Posts Tagged ‘La Piana Consulting’

Due diligence and advice for grantseekers

A few years ago, I was engaged in the process of conducting workshops for program officers and foundation executives who were seeking ways to more skillfully approach due diligence in grantmaking.

At LaPiana Consulting, we collaborated with Grantmakers for Effective Organizations (GEO) to update their guide, Due Diligence Done Well, and many grantmakers have embraced the principles we presented since then.

As an Executive Director, I didn’t always embrace this process. With some foundations and program officers, I felt we were developing a relationship designed to create positive community change. In other cases, I felt as though I was being quizzed without a clear sense of what the questions were designed to reveal about my organization and its work. Even today, the grantmakers I talk with experience this dichotomy in a similar way, with the most successful experiences yielding strong relationships and the most frustrating never getting beyond a “sales pitch.”

Although one part of the due diligence process might be considered “good hygiene” – collecting the basic legal and financial documents needed to ensure that the foundation can comply with its own requirements – due diligence should primarily be about building a shared understanding of how the grantmaker and grantseeker can work together to benefit the field or community about which they both care.

Given that, how can you as a nonprofit leader participate in the due diligence process to ensure that it is mutually beneficial?

Submitting a proposal or letter of inquiry is just one point in the process. Foundations ask for information in the proposal or LOI to make a basic determination regarding fit with the grantmaking focus of the foundation. If there is a fit, the next steps are all about deepening their understanding of your organization and gathering the additional information to make a funding decision. Even in the presence of an existing relationship, there’s more to learn. Here’s some of the advice we give to grantmakers and its application to you as a grantseeker:

Get clarity regarding the process:

Unspoken assumptions about how the process will unfold will almost certainly lead to misunderstandings or disappointment. Ask the grantmaker about his/her information needs and the best way for you to supply information. Discuss expectations and timelines.

Red flags:

One program officer said that an immediate red flag comes when a grantseeker (wrongly) claims that his/hers is the only program in the region, state or country that provides certain outcomes or works with a particular population. Grantmakers invest time in understanding what is happening in the field and community; you should too. You can point out what differentiates you from similar work done by others, but be realistic in the depiction of those differences. Grantmakers should and will spend time talking to foundation colleagues and others in the field and community as they gather information.

Build a relationship based on mutual respect and trust:

Engage in a dialogue. A meeting with a program officer shouldn’t be regarded as a sales meeting or one-sided communication. Ask the program officer about the information he/she is seeking and discuss the best way to convey that information. If you do plan a presentation, make it short and leave plenty of time for discussion. Also, think about what you want to know, especially if this is a foundation that you haven’t worked with before. What are the expectations regarding measurement and outcomes? What does the foundation know that can help you be more effective?

Be honest. If you’ve had struggles in delivering programs or have faced organizational challenges with your board or in retaining staff, talk about it. What have you done to address these problems? You need to pass the “smell test” – if you are painting an unrealistically rosy picture or trying to gloss over any problems, the truth will eventually emerge and if it comes from another source, it will harm your credibility.

Be respectful. Program officers understand the power differential and most want to “level the playing field” by demonstrating that they – like you – are concerned about how to achieve your mission. Also, just like you, program officers work hard and are juggling multiple demands on their time. I have heard more than one story from program officers about prospective grantees who call the program officer to criticize the time the decision is taking or complain that the program officer is talking to others in the community. I don’t know of any program officer who has decided against making a grant based on the poor manners of the Executive Director, but it sure doesn’t help the relationship. Frame your questions in nonjudgmental ways.

The grant decision isn’t the end — it’s the beginning of a new stage:

If the decision is affirmative, there’s a lot of work ahead. What benchmarks or requirements are set in the grant document? What do you need to do if there’s a change in the budget or if something isn’t working? How often will you “check in” with one another about the grant? You should expect different answers to these questions based upon not only the significance of the grant in terms of your budget, but the significance of the grant in relationship to the foundation’s grantmaking budget.

Always think about the future:

If the decision is negative and your grant application was not accepted, seek an opportunity to learn how you might better communicate your work in the future. But don’t seek that discussion as a way to convince the grantmaker that he or she should reconsider the decision. You may need to accept his/her decision as a learning experience and move on, but you should also conduct a final conversation in a way that can leave the door open for reconnecting in the future. 

See also:

Storytelling for Grantseekers: A Guide to Creative Nonprofit Fundraising

The Ask: How to Ask for Support for Your Nonprofit Cause, Creative Project or Business Venture

The Ultimate Insider’s Guide to Winning Foundation Grants

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Don’t neglect your message in tough times

“We need to get our message across.” This is a common refrain by many nonprofits leaders and never has it been more relevant, given the current economic situation. In any organization, marketing and communications resources are usually the first budgets to be cut. However, getting your message across and getting people to act on your message has never been more important. Thoughtful, sophisticated communication and organizational transparency are hallmarks that constituents have come to expect from effective nonprofits. You can’t afford to fall silent if you want your organization to retain and engage its constituents.

Even in good economic times, investing in a solid communications plan can often be viewed by nonprofit leaders as too difficult and expensive, unnecessary or beyond the scope of the organization. The reality, however, is that even a basic communications plan directed at both internal and external constituents is critical to an organization’s success. Yet, I’ve worked with a wide range of nonprofit clients who struggle to make communications planning a priority. Some of the most common roadblocks to communications planning include:
Who: Who is my target audience? Who should I reach out to?
What: What should I communicate? What is my message?
How: How do I get my message out (i.e. Web sites, blogs, email newsletters, etc.)?
When: I just don’t have the time with everything else on my plate …

These “Who, What, How and When” questions focus on the symptoms, but not necessarily the cause of an organization’s communications challenges. It’s important for today’s nonprofit leader to keep a broader mission-focused perspective when developing a communications strategy.

Understand who you are

For a lasting message, stay focused on your organization’s mission, not passing fads. Your organization’s messaging needs to be tied to your mission and to the broader organizational strategies and programs you coordinate in order to accomplish that mission.

Because many of your constituents are drawn to your organization because of its mission, the last thing they want is for you to waste resources on activities that do not help you accomplish it. Stay focused with a mission-driven message, and reinforce to your constituents that your organization is committed to the mission they care about. Mission-focused communications will stress that your organization is worthy of your constituents’ time, attention and support.

One way to ensure your message is in synch with your mission is to revisit your mission statement and make sure you have the proper strategies or programs in place to actively achieve it. This may include creating new strategies or programs that will help you maintain your constituents’ support and sustain your organization during these tough times.

Stay relevant

After reflecting on your mission, strategies and desired impact, you can frame your message in the context of today’s economic environment. Since constituents demand transparency, ensure your communications are relevant and directly address the economic conditions that impact your organization’s mission. Don’t be afraid to let your constituents know the truth. Clearly communicating to your constituents that “times are tough and this is how we are responding” is better than saying nothing at all.

Don’t try to reach everyone

Often, nonprofit leaders want to reach everyone they come into contact with by casting as wide a net as possible. But prioritizing your audience – specific to the message you are trying to deliver – is key to a successful communications strategy. I suggest identifying your top three to five key constituent groups and determining a) what kind of information you think they want to hear; and b) what you think they will do with this information. Having a clear picture of who you want to communicate with will help in making your message more impactful.

Don’t neglect your staff

In my communications consulting work, I find that one the most neglected constituencies is the staff, and regardless of an organization’s size, this is an issue for most nonprofits. Small organizations tend to suffer from “forgetting,” or having no time to inform, and large organizations tend to neglect staff due to too much bureaucracy or seeing staff as too hard to reach. This is not true for all organizations, but is something to consider as you develop your communications plan. There is nothing worse for morale than having external constituents know a critical piece of information about your organization before staff does.

Moreover, keep in mind that your organization’s staff is usually the most important element in your brand, so making sure they can speak to constituents about the conditions your organization faces is very important. At a minimum, your staff should know how to respond to constituents’ questions and who to refer to when a question reaches beyond their knowledge.

Embrace new methods

Regardless of your message or audience, one consideration stands out more than ever – the communications methods available to you are endless. The days of the printed newsletter are fast disappearing. Today, communications strategies encompass email newsletters, blogs and social media such as Facebook and Twittter. But remember to stay focused on your top priority constituent groups, not trends, when determining which communications methods are going to be the most effective. As long as the communications methods are appropriate for your target audience, don’t be afraid to try as many as you feel comfortable with, and then determine which works best for you. The new methodologies are either cheap or free, so feel free to experiment.

Review, adapt and repeat

Evaluating and adapting your communications strategy over time is critical to your organization’s success. While there are many metrics that communications professionals suggest you track, keeping it simple can also do the trick. For example, once you have sent out your email newsletter, call up some of your constituents and ask what they thought of your recent communication and how it could be improved. Much like investing in communications, any level of resources devoted to researching your communication’s impact is better than no research at all. Regularly solicit feedback from your constituents and adapt your message accordingly.

While the suggestions above are nothing new, they should guide your organization’s communications planning, regardless of the size or budget of your organization. Staying connected with your constituents will help your organization weather today’s challenging economic climate. Times are tough, but do not bury your head in the sand. On the contrary, it is time to let people know your organization is still on the job.

See also:
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Does your organization have a high impact board? Seven questions to ask

Great boards have a significant impact by adding value not available to their organization’s current resources and means. High impact boards are the key difference between achieving good results and great results. They don’t spend their time micromanaging, listening to reports, approving predetermined decisions and second guessing their staff’s decisions. Instead, they act as a high performance team using their member’s skills, talents, knowledge and expertise to make key decisions and build organizational capacity for producing results.

How can you ensure your organization benefits from a high impact board? Here are seven questions to ask:

1.      Do you have the “right people (board members) on the bus”?

Jim Collins in Good to Great (HarperCollins, 2001) stresses the importance of having the “right people on the bus” for building a great organization. High impact board members have a passion for the mission, vision and the organization. They act as team players using their individual knowledge and expertise to engage in collective decision making. These board members put their egos aside and have the ability to engage in strategic thinking that builds on one another’s ideas, thoughts and opinions. Each board member adds specific value to the board that would greatly impact the organization if he/she were to leave.

2.      Does your board partner with the chief executive officer (CEO)/executive director (ED) to operate as a championship team?

High impact boards have a culture similar to a championship sports team. Their focus is on becoming or remaining number one, so their culture is built upon using the individual skills and abilities of each team member collectively to achieve their goal. Patrick Lencioni, in his book The Five Dysfunctions of a Team (Jossey-Bass, 2002) lists these characteristics of high functioning teams:

·        High level of trust between their members

·        Willingness to engage in conflict

·        High level of commitment to each other and their organization

·        Collective accountability for following through on board agreements

·        Attention to producing results

3.      Does your board chair and CEO/ED act as one leadership team?

There is a high level of trust between the board chair and the CEO/ED of a high impact board. They act as one leadership team communicating the same message about the organization. They are clear about the differences in their individual roles and build on each member’s skills, strengths and expertise to complement each other. They feel comfortable disagreeing with each other respectfully at board meetings and putting their unfinished thinking on the table for others to build upon.

4.      Does your CEO/ED take personal accountability for building the board’s capacity and leadership to govern with excellence?

CEOs/EDs of high impact boards understand their critical role in building their board’s capacity to lead. Most board members have little, if any, training in how to effectively govern a nonprofit organization. They often think that their governing role is to manage the day-to- day operations of the organization. CEOs/EDs need to constantly educate their board members about effective governing practices and provide them with the skills, information and support to successfully carry out their roles. The CEOs/EDs must also learn about what motivates each of their board members and about important aspects of their life (i.e. family, passions, etc.).

5.      Does your board have a “Culture of Inquiry?”

Most boards see themselves as policemen or compliance regulators. High impact boards add significant value by engaging together with their CEOs/EDs to determine future directions, impacts and strategies. They have what Nancy R. Axelrod calls a “Culture of Inquiry,” in which they are constantly learning and sharing knowledge and information about how they can have greater impact. They are not afraid to question complex, controversial or ambiguous matters or to look at issues from all sides. They are clear about their decision making authority, as well as about those they have delegated to CEO/ED, which allows them and their staff to feel comfortable discussing any key issues impacting their organizations. They have active feedback mechanisms, employing board and board member assessment processes, that help them engage in continuous improvement.

6.     Do your board and CEO/ED constantly recruit and groom future board leadership?

Most organizations wait until the board chair announces that he/she plans to retire to begin succession planning. They often end up “twisting the arm” of some unwilling board member who is often not the most qualified person, but who is willing to serve as the next board chair. A high impact board, usually through its governance committee, and the CEO/ED, think about who will be their next board leaders when they recruit and select new board members. At least a year ahead of the retirement of their current board chair and other board leaders, high impact boards have identified their next board leaders and have begun grooming them for their jobs.

7.      Do board members feel a significant return on their invested time?

Board members who feel that they are in an exciting learning environment, meeting interesting new contacts and friends, having fun and feeling that they are part of a winning team, are more willing to give of their time, expertise and resources to the organization. If their board service significantly enhances their life experiences, they will make it a high priority in their day-to-day activities.

A high impact board adds significant value to an organization that can be measured in terms of organizational resources, organizational performance and organizational influence. The board plays a leading, proactive role partnering with the CEO/ED, rather than merely serving as an audience for staff or as a regulator providing oversight. If the high impact board vanished, the organization would suffer.

See also:

Super Boards

The Board Game

The Ultimate Board Member’s Book

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Build on your organization’s strengths when developing strategy

This is the second part of a two-part article on strategic planning. Part 1 was “Get back to basics with first principle of strategy development.” Part 2 continues with the next two principles: building on your strengths and making decision-making criteria explicit.

My last article covered the first principle in strategy development – Know Thyself – and provided questions to ask to make sure that nonprofit board members and managers share a fundamental understanding of the organization.

Building on that base, organizations should consider two more principles when developing strategy.

Second principle: Build on your strengths

Knowing Thyself is important for many reasons, but the most important benefit is to guide the organization in making major decisions by doing more of what it does best. Human nature is often to fret over our weaknesses. But individuals are more energized, and organizations more successful, when they focus on their strengths. We all know the energy we get from completing something we are particularly good at – the actor at the end of the show, the athlete at the end of the race or the teacher when a struggling student finally aces a test. The principle is no different for an organization – nonprofits come alive when they focus on what they’ve learned to do best.

The best approach to developing strategy is to use the fundamental organizational identity discussed in the first principle – composed of mission, geography, programs, customers and funding – as a guide to select among strategic options. The option that best fits your current identity – that takes advantage of what you’ve already developed as your area of expertise – is often the best choice.

One piece is still missing, however. Another part of self-knowledge is knowing how your organization is distinct from others or how it is unique in your field. In the for-profit world, this is known as the organizational differentiator or, in a term I find particularly useful at challenging nonprofit assumptions, the competitive advantage.

Nonprofit board members and staff are often reluctant to think about competition because a premium is placed on cooperation. Indeed, nonprofits do and should cooperate. But understanding when and how you compete will give you a real lead in achieving your full potential. To put it bluntly, you don’t deserve to stay in business if your mission is not important enough, or your execution not sharp enough, to attract the resources to carry it out.

Nonprofit competition is different in key respects from for-profit business competition. Both sectors have to consider direct competitors (those doing exactly what you do), as well as indirect competitors (those doing something different, but similar, such as a movie theatre compared to a live theatre). But nonprofit organizations also face resource competition for funding, staff, media attention and board members.

Once you get used to the idea of competitors, then think about your competitors’ strengths. Do they have a program that no one else operates? Have they developed a skill and reputation for working in a community that has been particularly hard to reach? Then ask the same questions of your organization: What is the particular strength we have that differentiates us, makes us unique and helps us make the case that others should support our work? Once you know what your competitive advantage is, do more of it!

I know of several organizations – all in different communities – that had developed particular skills in working with the Latino community. Although the types of services they offered were often similar to those offered by others – health education or leadership development – they were able to develop new strategies that leveraged the trust they had built with the local Latino population by partnering with other organizations. Through this approach, they have been able to generate additional revenue and exert a greater impact in their field.

Although the second principle is to Build on Your Strengths, it wouldn’t be fair to pretend that you should never try to improve where you are weak. At times, organizations must move into a new area to be most effective or to remain financially viable. The point of this principle is that any move to go beyond your basic identity or to develop new core strengths should be driven by the greatest possible necessity and supported by more extensive planning.

Third principle: Make decision-making criteria explicit

Many great leaders make brilliant strategic choices without ever talking about the thinking behind those choices. I’ve heard middle managers in one organization describe a kind of strategic chaos – they do not understand why one program is emphasized over another, or why new programs are taken on. But the CEO and senior managers are credited by everyone in the organization with making remarkably prescient choices. The factors that go into major strategic decisions are somewhat opaque for many in the organization. As a result, the organization has thrived – driven by the decisions of senior managers – but seeds of serious challenges around staff cohesion and succession are readily apparent.

By taking time to identify and communicate the fundamental criteria for decision making, rather than assuming everyone understands these factors, you can build a more cohesive organization and address the latent frustration described by mid-level managers and staff when faced with changing assignments or increased work stress.

These three principles are perhaps simple, but they reflect a lesson we all learned from Julie Andrews in The Sound of Music: “Start at the very beginning.” By naming organizational fundamentals, you can move forward with cohesive guidance for making decisions on a day-to-day basis – or, at the very least, communicating the factors for major decisions throughout the organization.

See also:

The Nonprofit Strategy Revolution

Building Nonprofit Capacity

Nonprofit Sustainability

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Using Real-Time Strategic Planning to evaluate nonprofit partnerships

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Many nonprofits are considering the spectrum of strategic restructuring options, such as partnerships and mergers, as potential strategies to enhance financial viability and achieve greater sustainability. With more than a decade of experience in this area, I have learned one crucial lesson for those seeking a successful partnership: It must be considered within the context of a broader organizational strategy.

In this time of economic uncertainty, organizations may seek a partnership out of expediency without considering how the partnership may advance, or derail, their organizational strategy. Nonprofit leaders may lack the time, resources and data to undertake strategic planning while exploring potential partnerships. La Piana Consulting has developed a research-based and field-tested methodology called Real-Time Strategic Planning (RTSP) that allows organizations to consider their strategic focus effectively and in a fraction of the time required by traditional strategic planning.

RTSP and strategic restructuring

Within the context of a merger or partnership, nonprofit leaders should refer to the following elements of the RTSP process.

Business model

The term “business model” can overwhelm many nonprofit leaders by conjuring thoughts of corporate executives plotting money-making schemes. However, RTSP provides a simple way to think about your nonprofit business model to turn it into an effective tool for decision making. When considering a partnership, nonprofits can define their business model into easily understood and efficiently analyzed themes:

Who you are – your mission and brand;
What is your scope – the geography, activities and clients served;
What is the source and distribution of funding – where funding comes from and how it’s spent.

Once you have a clear understanding of your current business model, it is important to consider potential gaps and opportunities that a prospective partnership may impact, i.e. new geography, clients, funding, or more efficient operations.

Market awareness

Understanding your business model will make it much easier to understand where you “fit” into the market. Therefore, conduct an honest assessment of your market. Ask yourself, is demand for your services growing or shrinking?

Other key considerations include: Who else is providing similar services? With what organizations do you compete or collaborate? What are their strengths and weaknesses relative to your organization? What do they bring to the table that strengthens their position in the market? Look at these competitors and analyze how they compare to you.

Answering these questions will help you better understand your own market position, as well as how a partnership can strengthen your organization and better fulfill its mission

Competition

As described above, a large part of market awareness is recognizing your organization’s competition. Although the concept of competition may not be commonly referred to in the nonprofit sector, nonprofit leaders must address competition in order to ensure an organization’s success. Consider the various types of competition your organization faces, including competition for funding, staff, board members, media attention, clients, etc. Understanding competition is a stepping stone to understanding your relative strengths as an organization, and being able to leverage them in support of your mission.

Trends

No one can predict the future, but having a general understanding of the trends facing nonprofits, and your organization in particular, is critical. Consider trends in demand for services and funding. Many nonprofits find themselves in the unpleasant situation of seeing their financial support (from government, donors and foundations) decline at the very time the demand for services is increasing. Nonprofits facing this dilemma should consider how partnerships can enhance their ability to serve more people in the most efficient way possible. Partnerships can offer potential funding opportunities if they are well designed and well promoted.

Competitive advantage

Competitive advantage in the nonprofit sector is defined as “your organization’s ability to produce social value using a unique asset, outstanding execution, or both.” By gaining an understanding of your market, competition and the trends that impact your work, you will be better able to hone your organization’s unique strengths. Again, understanding your competitive advantage and those of your competitors and collaborators is the first step to considering how to build on your strengths or mitigate any weaknesses. Furthermore, combining the strengths of two or more organizations and aligning competitive advantages can significantly enhance an organization’s ability to compete, and minimize each organization’s weaknesses.

Strategy screens

In considering a partnership, your nonprofit organization should create explicit criteria to help guide decision making. A strategy screen is a set of criteria that are applied to any potential strategy to help determine its appropriateness. The decision-making criteria in such a screen are rooted in your nonprofit’s business model and competitive advantages; in fact, you should look for partnerships that build on what you currently do well. A strategy screen can help you to determine the relevance of potential partnership strategies. Strategy screens can also be used as a quick way to determine the appropriateness of a potential organizational partner. 

Putting it all together

Use these concepts when considering a strategic restructuring partnership, whether it is a merger, administrative consolidation or joint programming effort. Like any organizational strategy, partnership development needs to be carefully considered and not just pursued because an exciting opportunity crops up.

Moreover, the initial exploration with a potential partner does not have to take up huge amounts of time or resources. The RTSP process is designed to be quick and efficient, usually taking one or two days of facilitated discussion, with basic information gathering prior to the session.

Wherever you are in the partnership development process – assessment, negotiation or even integration – the Real-Time Strategic Planning process can help you determine if the partnership supports your nonprofit’s organizational strategy and advances the mission.

See also:

The Nonprofit Strategy Revolution

Building Nonprofit Capacity

Nonprofit Sustainability

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Get back to basics with the first principle of strategy development

This article is Part 1 of 2. The second article continues with the next two principles after Know Thyself: building on your strengths and making decision-making criteria explicit.

We all carry unexamined – or unstated – assumptions with us. When organizations initiate strategy development processes, these unexamined assumptions can lead to unsatisfying results: mis-communication along the way, time wasted gathering information you don’t need, or agreement to words that merely paper over differing understandings.

Many of these pitfalls can be avoided by beginning any strategy development process with three principles.

First principle: Know Thyself

Whether as individuals or as organizations, we often forget to remember who we are. For individuals, this might mean spending time with an old friend or a sibling, someone who brings you back to your fundamental self. For organizations, this means reviewing the most basic questions of the organization.

At the beginning of any strategy process, be sure to spend time up front reviewing a few deceptively simple issues with both board and management.

Mission. This is, of course, a common starting point for assessing an organization’s identity, and for good reason. Focusing first on mission reminds us why we have dedicated so much of our time, and even so much of our lives, to a nonprofit cause. Rather than just repeating the words of the mission statement, exercises that describe the mission or the hoped for impact can be more inspiring and also more accurate. Explaining benchmarks your organization will achieve in five years, or on what will change in the world because of your work, are simple ways to refocus on the meaning of the mission.

Geography. How would your board, executives and staff describe the geographic area served by the organization? Sometimes this is an extremely simple question; more often than not, it uncovers nuances about how the organization is focused that are vital to moving forward. For example, in my work with one health care organization, we found that while its literature described a “metropolitan” service area, in fact nearly all their clients came from a handful of inner city zip codes.

Customers. This question can be answered in different ways. First, most nonprofits can describe direct customers: patients in the example of a health care organization above, patrons for arts organizations, recipients of service for social service organizations and so on. However, it’s good to make sure you understand the secondary customers, or audiences, your organization must serve: funders of programs, local political leadership, nonprofit collaborators and more. For nonprofits, defining customers means understanding who you are accountable to – and speaking to those audiences.

Programs. Programs are, of course, the primary vehicle for achieving organizational mission. I have served on the board of a small nonprofit organization for several years, and during that time I have experienced the regular occurrence of a board member reacting in surprise at a board meeting: “Oh!  I never knew we did that!” It can be notoriously difficult for some organizations to educate board members about the details of program work, but it is essential that board members understand the basic category, or “buckets,” of program work before considering questions of strategy – since considering strategy often means redirecting existing programs or establishing new activities.

Funding. Many board members and managers are familiar with their organization’s overall budget, but may be less familiar with the relative importance of different funding streams. A basic analysis of revenue by category – government grants, fee for service, foundations, general contributions – is essential knowledge for nonprofit leaders.

When I work with nonprofits, I sometimes worry that these questions are too simple. But again and again, as we talk through these fundamentals, I discover that they offer a clear definition of an organization’s basic identity. On top of that, I have never once been in a situation where the entire board and management team involved in developing strategy began with a shared understanding of these fundamentals. Walking through this discussion may be elementary for the executive director, but it can be illuminating for board members.

Another way to think about the Know Thyself principle is that for an organization, the entire leadership must be self aware.

See also:

The Nonprofit Strategy Revolution

Building Nonprofit Capacity

Nonprofit Sustainability

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Arts and culture mergers: Trends, challenges and benefits

Mergers and other forms of partnerships between nonprofits have been on the rise for the past decade, particularly in the last five years. The reasons for this trend are numerous and include cuts in foundation and corporate funding, as well as in individual donations; a desire on the part of nonprofits to have a greater impact, which is often easier to do by joining together; and the retirement of many executive directors and the difficulty of finding replacements, which leads to organizations merging with others that have strong EDs and/or boards.

While these factors impact the nonprofit sector in general, sub-sectors have been affected to varying degrees and differ in their proclivity to enter into partnerships. As a result, mergers, in particular, have been more prevalent in some sub-sectors than in others. Until recently, most mergers were in the health and human services sub-sectors, which for many years have been severely challenged by competition from for-profit entities and by a decline in government funding. The arts and culture sub-sector, on the other hand, has been slower to embrace mergers. However, in the past few years, we have seen an increase in mergers among arts organizations.

What are some of the factors underlying this trend, as well as the unique challenges faced by arts organizations seeking to establish such partnerships? What are the factors for success, and which factors can potentially derail a partnership? This article looks at the trends and challenges of mergers, and provides examples of negotiations that resulted in a successful merger and of situations where a merger was determined not to be the right option.

Factors underlying the trend

The reasons for the increased interest in these partnerships are multiple and include:

A significant decline in government (federal, state and county) funding for the arts, which has come to rely heavily on these sources of income.

Similarly, a decline in corporate funding due to mergers and acquisitions in the business sector, as well as tighter profit margins for small businesses; typically, local businesses have provided significant support to artistic and cultural programs in their local communities.

Natural disasters, such as the tsunami and Hurricane Katrina, which have drawn funding from individual donors and foundations that might have otherwise gone to the arts.

Economic challenges in general, which have led to a shift in giving and funding priorities to basic health and social services.

The increased pressure on the educational system to raise academic standards and test scores, leading to reduced emphasis on arts and other “non-academic” programs.

Aging of the population that forms the core audience for traditional arts programming (ballet, symphony, musical theatre, etc.), coupled with a decline in the development of younger audiences for this programming—which leads to less demand and, in turn, less earned income.

Other forms of entertainment have proliferated, and the quality of this programming has increased dramatically due to technological advances, as well as affordability and accessibility.

In general, the public has less leisure time and more options for how this time is spent.

Challenges for arts organizations in considering a merger

These trends are converging to create a crisis of sorts in the arts and culture sub-sector—and to push the sector to consider creative approaches to addressing these challenges in order to remain sustainable. However, these approaches are sometimes difficult to embrace, regardless of the necessity to do so.

Stumbling blocks include:

One of the greatest challenges is in aligning and/or defining “arts and culture.” There are many definitions, and organizations feel very strongly about their particular emphasis.

Related to this is “artistic direction”: An arts organization is defined by its artistic direction and may feel that it will lose its identity and unique branding in a merger. It’s not an absolute, but arts organizations that have the most difficult time in negotiating a merger are often those that are involved in “direct” provision of art (e.g., performing arts, visual arts, etc.), as opposed to those that are advocacy and/or educational in nature.

The “culture” of merger, in particular, is alien to many arts organizations. While they are used to collaborating, they may view a merger as a competitive strategy in the sense that it excludes others.

Unlike health and human services, where government funding is the major form of support, arts organizations rely heavily on individual donors and foundations. A fear exists that when two organizations become one, these funds will be reduced. To alleviate this fear, organizations need to cultivate and communicate with donors and funders to help them understand that the motivation for the partnership is not to have to do more with less.

Mergers typically do not involve a significant reduction in staff positions, other than needing only one ED. However, positions may also be consolidated in arts organizations that provide direct services where each has an artistic director. It can be difficult to overcome resistance to this.

When a merger was not the best option

A merger is not always the optimal partnership option. This is often revealed through the process of considering a merger. So, while the decision may be to not proceed, the process is beneficial and avoids the cost of moving forward—only to discover problems after the fact. In addition, these discussions often lead to forming other types of partnerships, such as administrative consolidation, which can result in significant cost savings, without incurring the cost, bad feelings and negative publicity of trying to force a merger that wasn’t meant to be.

The well-publicized merger of the Jewish Museum San Francisco and the Magnus Museum is a case in point. Despite the significant potential benefits of a merger, the organizations were unable to implement their decision to merge due to a lack of compatibility in artistic direction and significant cultural differences between the organizations. Unfortunately, these problems did not emerge as barriers until the merger was implemented.

Another example is the potential merger of the New York Philharmonic and Carnegie Hall. Among the factors leading to the decision not to merge were the perceived loss of the Philharmonic’s identity and the potential decrease in donations from supporters of both groups.

Falling short of a merger, the recently publicized consolidation of the back-shop and box office operations of the San Jose Repertory Theatre and the American Musical Theatre is viewed as a possible first step towards a closer working relationship between these financially-challenged organizations. At a minimum, this partnership should help stabilize their operations.

Successful arts mergers

Despite the obstacles, arts organizations are increasingly finding the benefits of a merger to be greater than the challenges. Some of the most successful arts mergers that we have observed are those between advocacy organizations. In general, the objectives of these organizations are to increase visibility and funding for the arts and help the arts to have a greater impact on society in general. Recently, the Michigan Association of Community Arts Agencies and ArtServe Michigan merged. Although they had some differences in their areas of emphasis, these nonprofits realized that their missions were basically compatible and that a merged organization would have greater visibility and impact—and, therefore, better outcomes for art, artists and the public at large.

 

The desire to grow and make a greater impact is a prime motivation for many nonprofits to merge. In general, organizations that have similar missions and that serve similar stakeholders, but that operate in different geographic areas, find a merger to be a cost-effective way to achieve this outcome. This was the case for Young Audiences of San Jose & Silicon Valley and Young Audiences of the Bay Area, which merged in mid-2004 to form Young Audiences of Northern California. In part, this merger reflects a general trend in the sector for chapters/affiliates of national nonprofits in contiguous service areas to merge.

 

Although arts and culture nonprofits have lagged behind other types of nonprofits in embracing mergers and other formal partnerships, trends in the sector in general and those specific to this sub-sector are putting these options in a more positive light. When the partners are well suited for each other, these partnerships can have significant benefits both to the individual organizations and to society as a whole.

See also:

Nonprofit Mergers & Alliances

The Nonprofit Business Plan

The Nonprofit Strategy Revolution

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Mergers: A cautionary note in difficult times

The current economic climate has everyone scrambling – looking for ideas that will help them weather hard times. Many in the nonprofit sector are looking to mergers as one solution. Mergers are often a good strategic move for nonprofits. This is especially true when the merged organization is able to more fully realize its purpose – greater social good. However, there are also ill-conceived mergers that represent setbacks for those the nonprofit exists to serve; in the midst of this heightened interest in mergers, nonprofit leaders should weigh both the motivation for pursuing a merger and the expectations regarding what a merger should accomplish.

What can we learn from the for-profit sector?

Nearly all of us have experience with mergers. In the financial sector, small local banks have been gobbled up by ever bigger banking systems now stretching coast to coast; Macy’s has become the ubiquitous department store in the United States.; US Airways and America West Airlines (AWA) merged as they and other legacy carriers were being challenged by new low-cost airlines. These mergers have brought some advantages – it is likely that US Airways would not have survived without the merger with AWA. Macy’s has greater “buying power” than the smaller retailers that it absorbed, and that may translate into better prices for consumers. For a time, bank mergers boosted the value of bank stocks, providing a benefit to many individual investors. However, there have also been some significant trade-offs as a result.

Most of these trade-offs relate to the underlying reason for nearly any for-profit merger. It’s a strategic move to enhance the financial value to the owner or shareholder. This is often accomplished through gaining market share by eliminating a competitor. When competition is eliminated, customer service can be compromised. For example, in the post-merger period, there may be some opportunities to reduce redundancy in staffing, but employees are often cut – sometimes to the point at which there is direct impact on the consumer – in an effort to trim costs in order to boost the bottom line. The shareholder’s or investor’s interests are being served even if the consumer’s experience isn’t better – and with fewer competitors for customers to turn to, there may be little downside for the merged corporation. As a consumer, you have probably experienced some of this firsthand.

What’s different about mergers in the nonprofit sector?

Nonprofit corporations exist to serve a very different kind of bottom line. They are in business to provide a social good – to feed the hungry, protect the environment, seek social justice or protect human rights. Nonprofit organizations that are better able than others in their field or community to deliver on their social goals should pursue any legitimate path to position themselves to do more good – including mergers or other forms of partnerships.

Merger is often a wise move that accomplishes both greater impact and achieves greater efficiency when the underlying motivation is to better protect the environment or provide a stronger social safety net. We have repeatedly seen that merged organizations are ultimately more stable; they have larger staffs with more diverse skills and greater sophistication in management; they are able to access more sources of funding and are able to attract the most talented board members. Much of their greater effectiveness and efficiency comes as they reach a scale of operation that allows specialization and more robust administrative systems.

However, we have also seen organizations approach a merger with no goal beyond survival. The organization may accomplish this goal, but it is at times done through cuts in programs and services or through a geographic expansion that simply spreads the same level of programs/services over a larger area. Just as there are exceptions in the for-profit sector – especially when a business is foundering, but a single unit remains viable – there are exceptions in the nonprofit sector. There are mergers that are the nonprofit equivalent of the “friendly takeover” in order to preserve a much needed and successful program in an organization that is otherwise not viable.

Questions to consider

There are a number of questions that nonprofit leaders can ask themselves in contemplating whether a merger or some other form of strategic partnership is a good move for their organization. Is there an overlap in consumers, funders, geographic area served and programs between your organization and others? Who are those organizations and do any share your mission and hold similar values? You may think you know the answer to these questions – and perhaps you do – but this is a good time to take a more thorough and perhaps more objective look at other organizations in your “market.” Talk to your funders and others in the community – what do they think of these organizations and can they imagine you working with any of them? Consider ways you might better serve your shared constituencies by working together. Would a merger allow you to provide administrative services in a more cost-effective manner that will allow you to channel more resources to programs and services?

Ultimately, the measure of success in a nonprofit merger is not whether the organization simply cut costs and survived (as it might be in the for-profit sector), but whether the merger resulted in its mission being better served. For us, that’s the bottom line.

See also:

Nonprofit Mergers & Alliances

The Nonprofit Business Plan

The Nonprofit Strategy Revolution

Image credit: wagemakerlaw.com, communitypartners.org, comstocksmag.com

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Which comes first: the partnership or the plan?

Our firm La Piana Consulting works with dozens of organizations each year on planning: strategic planning, business planning, succession planning—you name it. We also specialize in strategic restructuring: mergers and other forms of partnership between and among nonprofit organizations. All nonprofits engage in the former, many in the latter. Our belief is an organization should never tackle one without giving serious consideration to the other.

Every nonprofit does at least some of its work in collaboration with others. Most could go further, however. Joint programming, back office consolidation, joint venture, merger, collaborative scaling, networked action, collective impact—there are many ways to increase impact by working with others. How and when should an organization plan for this? What kind of planning is called for? What should an organization tackle first? To answer these questions, we consider planning from three angles.

1. Planning as catalyst

Strategic planning is the most common approach to strategy formation. Organizations also form strategy in “real time.” The latter approach is a big focus of ours and the topic of one of our books, The Nonprofit Strategy Revolution: Real-Time Strategic Planning in a Rapid-Response World, which argues the environment is changing so rapidly, nonprofits need to be forming, evaluating, and updating strategy on an ongoing basis, not just every two, three, or four years, when the latest strategic plan expires.

Regardless of the model used, strategy formation involves careful consideration of internal factors (mission, vision, business model, big questions) and external realities (trends, competitive landscape, market position, competitive advantage, need/demand). A single organization may begin a strategy formation process without any specific intent to partner, but the simple act of addressing the question, “Is there anyway in which partnership could allow us to better advance our mission?” may open doors to previously unrecognized opportunities.

Succession planning is another opportunity to consider partnership. Succession planning is the ongoing process of defining the organizational roles and capacities needed for success and of identifying and developing personnel to prepare them to fill those roles as needed. It may also involve considering “out of the box” responses to future leadership transitions. For example, “Would sharing an Executive Director CFO/Director of Human Resources with another organization help us to be more efficient and effective as we go forward?” Here again the planning comes first, but when done well, includes consideration of future strategic restructuring options and opportunities.

2. Planning to inform negotiations

While a formal planning process may lead to a decision to explore options for strategic restructuring, opportunities for partnership can and do arise at anytime. Planning isn’t far behind, however, and is in fact an integral part of the negotiations process. Sometimes that planning is at a very high level: “What is the programmatic scope of the partnership? How will [our combined effort] be structured, governed, managed, staffed, and financed? What will we continue to do independently?” In many cases, agreement on “the basics” may be sufficient to secure agreement from all parties to move forward.

In other cases, a potential partnership may be sufficiently complex as to require a full business planning process prior to a decision to move forward, either because of the number of parties involved, the complexity of the proposed business model, or the nature of the questions posed by key stakeholders such as board members or funders. The deeper dive of business planning allows those involved to develop, define and consider the parameters of an economically and operationally successful undertaking—and then make an informed decision based on the result.

3. Planning for implementation

Once two or more organizations have agreed to work together, they must implement. In a straight forward partnership (a jointly developed education program for new parents, for example, or an agreement to share a CFO) an MOU and an action plan may be all that is needed. In a more complex or highly integrative partnership (a merger, perhaps, or newly-formed coalition of similarly-focused advocacy organizations) a full-fledged strategy formation process may be called for. Or, if the partnership is focused on starting or scaling something new, large, or high-risk, business planning may be appropriate. As with planning to inform negotiations, the opportunity for partnership may have arisen outside of a formal planning process, but a formal planning process will very often follow the decision to partner.

Have those leading your organization considered the possibility of partnership recently? If not, and you have a planning process coming up, consider including a discussion of how working with others could help you better advance your mission and achieve your vision. It is certainly an appropriate question at anytime an organization is considering its future. For those occasions when the partnership opportunity comes first, get ready to jump into planning—together—for a whole new level of success.

See also:

The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model

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Small but mighty: game-changing strategy in small to mid-sized nonprofits

Many nonprofits use periodic strategic planning to tune up their strategies or make adjustments to their route along a fairly steady course over the near-term future. Sometimes, however, organizations have a bigger, bolder agenda, often driven by a big challenge. My recent column on “Game-Changing Strategy” in The Nonprofit Times (February 1, 2013) examined this phenomenon through the lens of our consulting work with large, national nonprofits and foundations.

Since its appearance, I have been asked if the only groups suited to developing game-changing strategies are these big, well-resourced institutions. The answer, most emphatically, is “no way!” Game-changing strategy is available to any nonprofit facing a need to change direction, respond to a major challenge, or seize a new opportunity if it has the capacity and the courage to undertake a large, sometimes daunting change process.

Strategy is about making hard choices

I remember an early experience with game-changing strategic change. It wasn’t with a big household-name nonprofit but with a small, state humanities council. As we began the engagement, the challenge was this: We have limited resources with which to pursue our broad mission to promote the humanities across a large, diverse state. In response we currently offer an array of programs, none of which are at sufficient scale. The council had set itself the task of narrowing its portfolio to concentrate more resources on a few core activities. The problem was that the varying interests among the staff and board were aligned in such a way that making hard choices–invest more here and thus less there–was not possible. They were at an impasse. Thus the wide array of poorly supported activities.

At one point early in the strategy process we asked: “If you were building the council from scratch today, what would you make sure to do and what would you avoid?” By moving the discussion away from an unwinnable debate over the relative merits of current programs, we facilitated engagement in the struggle to actually think strategically. The group soon decided unanimously the answer to our question was: “We would make sure to do only one thing and to do it really well.”

Bold thinking pays off

This conversation opened the council’s horizons to think differently and we exploited that opening. For the next few months it considered various ideas for “the one thing.” In the end, it found it, tested it widely throughout the state, even using a public polling firm, and defined a bold signature project: an initiative to engage the entire state in an effort to tell stories about how residents’ families came to live where they did. Whether the family had arrived last week from China, last year from another state, or in the last century from Mexico, it turned out that everyone had a story he/she wanted to tell.

This new effort was a true game changer for the council. As the idea gained traction, the board supported the management’s plans to shed existing programs in a responsible and orderly way, either by transfer to another host entity, spinoff as an independent new nonprofit, or phase-down. The council soon concentrated all its effort on the new initiative. As a result of its intense focus on a winning idea, private funding increased, libraries and schools around the state lined up to implement the project in communities, and the council’s profile rose immeasurably.

Small organizations, big ideas

This was not an isolated instance of courageous thinking reshaping a small organization: far from it. Consider: the merger of two small environmental nonprofits that decided to trade their independence for greater power in pursuit of their shared mission; a half-dozen small and mid-sized human services groups that co-located to save a precious but expensive-to-operate facility for the disabled; or the bold campaign launched by a grassroots HIV/AIDS service organization to redefine treatment as prevention in its community. These groups were not large but their ideas certainly were.

So, if you are a leader in a small or mid-sized organization embarking on an examination of your strategy (perhaps for no other reason than “it is time,” three years having passed since your last effort), here is my advice. Before you begin tweaking your current efforts–”We’ll raise 10% more money” or “We’ll serve 5% more people”–consider for a moment how you would go about pursuing your mission if you were to start your organization over today, free from all impediments to bold action. You might decide you would build the organization just as it is now. But if not–if you can imagine a better way–consider whether it is time for a game change.

See also:

The Nonprofit Strategy Revolution: Real-Time Strategic Planning in a Rapid-Response World

Nonprofit Strategic Positioning: Decide Where to Be, Plan What to Do

Nonprofit Mergers and Alliances

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

The NON Nonprofit: For-Profit Thinking for Nonprofit Success

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