by Andrea T. Mills, MBA, CPA, CCSA®, CGMA and Patrick Donohue, MBA, MSW
Even if your nonprofit organization is financially healthy, you’d do well to keep an eye on the future. We live in an environment of ever-increasing demands on resources; you need to be on the lookout for new ways to ensure long-term sustainability.
Strategic alliances — anything from sharing back office expenses to merging — may provide both the financial stability and expanded options to serve your clients.
Ed Wiertel, long-time Board Chair of the Chicago Youth Centers (CYC) saw that funding for the well-regarded, high-performing nonprofit was continually contracting so he did what other nonprofits would be wise to emulate: He formed an in-house team to evaluate ways in which the organization could uncover savings and build a more secure path to the future by thinking outside the box.
CYC had made all the “inside the building” cuts it could without cutting into the heart of its programs. That meant it had to look outside, to new ways of ensuring CYC’s sustainability. Often, nonprofits attempt to carry on in the face of funding cuts, tightening their belts, cutting programs and, unfortunately, sometimes even reducing quality. By planning ahead, when still healthy and vital, a nonprofit like CYC can become more financially sustainable.
CYC’s solution was to look for a financially solid strategic ally with whom to partner in a way that would benefit both organizations by sharing infrastructure and administrative costs while strengthening their programs. It sounds idealistic but it wasn’t; it was pragmatic. The first step was establishing the criteria needed in a partner. For CYC, these included mission compatibility, similar motivation for a partnership, non-competitive funding sources, financial health, and leadership it could work with, among others. CYC identified 13 potential nonprofit partners, whittled that list down to six, and, after talking with those six, found its partner, Family Focus (FF).
CYC provides services to children from age 3 through their school years; FF provides services in the same area to children from birth to age 3. By working together, they provide a solid continuum of services to families, which is better for their clients and better for both organizations.
At an initial planning meeting, facilitated by FMA and Mission + Strategy, individuals at both organizations were skeptical about finding savings or benefits from the collaboration. Some worried that collaboration would mean more cuts in staffing.. But, by the end of that first session, the problem shifted to choosing among the bounty of options for collaboration that had been identified. The group chose to first implement options that enhanced program and reduced administrative expenses. The other options are still on the table. Now that a long-term, trusting, collaboration has been established, the door is open to exploring the top and many other ideas to work together.
Initially, the group determined that both organizations could save money through joint purchasing; shared use of transportation; and shared expenses for facility rental. The group recognized the potential for future savings in development and IT. The program for FF clients was enhanced by extending the continuum of care from birth through school years for their children. This gives CYC a steady flow of clients into its programs, relieving Program Directors of the client-recruitment burden.
The end result from this collaborative partnership is that neither organization has lost staff or its independence. Both continue to operate as separate entities.
The joint venture between CYC and FF illustrates some basic lessons for maintaining a sustainable nonprofit:
1. “Alliance” is not a synonym for “merger.” Organizations can work together in many ways, from sharing back office expenses to joint ventures in which they collaborate on programs, referrals, and costs but do not share staff or governance.
2. Look ahead and around in your community. Evaluate the value of alliances whenever you re-do your strategic plan. Have an open mind and discuss possible options for collaboration.
3. Focus on the best interests of clients. It’s their access to needed services that you want to sustain. How can partnering with another organization enhance program quality?
4. Set up the criteria. What would you like in a partner?
5. Look beyond the obvious. You may find that an organization that offers complementary services, rather than similar services, is your best strategic ally.
6. Don’t expect to nail down all the benefits of an alliance before you sit down to talk. At those initial meetings between CYC and FF, people were still skeptical … until they got down to brainstorming in earnest and trusting each other.
7. Alliances require collaboration and communication. Listen to the legitimate concerns of staff and communicate throughout the process.
8. Look for funders who value a collaborative approach. Community foundations, such as The Chicago Community Trust or Seachange value this type of communication. Ask them to fund the design and implementation of your strategic alliance. More and more funders are recognizing the value of strategic alliances and are willing to help.
Well-planned alliances have benefits beyond the obvious cost savings. By collaborating, both CYC and FF expanded their access to expertise they lacked in-house and the services they provide.
Exploring an alliance can be challenging for both partners but those challenges can be invigorating and, with clear-headed leadership, can result in more efficient ways to ensure delivery of vital nonprofit services. Don’t let resistance to change bar the door to the positive opportunities that alliances represent.
Andrea Mills is a director at FMA, which provides consulting, outsourcing and training to nonprofits.