When is Nonprofit Consolidation the Right Choice?

Giving Compass Sep 20, 2018
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When is Nonprofit Consolidation the Right Choice? Giving Compass

In 2017, One By One (1×1) found itself in a position many small nonprofits may find relatable: their small staff was unable to scale up their efforts without additional resources, which they could not afford to access. Their method of supporting grassroots education and treatment for obstetric fistula survivors was proving successful, but scalability was becoming an insurmountable obstacle.

Former 1×1 Board Director Barbara Gauld recalled the difficulties that the organization faced, citing the frustration induced by the knowledge that the money they worked so hard to raise went to the overhead needed to keep the organization moving, rather than their programs. While there is no shame in healthy overhead, the cycle of raising money so that you can afford to raise money can be exhausting. But a potential solution presented itself: consolidation.

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    It’s About Results At Scale, Not Collective Impact

    Giving Compass' Take: • In this Stanford Social Innovation Review post, StriveTogether discusses the mechanisms of collective impact, including the flaws in the system, and explains why improving outcomes at scale requires a paradigm shift in how we work. • Are we using the right metrics when it comes to assessing impact? How can we improve on our efforts in the field and learn from StriveTogether's example? • Here's more on what quality collective impact really looks like. It’s easy to see why collective impact — the commitment of a group of important cross-sector actors to a common agenda for solving a specific social problem — caught fire in 2010. During an economic downturn, when few new resources were available, a voice said there was a way to do more with what we already had. The concept offered hope for achieving results at the scale we desired, even though we were feeling constrained. And thank goodness. Collective impact both validated work that had been underway for years and prompted innovative efforts to address complex social challenges. It gave a name to work that goes beyond traditional collaboration to understand the impact of working together in measurable ways, generating a host of new insights that would not have emerged otherwise. But for all these benefits, as numerous articles have rightly noted, collective impact is not without significant flaws. The best example is the idea of a backbone organization — the organization and staff that coordinates collective impact efforts. Most people believed backbones could achieve collective impact on their own, not realizing that their role was supporting community leaders and members to use data of all kinds together to change everyday behavior. Fortunately, through a partnership with Living Cities and KnowledgeWorks, a collaborative of foundations and financial institutions, we were able to build on a basic framework we started in 2009 to understand how to move from theory to action ... The list of challenges that partners must address when working to achieve measurable results include: Managing resource allocation across multiple authorities Empowering partners to access and use data for improvement Structuring productive discussions and actions related to race, class, and culture Influencing leaders and practitioners across hierarchies and sectors concurrently Authentically engaging community voice to interpret and act on data Navigating power dynamics and conflict Limiting time spent planning, and encouraging frequent testing and learning These are just a few lessons we hope can help inform others working on collective impact approaches. No single training approach or new insight will be the panacea. But we can expedite the timeline of impact by capturing these and other emerging lessons, and applying and improving on what we have learned in real time. Read the full article about achieving results at scale by Jeff Edmondson & Parvathi Santhosh-Kumar at Stanford Social Innovation Review.

Why Consolidate?

Consolidation is a hot topic in philanthropy – its proponents include Prince William – and evidence has shown that the practice has promise. The argument for consolidation holds water: reduce the duplication of efforts that contribute to overhead by merging two organizations into one. Internal departments (HR, IT) and resources (databases) can be merged and reduced, leaving more money for choosing, vetting, building, and funding programs. Essentially, it is more efficient for one organization to distribute funding than two, or more.

But consolidation can have drawbacks. Merging can blur or eliminate organizational identity that may be important to staff, board members, and donors. Mission misalignment could alienate formerly invested stakeholders. Working with new people, perhaps in a new place, is always a challenge. Actually physical and logistical consolidation also bring a host of potential difficulties.

An Ideal Consolidation Partner

1×1 and Worldwide Fistula Fund (WFF) had already been collaborating closely, working together to provide funding for a mutual grantee in Uganda. Taking the partnership to the next level seemed like the obvious choice. The two small organizations saw eye-to-eye on most things. While their approaches varied slightly – 1×1 focusing on supporting grassroots outreach and WFF emphasizing training for doctors – their values were fundamentally the same. Both organizations wanted to develop holistic, sustainable programs that lead to the end of obstetric fistula.

Ultimately, it was this fundamental alignment of values that convinced all of the board members from both organizations that consolidation was the best path forward. Soja Orlowski, executive director of WFF, likens the consolidation to a marriage.

She recommends that organizations considering consolidation treat a merger like a relationship. Strong lines of communication, honesty, and value-alignment are key to long-term success. Take it slow and do your due diligence.

How to Consolidate

When it comes to consolidation it is essential to decide what features of each organization can be retained and eliminated. In this case, the organizations were intentional about treating the process like a blending of families. They took care to ensure that various communication styles were welcomed and respected. It is key to “invest time in allowing people to adjust,” according to Orlowski.

Orlowski also emphasizes the importance of establishing a transition team from the beginning to communicate the process externally to maintain transparency and trust among stakeholders – especially grantees and donors – throughout the process. The order and method of communication is essential to a smooth process.

1×1 and WFF now both exist under the name Worldwide Fistula Fund in Chicago. It will hold events in Seattle, as well as Chicago and New York, to maintain the engaged, energized donor base that supported 1×1 over the years.

WFF is also excited to adopt 1×1’s grantees, all of whom will continue to receive funding from the merged organizations. 1×1’s Kenya program model will be expanded in concert with WFF other programs. Keeping the most impactful models of both organizations intact and scaling up is the major benefit of consolidation.

Logistical and legal questions can be solved by teams working together well. Database merging and other challenges can be addressed by a prepared, communicative staff.

Consolidation can be a powerful tool for nonprofits looking to make their next big move and up their impact.

Keep Orlowski’s advice in mind: Do your homework on your partner. Build a strong transition team. Work together to problem solve.

_______

Original contribution by Clarissa Coburn.

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