Is it Time to Explore a Strategic Alliance or Merger? Over the last 12 years, Vista Global has supported nonprofits across the country to examine whether a strategic alliance or merger was a strategy for increased impact. When the pandemic began, most nonprofits looked at current reserves to evaluate whether they could weather a 3-6 month downturn in revenue. We are now passing the 6 month mark and all indicators are suggesting that we will be in this stage for at least another 6 months, if not longer. Can your organization continue to weather this economic situation on its own? In the 2016 study called the Chicago Nonprofit Merger Project, 25 nonprofit mergers were analyzed from 2004-2014 to identify how trends have shifted over the last 20 years. The study identified that strategic partnerships and mergers are seen as a competitive strategy to support organizations in increasing growth and services. The study saw organizations using strategic partnerships and mergers as a response to market and policy trends to improve their competitive advantage. In addition, many of the organizations in the Chicago study had previous merger experience. In 85% of the cases, the board chair or board members emerged as chief merger advocates. The Chicago study, maps out the key stages and key questions for evaluation for a strategic alliance and through this process, your organization can make a strategic decision as to how an alliance or merger can advance a shared goal, respond to community need, improve program outcomes, reach more clients and maximize financial resources. From July 2019 to March 2020, Vista Global guided Big Brothers Big Sisters of the Fox Valley Region and Best Friends of Neenah-Menasha, now known as Big Brothers Big Sisters of East Central Wisconsin (BBBS-ECW), as they explored each stage of a strategic alliance. When the pandemic took hold, BBBS-ECW was prepared, having already pivoted their organization efficiently and sustainably in several ways. Recently, BBBS-ECW CEO, Lindsay Fenlon shared with community partners how the recent merger prepared them to navigate COVID-19: Through the help of community partners, we invested roughly $250,000 into the merger negotiation and integration process. This financial support enabled us to “do it right,” creating a new organization with the ability to pivot efficiently and sustainably in the following ways: Operational Systems: We chose to integrate and transition all critical operational systems to cloud-based options, including financial management (Quickbooks Online and online banking), telecommunications (VoIP phone system with virtual meeting, texting, scanning, and information sharing and storage (Office 365, Sharepoint and Onedrive file systems), program database (Salesforce platform), donor database (eTapestry) and board communications (Microsoft Teams). As such, we were able to transition to 100% work remote within 24 hours. Technology: In anticipation of the need to work remotely, all staff laptops and technology devices were replaced with camera and microphone enabled laptops with Bluetooth capability. We were able to stay connected to our cloud-based operational systems with no need to wait for additional supplies or materials to facilitate “business as usual.” Leadership Capacity: The merger required an organization restructure and we elected to maintain all personnel, focusing on adding more management positions to expand the leadership team. While this initially carried a higher salary impact on our operational budget, we gained additional capacity of leadership-thinkers, poised to strategically tackle the diverse crisis that COVID-19 brought while simultaneously achieving the following two weeks after the Safer at Home order was announced: Pivoted 100% of programming to virtual mentoring; Transitioned all program processes to virtual, including new enrollments and make-match meetings. The first virtual match was made 10 days after the Safer at Home order went into effect; Postponed and restructured fundraising events for optimal revenue retention; Designed and implemented a multi-audience communication plan, successfully communicated small wins and big breakthroughs with PR, social media and direct communication to stakeholders Developed financial forecasts that allow for 100% retention of employees Board Cohesion: The negotiation process required that each board of director associated with the original agencies come together to listen, learn and dream big about the future. Ten days into January, the newly combined board of BBBS met to define a cohesive way of moving the mission forward. Clear board member responsibilities, committees and goals, and communication expectations were defined and refined throughout the first quarter of 2020. When COVID-19 hit, board members were among the first to reach out to BBBS leadership to offer support and empower myself to take drastic action as needed to ensure the organization’s sustainability. As such, I was able to mobilize swiftly to take advantage of federal legislature and operational modifications necessary to best protect the mission of the organization and the safety of the BBBS team. Culture of Adaptability and Resiliency: As part of the merger, our team faced the need to embrace change in order to move forward under the umbrella of one unified agency. Policies, procedures, practices, and organizational structure throughout the entire agency were modified as we got use to the adage that “the only thing consistent in life is change.” When the life-altering changes that came with COVID-19 were first coming to light, our team embraced it as just another situation to adapt to. In the weeks since, the staff and board of directors have acknowledged having full confidence in agency leadership and in each other, identifying that the cultural challenges inherent within any merger actually led us to coming together as a dynamic and diverse group of mission-committed individuals with the tools to keep kids connected during a crisis. In Fall 2020, Vista Global in collaboration with BBBS-ECW, will release a white paper that shares the learnings and key success factors contributing to BBBS-ECW’s merger and how that prepared the organization to navigate COVID-19. Other Vista Global blogs on nonprofit mergers: Five Lessons Learned from Nonprofit Partnerships & Mergers Nonprofits on the Move with Mergers Tips on Nonprofit Merger Success Through Organizational Cultural Integration If you are wondering if a strategic alliance or merger might be your organization’s strategy for success, let’s explore the options together.
Five Lessons Learned from Nonprofit Partnerships & Mergers Over the last 20 years, there has been increasing research in the field of nonprofit mergers. How are they unique compared to the corporate sector? What are the elements that contribute to success? What are the trends being seen in the overall sector and sub-sectors? Over the last 20 years, there has been increasing research in the field of nonprofit mergers. How are they unique compared to the corporate sector? What are the elements that contribute to success? What are the trends being seen in the overall sector and sub-sectors? Continue reading “Five Lessons Learned from Nonprofit Partnerships & Mergers”
Nonprofits on the Move with Mergers Too often discussions around nonprofit partnerships and mergers focus on the financial drivers. For example, one nonprofit may be in crisis and rather than shutter operations, it seeks to form a new organizational structure with another, more financially robust organization. But there is another important reason nonprofit leaders should consider exploring partnerships: mission impact. This … Continue reading “Nonprofits on the Move with Mergers” Too often discussions around nonprofit partnerships and mergers focus on the financial drivers. For example, one nonprofit may be in crisis and rather than shutter operations, it seeks to form a new organizational structure with another, more financially robust organization. But there is another important reason nonprofit leaders should consider exploring partnerships: mission impact. This plays out in a variety of ways. If you are successful in achieving your mission, then it stands to reason that over time, your mission may need to evolve. Or perhaps your client population has shifted dramatically with the region’s changing demographics? Or better still, what if the social problem your organization originally formed to address dramatically improved or changed? Lessons from San Francisco and Beyond Such pivots are currently apparent in the nonprofit subsector of HIV/AIDS-related services. Many nonprofits, founded 30 years ago, focused on an acute public health crisis impacting a smaller demographic segment of the population. But over the decades, as new drug treatment modalities became available and as the disease spread across other demographic segments, the service models and organizations had to adapt to the chronic, long-term needs associated with supporting HIV positive clients. This summer, the San Francisco Chronicle and Nonprofit Quarterly reported how “Clients have gone from young men who were dying at 25 to older patients who, at 55, are still living. Currently, more than half of the people with HIV in San Francisco are 50 or older. Improved safer sex practices and advances in drug therapies and medical treatments have shrunk the client base dramatically; some agencies serve half the number they did in the mid-1990s.” These trends have led some nonprofits to shift focus. For example, food services for clients have evolved to serve healthier food for those also living with diabetes and heart disease. Other nonprofits have merged together to provide a range of services around housing, mental health, or substance abuse prevention, in addition to HIV/AIDS-related support. The need for HIV/AIDS nonprofits to refocus their operations has not been limited to the San Francisco Bay Area. New partnership models, collaborations, and mergers have taken place throughout the U.S. For example, Vista Global supported the cultural integration process for the merger of the AIDS Network and AIDS Resource Center of Wisconsin. Photo: AIDS Resource Center of Wisconsin (ARCW). Grand Opening of new Medical Home. June, 2016. Exploring the Implications for Other Sectors The rapid changes in the HIV/AIDS-related space offer lessons that can be applied across sectors. For example, to survive the wake of the Great Recession, arts nonprofits explored a range of collaborations. City government agencies are considering mergers as well, as highlighted by the recent merger of the offices of Homelessness and Welfare for New York City. With the fallout from the U.S. housing crisis, social service nonprofits also have to pivot as the face of the homeless population changes. Currently, Vista Global is working with four nonprofits serving the homeless population to explore program collaboration and merger options. Are the leaders of your nonprofit considering a program collaboration or merger? Share your story in the comments section below or contact Mary today to learn more.
Culture First: Tips on Nonprofit Merger Success through Organizational Cultural Integration Too often people think of nonprofit mergers as a frantic survival strategy for organizations in a state of financial crisis. However, robust nonprofit organizations are using a range of partnership, consolidation and strategic alliance models not to survive, but to thrive. In early 2015, AIDS Network and AIDS Resource Center of Wisconsin (ARCW) announced their merger, supported by a grant from the AIDS … Continue reading “Culture First: Tips on Nonprofit Merger Success through Organizational Cultural Integration” Too often people think of nonprofit mergers as a frantic survival strategy for organizations in a state of financial crisis. However, robust nonprofit organizations are using a range of partnership, consolidation and strategic alliance models not to survive, but to thrive. In early 2015, AIDS Network and AIDS Resource Center of Wisconsin (ARCW) announced their merger, supported by a grant from the AIDS United Sector Transformation Initiative. The organizations were not in crisis. The merger goal was to combine two strong organizations and expand services to patients and clients. “Wisconsin has always been a national leader in the fight against AIDS. Our merger will enhance this leadership position. By combining the best of our two organizations, we will enhance services, improve clinical outcomes, and generate new financial resources, all of which are critical as we continue on our quest for a world without AIDS.” – ARCW President & Chief Executive Officer Michael Gifford. Some Merger Integration Do’s and Don’ts Vista Global Coaching & Consulting facilitated the negotiations and the organizational integration for AIDS Network and ARCW. The continuity of consulting support over the course of both phases expedited the entire process. The timeframe from the initial conversation of the negotiation team to the celebration of the merger integration process was 18 months. Although the process was efficient, it was not without intention and focus. Don’t Ignore Culture in the Negotiation Phase Honor important cultural elements of pre-merger organizations. Surface and address historical challenges in relationships between organizations to move forward in creating a new narrative. Sensitivity to power imbalances and strategies to mitigate those imbalances from the beginning of negotiations, sends the clear message to staff of both organizations that we are in this together to create a stronger organization that will better serve clients. It is important to build relationships among the negotiation team members and develop a shared vision. Crafting ‘Strategic Intent Statements’ supports transparency and documents a process rooted in good faith which allows the group to point to that shared intent when there are bumps along the way. Do Make Culture the First Priority in Integration It is easy to launch into the systems and structural integration elements of combining two organizations but there is great risk in not putting emphasis on culture as the first priority. Without this focus, it is easy for staff to stay locked in the pre-merger cultures and fall into “us v. them” perspectives. Building an integrated culture is critical for long-term success. Cultural integration requires intention, structure and tools to support the transformation. To begin a cultural integration process, it can be helpful to use an assessment tool that provides an objective framework of the cultures of the combining organizations. In the AIDS Network-ARCW integration process, we used the Organizational Culture Assessment Inventory (OCAI). The tool allowed the merger integration team to look at the existing cultures and determine the preferred culture moving forward. Identifying the vision of the preferred culture and the behaviors and beliefs that align with that preferred culture sets the course for “being the change we want to see” in the new organization. Leadership Takeaways and the Return on Investment Leaders need to understand when it is important to push for rapid changes and when it is more important to pause, listen, and allow members of the organization time to process. In the integration phase, building a “guiding coalition” of staff from all levels of both pre-merger organizations is a critical success factor. The ARCW Merger Integration Team had 14 staff members. These individuals became the change agents as the structural integration process began. Eight work groups were established that included approximately 50% of all employees. Even though ARCW is a statewide organization with 10 offices, every staff member was engaged in the integration process. Strong nonprofits considering merger will be most successful if they go beyond just negotiations and invest financial resources, time, and staff in the integration process. Invest in a structure of internal leadership combined with external consultant support. Create early wins before and after the merger to maintain the momentum necessary to build a new organization. Organizational culture can be abstract or intangible. A nonprofit’s culture is the sum of many parts. For a successful cultural integration, leaders need to acknowledge the value of each part. The successful AIDS Network and ARCW merger integration is proof that cultural integration is possible when leaders invest in the process. What is your experience in cultural integration? We would love to learn more from you about this critical success factor. Contact Mary today!
