November 2009 

Sharing and playing well with others, among our first pre-school lessons, are just as important in the adult world. We’ve just given them fancier names: collaborating and partnering. And, as befits our complicated, grown-up world, we’ve made them more nuanced, layered and robust. But, in the end it still comes down to the simple notion of sharing stuff. And given the current economic challenges to nonprofits, we could all benefit from a little, or a lot, of sharing.  

Among nonprofit agencies, this concept plays out across a continuum that starts at simple collaboration, such as sharing office space; progresses to consolidation of administrative functions, such as accounting or marketing; includes joint programming; and finally stops at official organizational merger. “Strategic restructuring” ranges from complete organizational autonomy with degrees of shared activity to full and contractually delineated organizational integration. Along the way, those agencies able to successfully overcome their fears of losing control and complete autonomy can discover the real economic and organizational benefits of decreasing their expenses and increasing their efficiency and efficacy.

Let’s look at a few models more closely.

Collaboration: Perhaps the simplest of all, collaboration includes steps from sharing office space and rent to sharing information about clients to better serve their needs (with their consent, of course). For example, Eleanor Brownn, executive director of Life Long: Sisters Staying Healthy, said she moved her two and a half year old agency into the space occupied by two other agencies serving African American and Latino women and children: the Center for LifeLong Learners, which helps children and families improve reading and other learning skills, and the Pasadena Birthing Project, which works to reduce African American infant mortality. The three groups knew from the beginning that they had far more in common than an address in the West Adams neighborhood of Los Angeles. “Financial reasons are part of sharing, of course,” Brownn said. “But the first thing that we saw was that we are all addressing the need for services for women, and women’s and children’s health across generations.” 

Recently the three agencies, which remain organizationally separate with their own boards of directors, have taken initial steps toward sharing clients and donor bases and have started talking about seeking joint program grants. A year ago, they began working together under the name West Adams Healthy Learning Collaborative, and now, Brownn said, “We say we’re three groups doing good in the ’hood.” 

Brownn added that she and her two partners constantly talk about their relationship and seek clarity about their finances and goals. She acknowledged that it is not always easy, but she remains convinced that the benefits far outweigh the challenges. “I have gotten a sounding board from the other EDs and we are able to brainstorm in a different dynamic than talking to our boards,” she explained. “And our clients have the opportunity to get linked to other services that will benefit them.”

Administrative Consolidation/Joint Programming: These are two sides of the same, mid-continuum concept and involve more intense cooperation and oversight than the entry-level collaboration, according to Luis Vergara, a senior associate with LaPiana Consulting who was a guest speaker at the ESC national conference in October. Vergara says consolidating or sharing administrative or “back office” functions—such as accounting, marketing, communications and even fund development—is ideal for local agencies belonging to the same national or international organization, such as YMCAs, YWCAs, Boys and Girls clubs or scouting groups, because they already share missions, presumably understand each other’s operations and aren’t likely to be as competitive for resources as dissimilar agencies would be. Dissimilar agencies might find value in back office consolidation, but care should be taken to ensure that partners share values, working styles and, perhaps most important, trust among boards of directors and senior staff.

Joint programming, Vergara says, works well among agencies with similar missions that want to target similar audiences. He cited as an example three museums in an East Coast region with programs for youngsters that decided to pool their resources into a single curriculum aimed at young people. While such joint offerings are sometimes dictated by economics (demands from funders or dwindling funding sources), he adds that successful joint programs must offer value beyond that offered by the individual offerings or be entirely new and different from what had previously been available. 

Organizational Merger: This is partnering at its fullest extent, the joining together of two or more agencies into a single entity. According to ESC Consultant Jerry Weissman, one of several ESC consultants who have worked with ESC clients on merger opportunities, a merger should be considered when there is strong reason to believe that the mission of one organization can best be served by joining with another agency. 

Typical situations include agencies providing similar or complementary services to clients—the combining of which would allow for more services to be provided or more clients to be served. Difficulty raising the necessary funds to accomplish the mission is another common driving force for merger. A combined organization may lessen competition for funds and could provide a much stronger case for support.

“Recently we worked with a client who was exploring a potential merger with a larger agency,” Weissman said of a recent ESC consulting project. “Our client’s mission was complementary to that of the larger agency, and the client also provided expertise needed by the larger agency. In turn, the larger agency was much stronger financially, was well established in fundraising and could provide financial stability for the mission of our client.”

According to Weissman, the critical element for success in partnerships and mergers is the compatibility of the culture of the organizations. Studies of mergers in the for-profit sector often show that the major reason for failure is a difference in culture. 

“In the nonprofit sector the missions of the merging organizations, which are a critical element of their culture, must be similar or highly complementary,” Weissman says. “Management style, board relationships and funders should all be examined to objectively evaluate the ability of the two organizations to go forward as one.”

Struggling agencies often resort to a merger as an alternative to completely closing, but both Weissman and Vergara agree that it can also be a strategy for healthy organizations to more effectively hold their own against larger competitors. Beyond compatible missions and organizational cultures, mergers require extensive due diligence and a thorough legal review—and, according to Vergara, often take at least three years to reveal their hoped-for cost-benefit value. 

Does one of these collaborative options sounds like it may benefit your organization? ESC’s expert consultants can help you objectively evaluate options and find the right solution for your agency. Contact us at (213) 381-2891 for more information on how to tap into our low-cost, high-quality expertise to meet your needs.

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ESC Consultant Carla Lazzareschi is a retired journalist who spent the final 20 years of her career at the Los Angeles Times. During her last eight years there, she served as general manager of LA Times Books, the paper’s book publishing division. She welcomes your comments and questions about this article and can be reached at calazzar@pacbell.net.