Moving Mountains: Mergers and Collaborations Among Nonprofits
https://theevansconsultinggroup.com/services/visioning-process/The recent merger of three environmental groups in western North Carolina epitomized the trend of collaboration among nonprofit organizations. Increasingly, mergers and other forms of long-term collaboration are mission driven and not all about cost savings.
Mountain True is a true New Year’s baby, as this organization came into being on January first.
On Nov. 20, the boards of three, longstanding environmental organizations in western North Carolina – the Environmental and Conservation Organization, the Jackson-Macon Conservation Alliance and the Western North Carolina Alliance – approved the formation of one organization, called Mountain True, working for a common purpose.
All three organizations were undergoing leadership changes and reevaluating their strategic plans.
“To be ‘mountain true’ is to be committed to the values of stewardship and conservation of the forests, rivers and public lands of Western North Carolina,” Western North Carolina Alliance co-director Bob Wagner said in a press release. “We’re very proud and excited to carry that mantle into the future as a united organization.”
The merger, proponents hope, will allow a single organization to exert a strong influence on government policy, expand its geographic scope, and strengthen its grassroots engagement.
This kind of nonprofit collaboration is by no means limited to the Tar Heel State. Throughout the nonprofit world, organizations that once might never have imagined working together closely – nevermind merging – are joining in common cause.
The Great Recession prompted much of the nonprofit world to focus on the importance of collaboration and avoiding duplication. The lack of resources, the thinking goes, demands that nonprofits find new and creative ways to work together.
But what are we suggesting when we talk about nonprofit collaboration? Are we seeing more of it in the nonprofit world? Is it making a positive impact?
A recent report released in December by the Bridgespan Group and The Lodestar Foundation called “Making Sense of Nonprofit Collaborations” offered an informative look and enumerated four main types of long-term, formal collaborations (as opposed to more informal, one-off efforts such as running a joint fundraiser). These efforts can be broken down into:
• Relatively informal associations
• Running joint programs
• Sharing support functions
One might have thought that the recession would have led to a spike in nonprofit mergers. Indeed, for a time, it seemed that, every week, another nonprofit organization was either folding or merging with another group. But the report found that the overall rate of nonprofit mergers remained unchanged between 2007 and 2012. The flat rate was due to the fact that even in the most troubled of economic times, the total number of nonprofits grew. So even as the number of mergers increased, the number of all nonprofits increased as well.
The Bridgespan/Lodestar survey of 237 nonprofit CEOs found that 91 percent of the respondents had engaged in at least one of the four forms of collaboration and 54 percent engaged in two or more. Clearly, there is a great deal of enthusiasm for the idea of collaboration. According to the study, the two biggest obstacles toward greater collaboration are inadequate funder support and the challenge of finding the right organization with which to work. Innovative foundations like Lodestar are promoting the idea of collaboration and urging philanthropists to fund these efforts. Entities such as SeaChange Capital Partners, a nonprofit merchant bank, are providing grants to make collaboration more feasible. For example, SeaChange, in collaboration with Lodestar, provided grant money to help bring the Mountain True merger to fruition. But more philanthropic support is needed.
In an interview, Jessica L. Cavagnero, Vice President at SeaChange, stated that nonprofit mergers and collaborations are rarely just about saving costs, but are most often about better fulfilling missions.
In another recent interview, Laura Solomon, a Philadelphia-area attorney whose firm caters to nonprofits, said that, during the Great Recession, a number of organizations faced bankruptcy or dissolution and, in other cases, entered too hastily into affiliations and mergers. For sure, there have been enough examples of nonprofit mergers that felt like hostile takeovers to make volunteer and professional leaders – not to mention employees – nervous about dramatic change.
Whenever a tax-exempt organization collaborates with another nonprofit or for-profit, Solomon explained, the organization needs to consider first whether the collaboration is in furtherance of its charitable mission. Then, the organization should work with legal counsel to fully understand the unique corporate and tax consequences of the form of collaboration, which may be an affiliation, a management services organization, joint venture, traditional merger, or a “virtual” merger, where one nonprofit becomes the parent of the other. Nonprofits need to consider both the cultural and legal issues as there is a potential for misunderstanding when nonprofits don’t fully vet the partner organization or engage legal counsel to weigh in on the form of collaboration. But, as the economy has improved and most nonprofits have recovered, they are becoming more selective about collaborations and, on the whole, making better-informed decisions.
“We are seeing charities that are not merely reactive, but are looking at potential collaborations in a strategic way,” said Solomon. Solomon noted that “in many cases, these collaborations are being encouraged by board members or required by funders as a condition of continued funding.”
Lois Savage, president of the Arizona-based Lodestar Foundation, said in an interview for this posting that in the past, there was a certain stigma attached to nonprofit mergers.
“It was usually a measure of desperation,” said Savage. “Mergers are now often very strategic. There has been so much money spent on issues where you are not gaining a lot of tracking, where you are not moving the needle. For example, some organizations are saying ‘if I feed the homeless, and you clothe the homeless, maybe we would have more impact if we did it together? It is not about me, it is not about my organization, it is about making the most impact that we can make.”
I urge readers to take a look at the Foundation Center’s Nonprofit Collaboration Database (www.collaboration.foundationcenter.org), which, as it so happens, was put together in collaboration with the Lodestar Foundation. It offers an exhaustive database of the types of collaboration that has been taking place over the past few years.
It is key to keep in mind that nonprofit collaboration can also be informal and short term and still offer great benefits to both organizations. Joint fundraisers, especially involving groups that wouldn’t ordinarily be paired together, have proven hugely successful. I heard a great example recently on the radio while driving near my home in the Philadelphia suburbs. The city’s local NPR affiliate, WHYY, took an interesting spin on its year-ending fund drive. The station announced that, for every membership pledge, it would purchase a meal for someone in the region through Philabundance, one of the primary agencies in the region serving the food-insecure population. This idea truly inspired me. In the nonprofit world, we often hear that some donors are reticent to give to arts and cultural organizations because they feel their money would be better utilized supporting organizations that provide direct social service. I have always felt this is a false choice. But here was a creative example where an individual or family was given the opportunity to support a top-notch cultural resource while feeding the hungry at the same time. The collaboration appealed to two different philanthropic strands.
While joint fundraisers are more of a one-time event than the long-term collaborations described in the report and literature above, they can be just as creative and have just as much of an impact. It is a new nonprofit world we are living in. Collaboration is not only the wave of the future; it is the way of the present.
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