Tag Archives: Governance

Nonprofit Merger and Collaboration: Open the Discussion

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Post by BVU Staff:  Brian Broadbent, President & CEO

Two-and-a-half years ago Cleveland-based Business Volunteers Unlimited (BVU) and Akron-based Center for Nonprofit Excellence (CNE) merged into one organization, BVU: The Center for Nonprofit Excellence.  Looking back, this was a positive step for our organizations due to the strengths of each.  Although the merger process was not easy, we are enjoying the fruits of a vision led by our boards.  The CNE board reached out to BVU’s board to get the ball rolling.  A small task force of both boards and senior staff drove the process by openly discussing any roadblocks.  Because of its success, we have been asked to speak on the subject and help other organizations through the process.  Many community leaders want to see mergers happen but sadly they are a rarity.

Why are boards and staff resistant to explore options?  The Chronicle of Philanthropy published an article last month, “Mergers Might Happen More Often If Nonprofits Focused on Workers’ Needs,” authored by Katie Smith Milway and Maria Orozco.  This article gives valuable insights to what we have seen.  While the Great Recession of 2011 led corporations to pursue mergers at a fast pace, the nonprofit world did not follow suit.  They cite two facts: 1.) Few organizations exist to make matches between prospects, and 2.) Little money is available to ensure that the senior staff have financial incentives in that they may lose their jobs.  In 2009, Denise Zeman, President & CEO, St. Luke’s Foundation, and Deborah Vesy, President & CEO, Deaconess Foundation, invited 80 nonprofits in Northeast Ohio to discuss the spectrum of collaborations.  They were concerned about the decreasing availability of dollars from funders and the need to consider alternatives, one of which is mergers. These foundations offered to provide consulting support to nonprofits interested in exploring collaborations. The foundations’ leadership opened dialogue on a sensitive topic which resulted in three mergers and one consolidation.  However, since then it has been quiet.

Why the unwillingness to open this type of discussion?  Is it the loss of leadership roles for board and staff?  The daunting amount of work? Anxiety in negotiating with funders to prevent cuts in funding when two entities are combined with no loss of services?  Founders’ (board and staff) lack of flexibility? Name, mission, and branding of the new entity?  All are emotionally charged issues.  An unwanted outcome is that mergers could be reactive due to a depletion of cash reserves and lack of capacity — rather than being a proactive step.

In the next 10 years, hundreds of baby boomer nonprofit chief executives will retire.  This is an opportunity for new leadership to consider a merger or collaboration.  When conducting strategic reviews, we must always ask the question, “Are there better ways to advance our mission by working with another organization?  If so, what are the possibilities in aligning ourselves more effectively?”    It is up to the board and chief executive to determine if it a merger or collaboration is warranted. Remember that the act of an initial investigation does not equal commitment to moving forward.

The Foundation Center's nonprofit collaboration resource page provides a wealth of information on nonprofit mergers, joint programming, and other forms of collaboration.

The Foundation Center’s nonprofit collaboration resource  provides a wealth of information on nonprofit mergers, joint programming, and other forms of collaboration.

Considering a merger or collaboration?  Where do you start? Best practice is to look at complementary organizations serving different geographies or finding a continuum of services that could be expanded with the same constituency, with both leading to savings in administrative costs.  There are three stages of review.

1.  Feasibility – looking at the ‘fit’ of mission, service offerings, board structure, staff organization, geographic reach and culture.

2.  Due diligence – financial sustainability, HR policies and benefits, by-laws, etc. This is where the attorneys and accountants need to be involved.

3. Pre and post-merger integration – all of the steps that help the board and staff to integrate.

BVU and CNE addressed 66 integration steps.  Although daunting at the time, our merged organization has supported us in growing and delivering on our mission.  A valued, but unanticipated, outcome has been the respect of the community.

Get the Governance Right – It Matters!

Post by BVU Staff:  Elizabeth Voudouris, Executive Vice President

Governance = Strong Nonprofit BoardOne key element of a healthy nonprofit organization is a strong board.  A strong board:

1. Can clearly identify its work and its role for a particular nonprofit at any point in time.

2. Is comprised of people who bring the relevant skills, expertise, diversity, networks and passion to get the job done.

3. Doesn’t just happen. It requires a tremendous amount of attention, creativity, strategy and patience.

Through our work with hundreds of nonprofit boards each year, we see that the strongest boards continue to develop and evolve good governance practices in order to provide relevant leadership.

Strong boards:

  • Focus on the best way to achieve the mission.  A crisis nursery developed a strategic plan that included a significant expansion project to serve more children and keep more families together. The success of the plan was dependent on using the strong marketing and business background of the CEO together with the board, whose duties were to expand networks and visibility of the organization in the broader community. The board also provided sound oversight for the growing programs and finances.
  • Concentrate on the larger opportunities and challenges facing the organization, and allow staff to manage the day to day operations.   A board identified and pursued potential strategic partners to ensure that their mission was preserved; they formed a strategic alliance with a similar organization, and eventually they merged.   Board members with the relevant skills and expertise led this process and ensured their good work continued.
  • Understand the relationship between board and staff, and the significance of a positive and healthy partnership.   Establish structures and practices to work effectively together.  Monthly communications from the chief executive to board members, annual individual meetings to help board members identify new ways to engage with the organization, constructive and thoughtful annual performance reviews, and open and transparent communications to build a culture of trust.
  • Plan for the board’s future.  The board develops annual succession plans and is always grooming future leaders.  Future leaders serve as committee chairs so that they can demonstrate their leadership to the board and staff, learn more about an important aspect of the organization, and determine if they have the time and/or interest to move into leadership.
  • Build committee structures that utilize board and staff time effectively.  Meaningful work is accomplished in strong working committees.  Strong working committees have an effective committee chair, strong staff support, annual calendar of meeting dates, annual priorities, and relevant agendas and publish minutes for the full board to view.  Strong committees are comprised of people who bring relevant experience, expertise, networks and diversity to the work of the committee.
  • Ensure that there is a viable business model and financial systems in place.  If this is not already in place, consider engaging a pro bono consultant.   BVU engaged a pro bono consultant to help a local nonprofit, and the consultant restructured all financial systems and reports, and developed a business model to sustain the organization’s diverse programs.  The pro bono consultant worked closely with the chief executive and the board, and eventually joined the board. This project gave the nonprofit the ability to attract larger grants and sustain programs that meet the needs in the community.
  • Prepare carefully for board and committee meetings.  Agendas and materials go out 4-7 days in advance.  Board meetings do not consist exclusively of presentations by committee chairs or staff, but instead are used to engage board members in meaningful discussions around topics that are relevant to the mission and vision.  Board members leave these meetings feeling informed, engaged, and confident that they are vital contributors to the future of the organization.
  • Regard each board seat as precious. Written board member expectations are clear to all current and future board members.  Board members are held accountable to those expectations annually.  Board member terms are not renewed automatically, but considered carefully based on the changing needs of the organization and interests of the board member.

There is no magic bullet or “one size fits all” solution for stronger boards.  BVU’s work with nonprofits over the years has given us great insight into effective practices and policies that can help strengthen an organization.  Strong boards take work, but by staying focused on your mission, the work of your board, and ensuring that you have the right board members sitting around the table,  your nonprofit can position itself to navigate today’s challenges and leverage future opportunities.