Saturday, October 15, 2011

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 2

“No nonprofit organization can survive and succeed in advancing its mission while living independently of other nonprofits. Organizations gain information, political power, and personal and professional support from and in concert with other nonprofits. Thus, close working relationships, partnerships and even joint ventures between nonprofit organizations are a fairly natural occurrence.” ~ David La Piana

Organizational Leadership: Considerations for a Nonprofit Merger ~ © by James K. Lewis

CURRENT NONPROFIT ENVIRONMENT

The previous decades witnessed a marked growth of the nonprofit sector from 1998 to 2005 as the numbers expanded from 1.1 million to 1.4 million nonprofits. In 2006 these public benefit corporations added over $600 billion to the economy and almost 10% of jobs nationwide – 35% in health services alone (NPSIB, 2007). This growth led, not only to increased services, but to a corresponding increase in funding requirements as well – from both private and government sources – unintentionally serving to create a duplication of services and dilute the available funding. In 2009 Robert Egger, author of Begging for Change, warned that this growth had caused “. . . too many nonprofits, sometimes duplicating each other's services and fighting one another for funding and supplies” (Condon 2009).

In recent years, however, that growth has been checked with the downturn in the economy as funding sources have been hit with losses. As early as 2008 monitors of nonprofits started warning of a decline, and funders were told to reconsider who they funded:
More than 100,000 nonprofit groups nationwide will fail within the next two years, including a few “big brand-name nonprofits,” a scholar of philanthropy and government told charity leaders assembled here to discuss the fallout from the nation's financial meltdown. Paul C. Light, a professor of public service at New York University, said that grant makers and others should focus resources on strong organizations and pull the plug on those that are likely to fail . . . (Wasley 2008).
These warnings also called for a consolidation of similar service providers. Ben Gose, in "Chronicles of Philanthropy" quotes Ken Berger, chief executive of Charity Navigator, who admonished that there was a definite need for “charities to consider joining forces now or at least share administrative staff.” He saw immediate value in nonprofit partnerships (Gose 2008).

Similarly, New York Secretary of State Lorraine Cortes-Vazquez noted that collaborating would be critical for the survival of the nonprofit sector, and stated that it was not the level of services that put nonprofits at risk of failure, but not having proper administrative capacities, and called for sharing back-office functions in order to reduce the load on most charities. This shared effort would permit a refocusing on service rather than fund development (Wasley 2008).

The future for those who refuse to recognize this need is more foreboding, and we have seen many organizations take to downsizing and internally breaking down into core areas of expertise. Eventually, some may seek out and enter into increased partnerships with other organizations in their similar contexts . . . or cease to exist. Nonprofit leaders should take note of Peter Drucker’s early stance, long before the current economic shifts had forced organizational change on all levels. In Innovation and Entrepreneurship (1985) he wrote that “systematic innovation . . . consists in the purposeful and organized search for change, and in the systematic analysis of the opportunities such changes might offer for [or force?] economic or social innovation.” He goes on to identify systems of change. Several are: unexpected success or failure; incongruity (gap between reality as it and reality as it is assumed to be); and changes in industry or market structure that take people unawares (Drucker 1993, 342-343 brackets mine). These shifts and discrepancies are indicative of the culture and context of the at-risk nonprofit.

No comments: