How to Grow for the Greater Good
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Leadership Organizations Social Impact Dec 1, 2014

How to Grow for the Greater Good

Non­prof­its join­ing forces should keep these tips in mind.

Based on insights from

Donald Haider

Nicholas Pearce

Stacy Ratner

For more on non­prof­it con­sol­i­da­tion, lis­ten to this month’s Insight in Per­son podcast.

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In recent years, non­prof­it orga­ni­za­tions seek­ing to get more bang for their buck have sought ways of work­ing with oth­er orga­ni­za­tions. Whether they want to serve a wider geo­graph­ic area, take advan­tage of economies of scale, reduce over­laps in cov­er­age, or coor­di­nate ser­vice deliv­ery, many non­prof­its are look­ing to con­sol­i­date — which can range from sim­ple part­ner­ships on pro­grams, to alliances on ser­vice deliv­ery, to join­ing back office oper­a­tions, to full-on merg­ers — to grow the impact of their missions.

But though con­sol­i­da­tion can prove fruit­ful, it can also have its pit­falls. What should non­prof­its con­sid­er before decid­ing to join forces?

Cul­ture Matters

Not every non­prof­it orga­ni­za­tion should be think­ing about con­sol­i­da­tion,” says Nicholas Pearce, a clin­i­cal assis­tant pro­fes­sor of man­age­ment and orga­ni­za­tions at the Kel­logg School and an expert in non­prof­it management.

Pearce iden­ti­fies three ele­ments of orga­ni­za­tion­al cul­ture — pur­pose, prin­ci­ples, and prac­tices — as crit­i­cal fac­tors in the suc­cess of poten­tial mergers. 

When you’re talk­ing about bring­ing two orga­ni­za­tions togeth­er,” he says, it’s crit­i­cal that they’re oper­at­ing on the same prin­ci­ples, that they have the same greater good in mind, and that the prac­tices and the day-to-day lives of the orga­ni­za­tions are not so incom­pat­i­ble that the peo­ple would be in con­stant con­flict over not just what exact­ly they do, but how they do it and why they’re even doing it.”

One thing that lead­ers ought to be think­ing about as they con­sid­er con­sol­i­dat­ing is who’s on the bus,” Pearce says.

One thing that lead­ers ought to be think­ing about as they con­sid­er con­sol­i­dat­ing is who’s on the bus,” Pearce says. Are the two orga­ni­za­tions’ skillsets com­ple­men­tary, as opposed to over­lap­ping? If so, con­sol­i­da­tion may be an eas­i­er sell. 

Peo­ple are not going to have a fight over who gets to do this par­tic­u­lar func­tion if there’s only one per­son who knows how to do it well. Where you find the best con­sol­i­da­tions are where peo­ple are not afraid of whether or not they’re going to lose their job, or they’re not hav­ing to fight for turf, but where there is a clear under­stand­ing of shared value.”

Man­ag­ing Oper­a­tions — and Expectations

Open Books and Chica­go Lit­er­a­cy Alliance founder Sta­cy Rat­ner has been inti­mate­ly involved in non­prof­it con­sol­i­da­tion, both in the merg­er of Book Worm Angels into Open Books and in the found­ing of the Chica­go Lit­er­a­cy Alliance, an umbrel­la orga­ni­za­tion that coor­di­nates the efforts of more than 80 par­tic­i­pat­ing organizations.

Dur­ing the 2013 merg­er with Book Worm Angels, Rat­ner found her­self con­stant­ly con­vinc­ing the var­i­ous con­stituen­cies that the merged orga­ni­za­tions would not threat­en either program’s effec­tive­ness — that resources or effort devot­ed to one pro­gram, in oth­er words, would not come at the expense of the other.

Fund­ing is a ques­tion that every­body had com­ing in,” Rat­ner says. The Open Books board said, This is a very love­ly pro­gram, it’s very easy to under­stand. Are we going to find that we raise mon­ey and all of it is ear­marked for Book Worm Angels and it can­ni­bal­izes our fund­ing stream?’ The board of Book Worm Angels said, You have all these oth­er great pro­grams and they’re so easy to under­stand. What assur­ance do we have that you will fund the Book Worm Angels pro­gram as it is?’”

Cheer­lead­ing is also impor­tant. I think that the job of any­one who is in the top lead­er­ship posi­tion at an orga­ni­za­tion in the non­prof­it world is: How do you keep every­body excit­ed and engaged and real­ly into what you’re doing, and enthu­si­as­tic about it?” Rat­ner says, par­tic­u­lar­ly over the course of a merg­er, which can be a long and con­tentious process. When you’ve final­ly con­vinced board A or board B that this is a great idea and they’re total­ly behind it, some­thing hap­pens and one of the oth­er boards falls off the side. So build­ing trust was important.”

Oper­a­tions, too, need to be rethought entire­ly. Rat­ner explains that every­thing from how to process all the books that Book Worm Angels had amassed, to coor­di­nat­ing how to dis­trib­ute these books to schools, to decid­ing how to move around (or elim­i­nate) per­son­nel need­ed to be considered.

Get the Tim­ing Right

Don Haider, a clin­i­cal pro­fes­sor of social enter­prise at the Kel­logg School and a vet­er­an of more than thir­ty non­prof­it boards of direc­tors, advis­es orga­ni­za­tions look­ing to approach the ques­tion of merg­ers strategically.

Merg­er should be more of a proac­tive than a defen­sive strat­e­gy,” Haider says. For a lot of orga­ni­za­tions it isn’t the answer to their par­tic­u­lar prob­lem. They ought to go through a strate­gic analy­sis to find the orga­ni­za­tion­al prob­lem, or the mar­ket prob­lem, or the clien­tele prob­lem, or the fund­ing prob­lem, before they go down this road and say, Hey, merg­er is the answer.’”

Haider iden­ti­fies times orga­ni­za­tions may find right for a merg­er. Major dis­rup­tions like when a fun­der backs out or when an exec­u­tive direc­tor is leav­ing can act as a win­dow of oppor­tu­ni­ty for revamp­ing through a merg­er. Longer-term shifts — such as when the num­ber of peo­ple an orga­ni­za­tion serves is declin­ing, or if the board is lethar­gic, indif­fer­ent, or not buy­ing into the mis­sion — may also be good times to put the orga­ni­za­tion into new hands.

Art­work with Yev­ge­nia Nayberg.

About the Writer

Fred Schmalz is the business editor of Kellogg Insight.

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