Describes the various partnership options available to nonprofit organizations including mergers, joint programming, administrative consolidation, management service organizations, parent-subsidiary, etc. He will present the findings of landmark studies on mergers and alliances in the United States, and discuss the benefits and challenges of restructuring as well as the phases of the strategic restructuring process

1. Strategic Restructuringfor NonprofitsNational Alliance for Media Arts and CultureMay 28, 2010 with Bob Harrington Director of Strategic Restructuring Practice 5900 Hollis Street, Suite N Emeryville, CA 94608 www.lapiana.org

2. About Us 2 La Piana Consulting © 2010 Practice Areas Strategy Leadership Strategic Restructuring Consulting Services Trainings and Workshops Research Initiatives

3. Agenda Overview of Strategic Restructuring Why Strategic Restructuring? Strategic restructuring process Assessment The Negotiations Process Implementation Funders and Strategic Restructuring 3 La Piana Consulting © 2010

4. What is Strategic Restructuring? Continuum of partnership options for nonprofits Use of partnerships to more effectively achieve an organization’s mission Different from collaboration: change in the locus of control Valuable tool for managers and consultants 4 La Piana Consulting © 2010

6. Exchanging services

8. Program coordination

10. Multi-focus or program

11. Integrated systemJoint Programming Joint Venture Program Greater Integration Contract or MOU Change in Corporate Structure Greater Autonomy The Partnership Matrix 5 La Piana Consulting © 2010

12. Examples of Administrative Collaboration and Consolidation 6 La Piana Consulting © 2010 See Handout B

13. Research on Collaboration and Strategic Restructuring 2000-2003 Data Landmark Study of 192 respondents from the nonprofit sector “Strategic Restructuring: Findings from a Study of Integrations and Alliances Among Nonprofit Social Service and Cultural Organizations in the United States” Kohm, La Piana, and Gowdy, June 2000 http://lapiana.org/Research-Publications/Initiatives/Strategic-Solutions.html 2008 Data 644 nominations received Statistical analysis Searchable database of 173 nominations http://www.thecollaborationprize.org/ 7 La Piana Consulting © 2010

14. Why Do Nonprofits Consider Strategic Restructuring? Internal decision to increase efficiency/efficacy of organization (83%) Increased competition for funding (60%) Increased overhead expenses (47%) Pressure from funders was mentioned least often (30%) Source: Strategic Restructuring study; Kohm, et al. 8

15. Why Do Nonprofits Consider Collaboration? 2008 Data 9

16. Why Do Nonprofits Consider Collaboration, cont. 2008 Data Achieve administrative efficiencies 10

17. Strategic Partnership by TypeThe Collaboration Prize Data: Top 176 nominations 2008 Data Other (coalitions, confederations, etc.) Not specified Joint Programming Administrative Consolidation Joint Programming and Administrative Consolidation Merger 11 La Piana Consulting © 2010

18. Roadblocks to Strategic Restructuring Autonomy concerns Lack of trust Self-interest Organizational culture 12 La Piana Consulting © 2010

19. Collaboration and Strategic Restructuring by Field 2008 Data* 13 176 nonprofit collaborations, alliances and mergers *2010 Collaboration Prize database, the Lodestar Foundation

20. Current Trends in Strategic Restructuring Mergers and collaborations as a competitive strategy Increased interest and activity across the sectors Dramatic increase in mental health and social services Increased interest among national organizations Increased interest in administrative consolidation Funder interest in multi-organization partnerships or mergers (e.g. not 2 but 5 organizations merging) 14 La Piana Consulting © 2010

21. Other Reasons Why Nonprofits Consider Strategic Restructuring Economics Opportunities Leadership challenges A tired board To better serve the community Reasons specific to each nonprofit 15 La Piana Consulting © 2010

22. Critical Success Factors Alliance and Integration Study* Staff / board member championed the alliance (80%) Positive past experiences with collaboration (74%) Board support / encouragement (73%) Organization risk-taking / growth orientation (70%) Positive board-executive relations (64%) *Source: Strategic Restructuring study; Kohm, et al. 16 La Piana Consulting © 2010

23. Other Success Factors Mission focus Flexibility in pursuing mission Not in an immediate crisis A lack of divisiveness Clarity regarding desired outcomes Positive relations with potential partners 17 La Piana Consulting © 2010

24. The Strategic Restructuring ProcessAssessment 18 La Piana Consulting © 2010

25. Self-Assessment Motivators Desired outcomes Critical issues Organizational factors or “red flags” Financial assessment 19 La Piana Consulting © 2010

26. Partner Assessment Level of trust Past experiences “Usable” skills and assets Cautions and challenges Mission and program compatibility and complementarities Financial condition 20 La Piana Consulting © 2010

27. Competition and the Market Which organizations are most related to you? Offer same/similar programs and services Have geographic or “consumer” overlap Seek funding from the same sources Compete for media attention, staff, or board members What’s the overlap? 21 La Piana Consulting © 2010

28. The market, your current place in it, and how you got here Other organizations in the market—their strengths and weaknesses (with an eye toward potential partners) The forces—social, economic, technological, political—that have created your current position in the market 22 La Piana Consulting © 2010 Are you aware of. . .?

29. The Strategic Restructuring ProcessNegotiation 23 La Piana Consulting © 2010

31. Disclose information

33. Record agreements

35. Due Diligence See Handout E Documents to review: Organizational Tax Insurance Personnel Financial/Funding Capital/Real Estate Others? 26 La Piana Consulting © 2010

36. Financial Impact and Analysis Financial Comparison Statement of Financial Position Statement of Activities Analysis of financial health Human Resource Comparison Budget Development Projection for combined budget Cost/savings analysis Donor Comparison 27 La Piana Consulting © 2010

37. The Strategic Restructuring ProcessImplementation 28 La Piana Consulting © 2010

38. Implementation Options Assets and Liabilities Corporation A Surviving Corporation A Disappearing Corporation A Surviving 1 Corporation B Disappearing Corporation B Disappearing Corporation B Dissolving Assets 2 3 Corporation C New La Piana Consulting © 2010 29

39. Management Services Organization Relationship 30 La Piana Consulting © 2010 Before Corporation A Corporation B Corporation C Corporation D

40. Management Services Organization Relationship 31 La Piana Consulting © 2010 After Corporation A Corporation B Corporation C Corporation D New Management Services Organization (MSO) New Management Services Organization (MSO)

41. Parent-Subsidiary Relationship Before 32 La Piana Consulting © 2010 After Corporation A Corporation B Corporation A Corporation B controls

42. Integration Areas to be integrated: Culture Board of Directors Management Staff Program Communications and Marketing Systems Finance Fundraising Human Resources Technology Facilities 33 La Piana Consulting © 2010

43. Challenges in Integration Lack of a merger “champion” Scarce resources (time and money) Culture clash Board and staff development Creating reasonable expectations 34 La Piana Consulting © 2010

44. Why Merger Integration Can Fail Mergers do not fail because organizational leaders can’t integrate financial systems or IT. Mergers fail because people tend to hold on to their individual cultures and identity rather than create a new organization. 35 La Piana Consulting © 2010

45. Feasibility Studies The consultant’s full-employment act. May be needed for an administrative consolidation and/or MSO but not for most mergers. Can make things worse. 36 La Piana Consulting © 2010

46. Relating to Funders Foundations support strategic restructuring! Organizations should go to funders with whom they normally work or those involved in organizational effectiveness. Consider a two-phase proposal process that includes negotiations and integration. 37

47. Questions? 38 La Piana Consulting © 2010

48. Thank You! Contact Bob at harrington@lapiana.org For more information, visit www.lapiana.org 39 La Piana Consulting © 2010