Jul 15, 2010

An Examination of Strategic Nonprofit Restructuring: A Guide to Restructuring Types, Organizational Assessment, Identification of Partners, Funding Sources and Implementation

An Examination of Strategic Nonprofit Restructuring: A Guide to Restructuring Types, Organizational Assessment, Identification of Partners, Funding Sources and Implementation

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The beginning of the 21st century in the United States (U.S.) has seen an increased growth in restructuring and mergers within the nonprofit sector. It is not a coincidence that an historical economic downturn has occurred during this same period. According to the National Bureau of Economic Research (2009), the Bureau that makes the official rulings on the United States‟ economic status, an economic recession took place in 2001 and another began in 2007, in which the country remains, as of December 2009. A study published less than a year ago by The Bridgespan Group examined, over an 11-year span, close to 3,400 nonprofit groups from four states that were engaged in mergers. The study determined that “nonprofit mergers are happening at a far faster pace than most people in the nonprofit world realize” (Cortez, Foster & Milway, 2008). A 2005 study conducted by the Stanford Project on the Evolution of Nonprofits reported that 8.5 percent of 200 San Francisco Bay area organizations had pursued mergers or other forms of restructuring in the past 30 years (Gammal, 2007, p. 48). Although it is far more common to hear about for-profit mergers, primarily on account of what is reported by the U.S. media, both of these studies found that realignment is happening within nonprofits about as often as it is in the private sector. Qualitative data from the nonprofit sector also “overwhelmingly support [nonprofit mergers and restructuring] as a national trend” (MAP for Nonprofits, 2009, p. 12), one “destined to become the major nonprofit organizational tactic” of the future (McCormick, 2001, p. xxi).

Restructuring, sometimes referred to as collaboration, partnering or realignment, includes both integrations, involving a change in the corporate control of an organization, and alliances, involving partnering in one or more areas. Integrations can include mergers, parent-subsidiary relationships and joint ventures, whereas alliances can include administrative consolidation and joint programming. While examining the growth of mergers and restructuring in the U.S. nonprofit sector, this paper presents a four-stage organizational assessment designed to help nonprofit leaders understand their organization‟s composition and culture. With this knowledge, leaders will acquire the necessary criteria necessary to assess whether realignment is right for their organization, which types are most appropriate, how the challenges of collaboration might impact the organization and what to look for in a partner. Supplemented by a literature review, fundraising suggestions and implementation resources, this paper provides a comprehensive review of the topic, along with strategic tools to simplify the process. By being equipped with a clear understanding of restructuring and its ability to decrease competition and increase capacity, more nonprofits can incorporate it into their strategic planning, and, in turn, strengthen the sector as a whole. © 2009 Karen M. Radman

Category: Collaborations