Even if your nonprofit isn’t in financial trouble, your board and management should be alert to opportunities that will improve efficiency and sustainability. It’s best to do this before your nonprofit reaches crisis mode.
For-profit companies have long recognized the value of collaborations. More nonprofits are now looking for the same benefits. A successful collaboration can help a nonprofit:
- save costs by sharing infrastructure and administrative expenses
- strengthen programs
- expand the value proposition for both organizations
- improve efficiency
- tap complementary skills and abilities
- increase leadership skills
Many nonprofits, especially those in the social services sector, face shrinking funding streams. Ed Wiertel, long-time board chair of the Chicago Youth Centers (CYC), a children’s services provider to the underserved, didn’t wait for the agency to feel the pain of funding cuts. He formed an in-house team to develop a preemptive strategy. Other nonprofits would be wise to follow a similar path.
CYC had made all the “inside the building” cuts they could without harming the quality of their programs. They needed to find another way to efficiently provide their services and build a more sustainable path to the future. They did this by thinking outside the box, evaluating the possibility of an alliance or a merger.
Determining whether it’s best for your nonprofit to combine corporate legal structures, provide joint programs or share back office infrastructure may require an outside consultant. An outside expert can help you think through the options and recommend solutions that have worked for other nonprofits. CYC choose to work with FMA, which provides consulting, outsourcing and training to nonprofits.
Fortunately, foundations are increasingly recognizing the value of this exercise and are often willing to fund the process. CYC was able to obtain funding from The Chicago Community Trust which has funded this type of work for 20 years. Another funder in this area is SeaChange Capital Partners.
CYC’s solution was to look for a financially solid strategic ally. They chose to partner with Family Focus. The new relationship benefits both organizations. They are able to share infrastructure and administrative costs and continue to strengthen their programs.
CYC provides services to children from age 3 through their school years; Family Focus provides services in the same area to children from birth to age 3. Specific benefits for both CYC and Family Focus include:
- Cost savings: Both organizations saved money through joint purchasing, shared use of transportation, shared expenses for facility rental, creating a consolidated preferred vendor program and joint staff training. They also recognized the potential for additional savings by sharing development and IT.
- Enhanced programs: By teaming, both organizations were able to provide a continuum of care from birth through school years for the children they serve.
- More efficient outreach: Family Focus provided a steady flow of clients into CYC programs, relieving Program Directors of the client-recruitment burden. To a lesser degree, CYC was able to refer prospective clients to Family Focus.
- Expands the value proposition: Both organizations were able to expand their offerings without increasing their budget.
- Increased leadership skills: Both organizations are improving their leadership skills in a direction that the nonprofit sector is moving — external alliance-making. Future nonprofit leaders will need to know how to share information between organizations, and influence and persuade people who don’t report to them.
“Don’t expect to know all the reasons for doing an alliance before you sit down to talk,” said Andrea Mills, Director, FMA. “Once you build a relationship and understand each other’s capabilities, other ideas emerge.”
Strategic collaborations between nonprofit organizations can have benefits beyond cost savings. By collaborating, CYC and Family Focus expanded their programs, gained access to in-house expertise and became more efficient in the delivery of services.
The end result of this collaborative partnership is that both organizations are stronger. They are now better positioned to withstand fluctuations in funding, and can prove to funders that they are proactive about maintaining efficiency. Their alliance effectively secures a sustainable future for both organizations.
Geri Stengel, Contributor
Note: The author’s company, Ventureneer, has fielded surveys on nonprofit financial best practices for FMA.