Collaborations and mergers among nonprofits certainly aren’t new, but much of what nonprofit leaders know about them comes from our for-profit counterparts.
Nonprofit collaborations are no better and no worse than those done by for-profits. They’re simply different. As I wrote in a previous post, for-profit collaborations and mergers are driven by financial motivations including cost savings, but charities are unlikely to reap any savings for years, if at all. For nonprofits, the primary driver to merge or collaborate should be to help them achieve their missions. Mergers and collaborations are strategic tools. They do not have to be a last resort.
The Great Recession and the protracted recovery have sparked renewed interest in nonprofit collaborations. But resources dedicated to helping them carry out their plans are scarce, so many groups don’t know where to begin.
For two years, the Nonprofit Finance Fund has worked with five major grant makers on the Catalyst Fund for Nonprofits, which provides guidance and technical assistance for Boston-area organizations that are exploring, planning, or implementing strategic collaborations and mergers. And in an effort to demystify the process for all nonprofits, the fund has produced two free publications—a case study and a report about the first two years of the Catalyst Fund’s work.
The case study tells the story of one nonprofit merger, and the report includes interviews with 40 people involved in various ways with mergers or collaborations: those who have provided financial support, executives and board members of groups that received support—and of some that were denied support—as well as consultants and others.
So what are we learning about successful collaboration? What does it take?
Effective leadership. The level of organizational change dictated by a collaboration or merger requires leadership from many people close to the nonprofit. Leaders—both board and staff—with prior collaboration experience can be invaluable assets, lending perspective and raising important issues. And a talented and organized chief financial officer can help facilitate the exchange of information and reporting that is a critical part of due diligence.
Part of what makes leaders effective in nonprofit collaborations is the ability to build trusting relationships. In the merger featured in our case study, between two agencies that provide services for the homeless, an executive reflected that early in the process “someone should have held a cocktail party” to help build personal relationships between staff and board members. In her experience, when conversations got tense or an agreement felt elusive, personal relationships helped move conversations forward.
Clear and aligned objectives. Partner organizations with a strong sense of their own priorities are often better positioned to achieve the common goals of their collaboration. We’ve found that when organizations have recently undertaken a strategic-planning process, their reasons and goals for collaboration were clearer and it was more likely to be a success. In my experience, it’s when the goals of the groups were unclear or conflicted that the collaborative venture can stall or stop altogether. The simple question, “What are we trying to achieve together and why?” can lead to candid conversations among partners and help prevent roadblocks. The motivations and goals of the partners don’t have to be identical, but articulating them clearly fosters transparency and helps manage expectations throughout the process.
Resources and expertise. The reality is that strategic collaborations are expensive and require professional guidance. Experts can provide technical assistance and help with governance, finance, program design, and legal issues, and they can facilitate challenging discussions and negotiations. In Catalyst Fund ventures, nonprofits rely on the fund’s technical assistance but are also urged to tap experts on their board or draw on staff members who have collaboration experience. Pro bono help is great when you can get it, but expert assistance isn’t always free.
Costs can add up, and the participating groups may need additional dollars for advisory services, new technology, severance pay, or a re-direction of staff time. Once the merger is complete, the groups may be able to save money, but there is a long time horizon for realizing those savings.
Sources of financial support for collaborations, like the Catalyst Fund, can go a long way, but there’s a limit to how much they can do. In Boston, we aren’t able to support every proposal, and as groups that we do support move closer to their objectives, their needs may grow beyond the level that the fund can finance.
As the landscape of the social sector changes, it’s incumbent upon all grant makers and donors who care about preserving, improving, and expanding programs and services to support these strategic organizational tools.
At the Catalyst Fund, we hope that insights from our work supporting collaboration can help change inaccurate perceptions about nonprofit collaborations and mergers–and we are not alone. Grant makers in Charlotte, N.C.; Cuyahoga County, Ohio; New York City, and across California have also been working together to advance strategic collaboration in their communities. Their work, too, is enriching the available body of knowledge and building a track record of inspiring examples.Return to Top