6. What else should I know about nonprofit collaboration?
· My organization is experiencing strong financial performance, so why should we pursue a formal collaboration?
Formal collaboration should be considered not only when an organization is struggling financially, as they can provide opportunities to expand into new geographies, reach new audiences, or add new services. In short, they can provide opportunities to better meet your organization’s core purpose, which is something all high-performing organizations want to do. Review The Power of Possibility’s Discussion Guide or Starting Points sections for more information on the many possibilities of strategic alliances and restructuring.
· Do most strategic alliances and restructurings succeed?
Yes. Seventy percent of the executive directors who participated in research by The Bridgespan Group reported that their collaborations were successful in achieving the desired goals. Research on organizational collaborations conducted by SeaChange Capital Partners and The Lodestar Foundation puts the success rate at 80 percent.
· How long will the process take?
A successful formal collaboration takes time to plan and implement. Better Together Fund applicants will define their own collaboration timeline. According to research from SeaChange Capital Partners and The Lodestar Foundation, two-thirds of strategic alliances and restructuring discussions take six months or more to progress. The types of restructuring that result in a change in legal/corporate structure (mergers, parent-subsidiary relationships, and joint venture corporations) typically take longer to complete than others.
· How expensive is it to pursue a strategic alliances or restructuring?
Expenses vary widely based on the complexity of the strategic alliance or restructuring. According to research conducted by SeaChange Capital Partners and The Lodestar Foundation, the one-time out-of-pocket costs of exploring or implementing a strategic alliance or restructuring can range from $20,000 to $200,000. Costs for a potential strategic alliance or restructuring should be considered within the context of the potential benefits of the agreement over time, as, many times, the short-term transaction costs are far outweighed by the long-term potential for impact.
· How do we find the right partner on a strategic alliance or restructuring?
According to research conducted by SeaChange Capital Partners and The Lodestar Foundation, strategic alliances and restructuring usually occur between organizations that already know each other well, while less than five percent involve organizations that have no pre-existing connections. Board members can be extremely helpful in examining your networks to identify potential partners. Existing relationships and trust can be enormously helpful as organizations set the stage for a first conversation about a potential strategic alliance or restructuring, so it’s wise to consider how board members can be helpful. That said, board members should avoid initiating a conversation with a potential partner without being empowered to do so by the full board (in cases of mergers or acquisitions) or by the executive (in other programmatic partnerships).
· Will we have to lay off staff?
It depends. One of the biggest fears about strategic alliances and restructuring is that staff will lose jobs. While it may be true that a strategic alliance or restructuring can create duplication in roles that leads to some job loss, the majority of strategic partnerships do not result in immediate job loss. A search of organizations in the Nonprofit Collaboration Database shows that only 26 percent reported a consolidation of staff positions or of management and administration after the collaboration (177 out of 683 organizations). This compares to 97 percent of the same organizations that reported increased efficiencies and effectiveness and to 96 percent that reported a positive impact on the community.