In a recent GPP and NPA session on strategic partnerships, Tony McDade, the newly retired Executive Director of United Ministries, shared that he thinks of a strategic partnership as 1 + 1 = 3. That’s the outcome he believes resulted from the merger of the Greenville Area Interfaith Hospitality Network and United Ministries back in 2016. The two organizations shared clients and had many complementary services, so they decided to “join together” (they preferred that phrase to merge) to make their missions more impactful.
Scott Cotenhoff with La Piana Consulting agreed that strategic partnerships should be undertaken to enhance mission attainment, which certainly resulted from the GAIHN/United Ministries merger. He and his colleague Kyu Kang presented to philanthropic and nonprofit leaders on the topic on August 13th, 2020, thanks to sponsorship from The Graham Foundation.
Scott said that strategic partnerships are a means to an end – another arrow in the quiver – rather than an end in themselves. They are a way to build more strength from strength.
Strategic partnerships can take many forms, including mergers and administrative collaborations, and they can include multiple organizations (not just two). Organizations enter these partnerships for varied reasons, including opportunities to better serve the community, because of leadership transitions or challenges, a tired board, or economics (although mission needs to be the main driver).
Scott and Kyu shared a collaborative map depicting a wide array of strategic partnerships (slide deck here), and they shared a few examples, including an administrative restructuring by three cultural institutions in Chattanooga that allowed for shared human resources, IT services, and finance staff and created efficiencies to free up resources for the organizations’ missions.
Lessons that other organizations have learned during the strategic partnership process include:
- Focusing on the mission while being flexible
- Have clarity about the desired outcomes of the partnership
- Take a risk/growth orientation
- There are benefits in exploring partnership in the absence of an immediate crisis, and
- A more successful process results from a lack of divisiveness in the organizations (such as having an internal champion, board support, and a positive board/exec relationship).
There are roadblocks to successful partnerships that organizations experience. They include a lack of trust of each other and within the organization, self-interest (an orientation to what will my organization and I get out of this rather than how will the mission be forwarded), and different organizational cultures.
These roadblocks can be overcome or avoided with a focus on change management – which is beneficial even when not pursuing a strategic partnership, because organizational change is constant. This includes understanding that change takes time and that there will be costs and benefits to change (both immediate and long term), being willing to talk openly about the needed changes, and understanding that not all stakeholders will view the change with enthusiasm.
Regarding the views of those stakeholders during change: Scott said that generally, 20% of people affected by the change will be excited and ready, 60% will be somewhat anxious but ready to hear more, and another 20% will not want change and will resist it. Leaders can and should engage the 20% who are excited to bring along more of the 60% in the middle. Over time, some of the resisters may decide not to participate in the change and may separate from the organization, and that is OK – this is a normal part of significant change. But reaching out to donors, supports, members, and others early on in the change process can help bring more folks along.
Scott then discussed the process of strategic restructuring. Three phases make for a more successful process:
Assessment. During an assessment, potential partners look internally and understand their motivations and desired outcomes for the partnership. This results in a resolution of the question: is it worth proceeding?
Negotiation. If indeed it’s worth moving forward, then the partners must work out governance, finances, human resources, capital, programming, and communication (to the extent that they are relevant to the partnership). This results in agreements on things such as how decisions will be made and where and how funds will be managed.
Implementation. This can be the most difficult part. It includes planning for strategy, business, change management, finances, and more. It includes legal resolution of decisions, such as creating operating agreements and filing with the secretary of state if applicable. And it includes the most important and long term work of integration – and not just systems, administration, and programming, but that of people and culture.
Even when a strategic partnership isn’t as significant as a merger, the cultural integration of partners is still important. This can be handled by making communication and decision making styles explicit. Partnerships don’t fail because organizational leaders can’t integrate their financial systems; they fail because people hold on to organizational cultures or do not work out how decisions will be made.
Scott shared three last practical factors for consideration in a merger: leadership, cost, and timeline.
Leadership. In a strategic partnership and especially in a merger, partners need to decide the way the boards and staff will operate. In a merger, partners need to decide on the size of the board, who will join the board, and, from day one, who the officers will be. The CEO/ED in a merger can be one of the partners’ current leaders, a leadership role for each of the partners’ leaders, or recruitment of a new CEO.
Cost. There are three cost categories in a merger. Facilitation, due diligence, and deal-making are one; partners will benefit from having an outside neutral party broker these conversations and bring up topics that they might not think of or be comfortable raising. The legal execution of the deal is another that will require additional resources. And the long term integration of people and systems will require investment ranging from getting-to-know-you meals to new technology or even a new facility.
Timeline. Scott said if there are no time pressures, a four to six month merger process is ideal, but that things can move more quickly. But it can take 12 to 18 months to fully integrate partner organizations.
Eleanor Dunlap with The Graham Foundation asked what funders can do to support strategic partnerships. Scott noted that this very session is important to normalize the conversation around partnerships. Funders who are already aware should discuss with other funders to make strategic partnerships better understood by the philanthropic community. Beyond that, he offered several suggestions:
- Support and encourage partnerships at the community level and with individual grantees
- Provide financial support for the process of partnership, such as facilitation and legal work
- Pool funds to support strategic partnership conversations or fund them directly
- Create a central place for organizations to understand who is looking for partnerships
GPP and NPA are interested in learning how they can support members’ further learning about and exploration of strategic partnerships. If you have ideas or what to learn more, please contact either Catherine Puckett (NPA) or Katy Smith (GPP).