a fun exercise to try at your next board meeting. Just for fun, use the words “merger,” “acquisition,” or even “strategic restructure” in a room of nonprofit board members and staff. For every angry huff, you get 10 points; a noticeable headshake is 5 points; and add another point for every minute every individual actively avoids eye contact with you. When you hit 50 points (should take between 3-5 minutes depending on the size of the room), you can admit it was just a joke (whew) and we can all laugh heartily at your little experiment. Or cry. Because it’s an actual shame the nonprofit sector reacts so fearfully to a concept that could improve sustainability, service delivery, and program delivery.
But why does this happen? What makes mergers so taboo? There is a dangerous assumption that those scenarios mean the end of your organization, mass layoffs, and a gaping hole in services to your community. In actuality, formal partnerships between organizations can be an excellent way to advance your mission, preserve your assets, and sustain your services.
Restructuring is always a choice, and when approached with a clear vision and understanding of best practices for success, it can be a brilliant organizational strategy! Throw in a pandemic, social justice movement and global economic crisis, and it can also be vital to survival.
Think it’s not for you? Think again, and let’s shatter some myths while we are at it:
MYTH 1: Mergers always end with one organization dissolving.
This comes down to the word “MERGER,” but that’s just one of many outcomes when we talk about collaborations. So, let’s shatter the stigma right now and kick things off with a name change. Because formal collaborations cover a wide spectrum of specific structures, let’s refer to mergers, acquisitions, parent-subsidiaries, joint programs, administrative consolidation, and shared enterprise as STRATEGIC PARTNERSHIPS. Before your organization decides which specific structure is the right fit, we suggest some initial steps to build the foundation for a successful partnership, regardless of the legal structure.
MYTH 2: We don’t need to partner because we aren’t in crisis.
This is probably the number one objection that organizations have to overcome when discussing strategic partnerships. But nothing could be farther from the truth. In fact, exploring strategic partnerships is a careful process that requires both organizations to approach from a position of strength. If one organization is actively in crisis, truthfully, it may be too late for a discussion anyway.
Myth 3: We don’t want to lose everything we’ve worked for.
Strategic partnerships are about sustainability. That’s the main goal of every single partnership ever explored. Sustained programs. Sustained finances. Sustained community leadership. As nonprofit organizations, we are mission focused. This means that anything that doesn’t advance the mission should be off the table. So, re-frame the conversation: What is the critical work we are delivering? How does our shared identity contribute to our philosophy and vision? What measures do we need to take to preserve and sustain them both for years to come?
MYTH 4: We aren’t ready for a strategic partnership.
Are the needs of your service community rapidly increasing and your organization is struggling to keep up? Are new restrictions on program delivery putting things on pause? Are financial resources scarce, i.e. you’ve reached your fundraising cap, you’re losing the competition for private grants, and/or your government funding is getting cut? Is your FY2021 budget looking more like a “choose your own adventure” with the best- and worst-case scenarios both looking grim? If you answer “yes” to any of these, the time is now to consider a strategic partnership.
MYTH 5: We can’t afford to explore a strategic partnership.
Guess what, this is such a good idea that foundations offer grants to support strategic partnership exploration and implementation! In Los Angeles County, the Nonprofit Sustainability Initiative has granted over $3.6 million to assist 226 different nonprofits to enter into 82 strategic restructuring negotiations.
Similar funds in other cities include New York Merger and Collaboration Fund (New York City), Mission Sustainability Initiative (Chicago), and Nonprofit Repositioning Fund (Philadelphia), among others. These grants help with the real costs of considering a strategic partnership and then making it work, including hiring a consultant to facilitate and conduct due diligence, engaging legal counsel for both organizations, branding and marketing, and more.
Ready to learn more?
Check out how Envision can support your strategic partnership exploration and join us on Wednesday, July 15 at 10:30am PT / 1:30pm ET for a webinar with Envision diving further into lessons learned from successful strategic partnerships!