Online Assessment Tools for Identifying Organizational Issues

Nonprofit Leader,

As an Executive Director I often wanted to know how well my board and staff understood our organization’s mission and vision, and if they were being clarified well enough.  I needed to assess the awareness of my board of how critical their understanding our programs and networking was to the organization and to our position in the community.  

Each time I looked over an organization’s financials and fundraising, I found areas needing improving, and fundraising issues that the staff and board had not recognized had changed over time.  It was that process of discovery and analysis that helped me revitalize several stagnant nonprofits and help them thrive. 

It was the fresh perspective of an outsider that made the difference.  In many cases a consultant is hired to show an organization’s leaders what they have been missing and help them make the right changes.  Some of the leadership and/or staff may recognize the issues, but may not be able to be the agents for the needed change.  Thus, the third-party consultant is engaged.  But how do small, struggling under-funded nonprofits afford the rates for an experienced consultant?  They can’t, and so they keep struggling through tough organizational issues, ineffective programs, staff turnover, disconnect with the community, and loss of funding as a result.  And what are the options for well-run organizations to take an occasional fresh look at their organizational dynamics and leadership?

It was recognizing these issues that led me to create several online assessment tools that provide the data nonprofits need to get the overall view of their organization and start recognizing the needed changes to make.  By limiting travel and time of on-site interviews we reduce the cost and still provide a needed summary analysis to help an organization: 1. understand the stage in their life-cycle, 2. examine Staff-CEO-Board relationships, 3. measure their fundraising effectiveness.  

By developing anonymous surveys administered online, I have been able to assist a number of organizations of various age, size and budget.  The survey results are graphed for ease of understanding, and a brief, interpretive assessment is provided of potential action steps for further considerations.  The next steps are up to your organization’s leadership and funding capabilities.  You may decide to engage me or other advisor to help you move forward.  In any case, you will have this very important data with which to help change your organization for the better.

I invite you to take a few moments to examine my website and my background, and the four levels of low-cost assessment analysis tools I offer at jklewis54.wixsite.com/charisnp.  Whether you decide to engage my services beyond the surveys is completely up to you.  I am available to you to discuss how these can help your organization and help you lead quality change.

 

Serving together,

James K. Lewis, m.a., ccnl, cfre^®

When do you need a consultant?

 

Numerous issues in a nonprofit organization rise to the occasion of requiring paid outside assistance. These involve acknowledging you’re facing something larger than your in-house skill set can handle alone. Accepting that help is needed is the first step in any weakness or dysfunctional behavior – whether of a person or an organization.

Sometimes a struggling organization just needs help transitioning to its next stage of growth. Perhaps a well established organization needs help re-inventing itself. Facing reality is the most difficult when leaders and staff are deeply ingrained in the present organizational culture. It becomes even harder if the leader is a founder or long-term CEO, where he or she may be sensing a loss of control or that recent changes are becoming overwhelming. A lack of positive organizational dynamics keeps many dysfunctions hidden, and people are unwilling to be the one vulnerable enough to upset the apple cart.

Consulting with outside professionals isn’t limited to the need of addressing serious issues . . . most leaders could use regular coaching with peers and/or professional consultants. But some circumstances call for more serious consideration for outside help:

Strategic Planning. This process can require an anonymity that an independent consultant allows. Often I’ve found a key staff or board member who admits to not being sure of the direction or even of the organization’s mission and vision. In one case it was found that a new board member wasn’t aware of the organization’s religious core principles of faith. Appropriately laying the foundation before discussing strategy is critical to success. 

Analyzing fundraising effectiveness. In such a volatile economic landscape, it can become comfortable for an organization to stay the course with tired or limited funding appeals and stale communications. Organizations tend to stay with old metrics and “shot-gunning” rather than using new tools to target a segment of their donor base who are more likely to respond to different types of communications. E-commerce is still only effective in a small portion of demographics, and it is key to understand when and how to phase that in.

Closely aligned with fundraising is an understanding of an organization’s publics – those who can control or limit an organization’s ability to flourish. Many times an organization has “blinders” and they are not aware that they’ve grown myopic in their programs and vision. I’ve seen organizations atrophy due to ignoring the reality of their external context and relationships. This is where familiarity breeds contempt; stakeholders who once supported and helped form the organization can, if ignored or taken for granted, become the worse critics.

A most serious issue that desperately demands immediate assistance is internal organizational conflict due to a lack of unity in mission and vision. It's critical to quickly re-establish clarity of mission and unity between the leaders and the staff or board. This requires outside intervention. But choose the consultant carefully, as this requires a professional who is able to decipher the organization’s deeper cultural and personal issues – not merely personnel or HR issues that are on the surface. The former is ripe with personality clashes and broken trust, while the latter involves organization policy and procedure – which may need addressing, but is not the root cause.

I will mention briefly the need for a consultant and/or interim management through a period of crisis leadership change. Addressing this will require a separate blog, but it's most critical to contract with outside assistance rather than use internal staff in such a case.

These are just a few areas of concern where an independent third party will be able to increase awareness, broker unity, and ensure the stability and sustaining of the organization’s mission. Don’t wait until you realize the need – develop relationships with those you trust and who will be ready and willing to intercede within your organization when needed. While these resources may be costly, you will save time and money with the judicious use of consultants. They will be worth it to the organization, as you will gain much more than you spend. They may be reported as an expense, but they are an asset to any organization.

For more information on choosing Consultants:

http://strengtheningnonprofits.org/resources/guidebooks/Working_with_Consultants.pdf

http://www.first5la.org/files/Nonprofit%20Consultants-How%20to_Buttenheim.pdf

http://charisnp.com/
http://www.artiosinstitute.com/

http://www.theedgegroup.org/

A Case for a New Leadership Paradigm

We are in a world of change as paradigms are being challenged. Gone are the days of the broad community acceptance of the Christian service provider. Postmodernism is taking its toll . . . leadership is changing, urban demographics are changing, legal regulations are changing, staff and boards are changing, donors are changing, and ministry core services are changing. Change is as certain as the sun rising.

In this day and age, faith-based service providers and their staff need to be on the cutting edge to keep up with an ever-changing environment that challenges the sustainability of the mission and vision of an organization. In order to meet these challenges there needs to be a constant – and two critical constants are proper stewardship and increasing core competencies through accreditation.

Stewardship of the organization, program curriculum, staff resources, liabilities, finances, and board governance are paramount – and most importantly, is stewardship of the physical and spiritual health of the leader.
Artios Institute provides collaborative accreditation through coursework designed with stewardship as the focus. Through a peer cohort of fellow leaders, development staff and board members, your knowledge, skills, and capacity for change is strengthened and profound impacts are cultivated. In this two-year course, meeting two and a half days every other month for the first year and three times the second year, we will explore four foundational pillars:

1. An Understanding of Biblical Stewardship, Fund Development & Advancement 
2. The Keys to Balanced Personal & Professional Growth of the Leader 
3. The Core Components of Building Boards & Effective Teams
4. The Role of Strategy in Determining Vision & Direction 

Whether you are a seasoned executive or development leader, or just starting in ministry, this course of study will challenge and strengthen you and your organization – and prepare both for the challenges of today and years to come. This is an investment in stewardship you can’t afford not to explore. Examine the course elements and consider Artios Institute for yourself and your team.

  Review the Four Pillars               Examine the CCNL Credential

Leveraging the Passion of our Emerging Leadership in Philanthropy

Just a year ago in an article discussing the changing culture of nonprofits and the failing economy, I examined the decline of the nonprofit sector due to its failure of facing the realities of a changing market and demographic.* Following this marked decline, in just a few years we have seen an increasing flow of new blood in the sector . . . young leaders (I dislike tagging them “millennial”) are bringing a new passion and desire to impact their society.  

To this aging Boomer, having served most of my vocation in nonprofits, this brings a surprising feeling of promise and a desire to see them become empowered in a way my generation failed to realize through our efforts in the ‘60s and ‘70s.

This upwelling of philanthropic youth is more than evident here at the 50th International Conference of Fundraising in San Diego. The San Diego Convention Center is teeming with young people, wherein such a conference a decade ago would have witnessed an older attendee. In a review class for the CFRE – a certification for those with fundraising experience – there were quite a few young people who obviously did not bring experience of the level normally expected to such a class. I propose that not a few of them thought some of the material and processes discussed a bit mechanistic and antiquated. Additionally, the crowd was standing room only and overflowing the room of the First Timers orientation meeting.  This leads me to wonder what is the impetus of these new fundraisers? 

For those of us who have long been involved in nonprofit fund development, we may recognize the surge of funds now flowing from our generation’s estates, and how best to help divert them from the government and invest in charitable efforts. I sense, however, that the new conference attendees are not so much interested in investing these funds, but rather investing themselves in the empowerment of others. They recognize the weakness of government and institutions to meet the growing gap in services and bring a new paradigm to the task.

While wanting to encourage and empower this new generation, we need to sensitively guide them and their enthusiasm into this sector. Just as the ‘90s saw a growth of nonprofits that was impossible to properly fund, we can allow them to be change agents within existing organizations, as well as lead collaborations, acquisitions, and mergers which will increase capacity, reduce duplications, and bring a new face and paradigm to, not just the nonprofit sector, but to the for-profit sector and world-wide commerce as well.

How we assist, educate, encourage and empower this emerging leadership will be the fulcrum on which their impact is leveraged.  

http://ym.christianleadershipalliance.org/?CriticalShift

Starting a nonprofit revisited

Once again a recent question from someone starting a nonprofit brings me back to this topic. I will share an edited version of an e-mail response to some serious questions someone asked on seeking help getting funding, for what he sees as unique and critical services.

Bob:

Blessings to you! You are attempting daunting tasks.

First, be careful of making claims of exclusivity... other local providers do similar, if not identical work that you share here. Sometimes under the radar as you are. You may unintentionally alienate yourself from other providers you will need to work with.

Ensuring accountability is a first step for funding requests. To whom are you accountable? Who is working to assist you (church, board, committee)? Do you have a clear, well written case for support? In trying to understand all the areas you are attempting to serve I would ask if you aren't biting off too much and are at risk of choking on your own good works. Start with one thing, get good at it so you are sustaining it before adding an additional service.

It also brings up legal issues to ensure you are covering...to protect yourself and those you serve. For example: Are you a registered sober living home in order to be under the protection of state regs (so local codes don't apply)? Do you have appropriate program documentation to protect against federal fair housing laws and claims of discrimination? Funders will need assurance you have legal oversight as well.

"Tentmaking" (funding through outside income) is still a viable method of starting and funding a ministry, but the above questions are still relevant. God's clear leading should/will be accompanied with like-minded people wanting to help.

Quite a few people ask me about starting a nonprofit, and I always state, "DON'T"!

First couple yourself with a local or nearby similar organization and work under and with them -- and learn. (When my son wanted to get a horse, he spent a year volunteering at a horse ranch before buying his own) Oft times, after proving yourself, they will be open to suggestions in serving your area of interest. Then, and only IF that organization's goals do not match what you see as a clear leading from God, should you strike out on your own...hopefully with their blessing and support. I never endorse a new work too similar and too close to another viable current work unless the goals are significantly different. Dilution of your community's support and donor funding, along with a potential competitive spirit and confusion to the public serves to harm the ministry. This happens far too often.

These are just a few items for discussion. Let's meet at our fall conference and talk more about it. 

Blessings!  Read my article: Critical Shift

Want to start a new nonprofit? Don't!

Want to start a new nonprofit? Don't do it! Well, at least not yet . . . Instead, involve yourself in a similar existing nonprofit; increase or broaden their capacity; and learn from them... Then - and only then! - only if your service and mission are dissimilar enough, should you consider a new nonprofit. What usually happens with the growth of new nonprofits in a community today is a tragic duplication of services and a dilution of funding across the sector - weakening all nonprofits. Collaboration is the "critical shift" for both new and old nonprofits alike.
Click to read my article:

PACS Need to Collaborate to Ensure Continuity

Along with the recent termination of the Long Beach Redevelopment Agency (LBRDA) by our benevolent state government, our four Project Area Committees (PACs) have been shut down. These citizen-led PACs were made up of property and business owners working together to assist in the guidance and revitalization of our local communities. By their very nature each focused on their sphere of influence – under the umbrella of, and receiving funding from, the LBRDA. Their desire for speaking into the process of community development does not end with the death of our RDA, however. Each area group is now actively taking steps to reconvene as independent bodies through incorporating as 501(c)(3)s, seeking funding, in order to continue to act in the best interest of their communities.

That is all well and good, until one examines the effort and costs of creating four different nonprofits, acquiring insurance, grant writing, and ultimately seeking funding from the same sources – in effect competing against each other toward the same goals. As a former Central PAC member, and having recently written a project paper on the need for nonprofits to collaborate in operations and back office administration, I have attempted to share with the leadership of these groups the wisdom of a joint venture. Utilizing an umbrella nonprofit with a collaborative board made up of leaders from each area, sharing costs of insurance and administration, and participating in bundled grant writing, would serve to multiply its collective political clout, decrease duplication, prevent dilution of funding streams, and reducing confusion for funders.

But that caution is falling on deaf ears, as these groups seem blindly committed to riding out as Lone Rangers, refusing even the basic collaboration that would serve to sustain them in the long haul. Their individual special interests are acting as blinders, hindering them from seeing the vast benefit of a joint venture. A potential cause is several of their leaders seem to have no interest in giving up the reins of their respective PACs, choosing rather to hold onto what power their titular positions afforded them. Lacking a collaborative central leadership and organization will make the process difficult and create more division than unity, confuse rather than coalesce, and weaken rather than strengthen their cause.

It would be in the best interest of the city for some existing entity to step forward to facilitate a more persuasive plan for an umbrella organization rather than allow a disjointed effort by these well-meaning, but misguided citizens. The future of community development in Long Beach may depend on it.

Organizational Leadership: Considerations for a Nonprofit Merger ~ Final

“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

CRITICAL CONSIDERATIONS

In Nonprofit Board Answer Book II: Beyond the Basics, Robert Andringa strongly cautions organizations to think first about creating collaborations before even breathing the word merger. There is so much angst connected with mergers and acquisitions, that putting the effort forward into collaborations will benefit all involved – as well as lessen the chance of one’s intentions being misrepresented at the start of what is difficult enough without causing discord. Besides, if collaboration were a priority all along, one might not be in the place of needing to merge.

Analysis
Thomas McLaughlin begins his book Nonprofit Mergers and Alliances: A Strategic Planning Guide with the admonishment that the best time to consider change is “when the collective energies and creativity of the two entities can be used proactively instead of being sapped by the demands of crisis management” (McLaughlin 1998, 3). If conditions move an organization’s leadership to consider a merger, Andringa provides several factors for analysis and discussion that will clarify your positions (Andringa, 118-123):

1. What is the reason for the merger? Zero in on your goals. Is your desired outcome organizational growth; a greater diversity of services; a wider geographical scope; a larger market; an enhanced public profile? If the reason is your organization will not survive financially in the short term without merging, be honest about it. Discussions with the board and key staff will help bring consensus around the desired outcomes.

2. If a similar organization has been identified, how compatible are your missions? If not already knowledgeable about other organizations, do the research. History, reputation, programs, and fiscal stability are a few main concerns. Do you target the same general ends and utilize similar means for successful outcomes? How do you measure success?

3. What about your publics? Performing a focus group and feasibility surveys will help get a consensus from your stakeholders. What is the perception of the other organization/s in the eyes of the community; to civic and church leaders? Will a potential merger be looked at positively or will it create suspicion or undue confusion? Whose identity is more prevalent to the public? Or will donors follow the resulting entity as they did one or both of the organizations, or will the combined gifts equal the amount of one gift? This needs to be part of your feasibility study and financial forecasting.

4. Do your cultures conform or clash? Are both organizations’ core values compatible? Are there traditions to recognize as needing melding? How is each organization structured? How much effort will it take to integrate the two systems if they differ? Does either organization have anything that is non-negotiable?

5. Who will assist in the process? A consultant; a joint committee; an attorney? Defining parameters of roles, expectations, timetables, and communication will be key to the successful merger. What will the resulting staffing look like? Will some not survive the transition? Be clear in the process so as to be inclusive as possible in any negotiations. Ultimately the buy-in of all concerned will go far in building a new team.

Additionally, when analyzing a potential merger or acquisition, some critical questions must be discussed of the core competencies and sustainability of the resulting new entity: 1. What core activities would be combined, and how? 2. Would any revenues be lost? 3. Will there be efficiency savings? These questions can assist the two organizations in understanding the “strategic imperatives” of their individual core competencies and can more preemptively coalesce the two into an entity that can operate the combined program services in a fiscally responsible manner – with sustainability as the common goal (Bell, Masaoka and Zimmerman 2010, 123).

Decision
Once the subject is broached and leaders of both organizations have decided to move forward, the leadership will create a Joint Merger Explorations Committee (JMEC) as outlined in the sample Nonprofit Merger Process as shown in the attached Appendix. Key leaders and staff from both organizations will continue the process forward internally and in a combined effort to reach a joint venture. The process facilitated through go/no-go decisions provides the structure and procedures that will guide each transition step as outlined in the Appendix. Due to the intricacies of that progression this paper will not unpack that procedure here. I recommend the books which are included in the Bibliography. Primarily, I suggest the texts Nonprofit Mergers and Alliances: A Strategic Planning Guide by Thomas A. McLaughlin; Nonprofit Mergers: The Power of Successful Partnerships by Dan H. McCormick; and The Nonprofit Merger Workbook: The Leader’s Guide to Considering, Negotiating, and Executing a Merger by David La Piana.

CONCLUSION

McLaughlin provides an excellent assessment of what our environment is saying to today’s nonprofits: “. . . existing nonprofit organizations, as instruments of society, must change their ways of doing things. A big part of that change is to embrace mergers and integrated service delivery as the preferred strategic option of the next decade, rather than as something one must be forced to consider” (McLaughlin 1998, 8). As we see an increase in economic and other external factors causing change in programs and funding, more companies, subsidiaries, nonprofits, churches, and other service agencies with similar products and/or services will experience an ever-increasing need to consolidate services and/or merge . . . or risk the consequences. Unfortunately, the two major issues I hear most nonprofit executives lamenting are limited government funding and an increasingly frugal private donor base. Currently, there exists an inverse relationship between increasing service needs and decreasing funding.

In light of this decline in sources of funding, Gose calls on nonprofits to not just continue to rely on donors to pick up the slack, but urges merging with similar providers. In an environment of challenges, nonprofits need to seek out net-gain options. In the sphere of cultivating communities of practice, Wenger calls for “inter-organizational partnerships.” Full mergers; joint ventures; loose networks – even joining forces with “competitors” – will provide greater access to new capabilities and resources. He cautions, however, that doing so requires a large measure of trust and vulnerability (Wenger, McDermott and Snyder 2002, 222). It is not to be considered lightly – but through much prayer and counsel.

I believe wholeheartedly that these times demand more from our leaders, and that they need to recognize steward leadership as the crucial element for success. In The Leader’s New Work: Building Learning Organizations Peter Senge points to steward leadership as the issue that must come to the forefront in any question of an organization’s future. The primary purposes of the organizational leader are stewardship of the people and resources, and sustaining the organization’s mission and purpose. In fulfilling that duty, the role of steward becomes central. The resulting question becomes: in what manner can the organization’s people continue within a community of shared purpose and how can the mission be sustained? Will it be accomplished through mentoring, reorganization, restructuring, or through a third party merger or acquisition? Ultimately, I feel that as Christians we are to seek missional outcomes in our organizational development. We are not called to build complex structures of disconnected and remote organizations; rather, we are to create synergistic and holistic ministries that create a feeling of wholeness and connectedness of community, within which people thrive and are empowered to develop their full potential.

It may be that one nonprofit’s success is the answer to another’s adversity; leaders of both organizations should take note and be open to innovative collaboration.

BIBLIOGRAPHY

Andringa, Robert C. Nonprofit Board Answer Book II: Beyond The Basics. Washington DC: BoardSource, 2002.

Anon., interview by James K. Lewis. Interview of Anon(TBD) via telephone. Long Beach. May 30, 2011.

Beckhard, Richard. "What is Organization Development?" In Organization Development, edited by John V. Gallos. San Francisco: Jossey-Bass, 2006.

Bell, Jeanne, Jan Masaoka, and Steve Zimmerman. Nonprofit Sustainability: Making Strategic Decisions for Financial Viability. San Francisco: Jossey-Bass, 2010.

Blackaby, Henry, and Richard Blackaby. Spiritual Leadership: Moving People on to God's Agenda. Nashville: B&H, 2001.

Bolman, Lee G., and Terrence E. Deal. "Regraming Change: Training, Realigning, Negotiating, Grieving, and Moving On." In Organization Development, edited by Joan
V. Gallos, San Francisco: Jossey-Bass, 2006.

Carlson, Mim, and Margaret Donohoe. The Executive Director's Guide: To Thriving as a Nonprofit Leader. San Francisco: Jossey-Bass, 2010.

Clinton, J. Robert. The Making of a Leader: Recognizing the Lessons and Stages of Leadership Development. Colorado Springs: NavPress, 1988.

Cloud, Henry. Integrity: The Courage to Meet the Demands of Reality. New York: Collins, 2006.

Collins, Jim. Good to Great and the Social Sectors. Boulder: Jim Collins, 2005.

Condon, Tom. "Generous to a Fault? Nonprofits Must Align Efforts." The Hartford Courant, http://www.courant.com, January 22, 2009.

Drucker, Peter F. Managing for the Future: The 1990s and Beyond. New York: Plume, 1993.

Frank, John R., interview by James K. Lewis. Interview of John R. Frank, Ph.D. San Diego, CA, (May 24, 2011).

Gose, Ben. "After the Fall." The Chronicle of Philanthropy, http://philanthropy.com, October 24, 2008.

Lawler, Edward E. "Business Strategy: Creatng the Wining Formula." In Organization Development, edited by John V. Gallos. San Francisco: Jossey-Bass, 2006.

Lewis, James. 2010. "New Missional Strategies in Ministry to the Homeless." A paper written for MP520: Transforming Culture. Pasadena: Fuller Theological Seminary.

McLaughlin, Thomas A. Nonprofit Mergers & Alliances: A Strategic Planning Guide. New York: Wiley, 1998.

Parker, Glenn M. "What Makes a Team Effective or Ineffective?" In Organization Development, edited by John V. Gallos. San Francisco: Jossey-Bass, 2006.

Piana, David La. The Nonprofit Mergers Workbook. Saint Paul: Amherst H. Wilder Foundation, 2000.

Porter, Michelle, interview by James K. Lewis. Interview of Michelle Porter San Diego, CA, (May 24, 2011).

Rosenstein, Bruce. Bruce Rosenstein Interviews Peter Drucker. n.d. http://brucerosenstein.com/index.php (accessed May 29, 2011).

Senge, Peter M. "The Leader's New Work: Building Learning Organizations." In Organization Development, edited by John V. Gallos. San Francisco: Jossey-Bass, 2006. 776.

The Nonprofit Sector in Brief: Facts and Figures from the Nonprofit Almanac 2007. http://alliancetrends.org/nonprofits.cfm?id=56. Washington, DC: The Urban Institute, http://www.urban.org, 2007.

Wasley, Paula. "100,000 Nonprofit Groups Could Collapse in Next Two Years, Expert Predicts." The Chronicle of Philanthropy, http://www.philanthropy.com, November 27, 2008.

Wenger, Etienne, Richard McDermott, and William M Snyder. Cultivating Communities of Practice. Boston: HBS Press, 2002.


Appendix A

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 6

“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

STEWARDING CHANGE

What is the role of the leader seeking to assist his or her (or another’s) organization in creating change? In The Making of a Leader, Robert Clinton asks successful leaders to expect to be led into these types of situations in which God will use them to humbly undertake action in the life of other leaders [or organizations]. This action can be through: affirming or encouraging leadership potential; offering guidance on a special issue; giving insights that broaden the leader [or organization]; challenging the leader [or organization] Godward; or opening a door to ministry opportunity [or collaboration] (Clinton 1988, 149 brackets mine).

Resistance
Resistance to needed change can be due to several issues. Resolving change and its related conflict through the abuse of position and/or power are common maladies – such as the founder refusing to step aside, or a board chair disallowing discussion on the topic. Staff resistance – either preceding or subsequent to decision-making time – may create additional issues. An existing dysfunction of the organization, or the breakdown of a successful transformation, may be caused by an incongruence between people’s actions and the organization’s stated values. Addressing this mis-fitting of people to organizational values cannot be overstated; as Peter Drucker said in an interview with Bruce Rosenstein, “When people are very unhappy, they are in a position that the values of the organization don’t fit them.” The result is that they must be assisted into other work. (Rosenstein)

It is imperative in this scenario for the leader to focus attention on the primary purpose of the organization . . . that is, the sustaining of the mission of the organization. If the mission cannot be continued through an alliance with or mentoring by another organization, then the choice will be between a merger and acquisition, whereby the organization’s core purposes are sustained by and through the resulting entity. If the mission has been sufficiently accomplished, then either the reimagining or dissolution of the organization is the appropriate and normative choice. It takes a sensitive leader and/or consultant to lead the board and the staff to either of those responsible conclusions.

To reiterate: the role of the leader is to steward change in such a manner that the core mission is sustained. If it is determined that the mission has been completed, unless the mission is revised, the organization’s life-cycle is at its end. The leader must then develop the process for the required transformation of the organization, or for the legal dissolution of the organization.

Responding to Change
While the leader may be working on the process for change within the organization or with another entity, he or she must recognize and address specific change issues. In Reframing Change: Training, Realigning, Negotiating, Grieving, and Moving On, Lee Bolman and Terrence Deal outline several critical strategies leaders must implement in order to realize success through change of this magnitude. Three of these that I will share here are Realignment, Conflict, and Loss (Bolman and Deal 2006, 447-469).

The leader needs to begin to realign the organization’s structures to invite and provide the impetus for change. While an organization’s maladies may have developed due to deterioration or lack of structure, this is the time to act. The need for structure at this time is more imperative than ever; people need clarity, predictability, and security. Policies and procedures become welcome and bring cohesiveness to an otherwise chaotic work environment. Often, people are looking for structure in this scenario. Additionally, the formal delineation of authority informs all concerned who is responsible and provides continuity.

Change often brings about discord, which requires a leader to be able to identify the real issues, develop collaborative efforts and provide an environment in which discord can be mediated towards common ground. Two conflicting, and sometimes alternating, responses to change are status quo (to hold onto past accomplishments), and ignoring the situation (staying busy enough or throwing money into the organization hoping that the problems will go away – or solve themselves). The loss of what “once was” can also cause paralysis, and in the midst of responding to the changes, leaders and staff can go through cycles of grief. Providing appropriate counsel during this time will help the staff to handle the challenges and uncertainty they face.

Human Assets
In coping with the issues within a merger or acquisition, leaders must recognize the pressures that are being carried by our most important asset – our staff; human beings with feelings for the past and dreams for the future. Appropriately responding to how people deal with change is likely the most critical element for the success or failure of the organizations involved (Beckhard 2006, 12). Critical to the success of the resulting organization is the communication of its mission and core values that the staff is charged with embracing while supporting the development of new direction and purpose of the organization (Lawler 2006, 551).

Bolman and Deal also address several issues that leaders must assist staff in facing as the organization transitions and realizes stability through change: values, symbols, and celebration. It is crucial for people to be able to hold onto their organization’s core values. For many these values are what kept them in the ministry, struggling in order to provide crucial services for individuals in need and to benefit their community; perhaps having been asked to give up compensation and forgo raises, but remained loyal to the organization rather than taking a more lucrative position outside the ministry and the nonprofit sector.

Ensuring that symbols—either real or perceived—are protected and endure beyond the restructuring may help in dealing with the loss of what they identified with in the organization and its ministry. Keeping a logo or being identified in name as a ministry of the surviving organization can keep that flame alive for those surviving the change. Investing in ceremony is also an encouraging process that aids in bringing the positive to the forefront of significant change and celebrating a successful transition.

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 5

“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

OPTIONS FOR CHANGE

Although this paper is discussing mergers and acquisitions, these may not necessarily be the most effective way to deal with the issues at hand. The duty of the steward leader, in concert with his or her staff team and board of directors, is to determine the best course of action for the preservation and sustainability of the organization’s mission. A leader may find that a temporary mentoring, collaboration, or strategic alliance may be the best tool to get the organization on surer footing, providing time to determine the long-term solution. One option I spoke of in a previous paper is increased collaboration with the local church. One should keep all options open at the outset as he or she becomes more aware of the extent of the issues the organization is facing (Carlson and Donohoe 2010, 215-216).

A broadened outlook by an independent third party—such as a consultant or potential partner—can go far in revealing potential blind spots that the leader may have overlooked. Consultation with a professional, or collaborating with a potential partner—although sometimes difficult due to pride and fear of change—can be a great benefit in combining efforts, developing broader resources, and identifying common mission, vision, and core values with others.

While identifying potential joint ventures, in The Executive Director’s Guide to Thriving as a Nonprofit Leader, Carlson and Donohoe discuss several formal options available to the organization seeking partnership opportunities:

• Joint programming or Joint Venture: Broadly defined actions such as program collaboration between nonprofits that may serve to minimize duplication and, competition, or jointly doing business, fundraising, or awareness campaigns.

• Administrative Consolidation: Sharing core administrative functions. Each keeps their separate boards and staffs, however, a portion or all of support systems are shared, such as Accounting, Payroll and HR functions.

• Merger: The legal and permanent blending of two or more entities into a separate entity. Agreeing to integrate processes, programs, governance, and staff – establishing an entirely new organization that merges all operations and programs. This is sometimes referred to as a consolidation.

• Acquisition: Much the same as a merger, except that the surviving entity is usually the larger and/or more capable organization that assumes control of the smaller organization. Much of what is termed “merger” is actually an acquisition of a smaller, weaker organization by a larger, more successful, or well-known organization. Although the term acquisition can have negative connotations, the benefit of both merger and acquisition is the designed potential of the resulting organization being greater than the sum of each organization.

• Only vaguely alluded to by Carlson and Donohoe, is mentoring – or what they might call collaborative assistance. As a stronger, more able organization—and/or perhaps a consultant—comes alongside of a struggling organization, a relational collaboration can take place – helping strengthen that weaker organization in areas of needed growth. This is especially helpful when the organizations are not similar in mission, program or values, perhaps as a preliminary step for those considering a merger or acquisition.

Case Studies

In the following three situations, six organizations followed one of the above scenarios with positive outcomes:

1. In light of external forces causing downsizing and other remedial responses in two similarly recognized and successful organizations, one of the boards sought a discussion with the other on how they could work more closely together – initially without including the topic of merging. They came to recognize their joint efforts could be more powerful and effective than continuing separately. One of the CEOs was skilled in program and the other in administration. As one CEO was adverse to a co-leadership position, the boards set one in place as CEO of a true merger of the two organizations, and the other over program/operations. (Frank 2011)

2. RRM was a newer, larger, more successful and well-managed—but lesser known—service provider. SHMC was a much smaller, less funded—but more recognized—service provider in the same town. Due to external economic and operational issues, they both sensed a need to collaborate – especially when both faced the loss of their respective properties. After an initial period of trading staff and testing the culture of the new combined team, the two boards came together and accepted the acquisition of the larger by the smaller, joining the name, using the prefix of the more recognized name of SHRM. Although a true acquisition, they used the term “merger” as it was more acceptable to the community, who recognized great benefit in this apparent joining of efforts, rather than an acquisition of the more recognized by the other. It was seen as the biggest thing to happen in the Province in years. So positive was this collaboration that they were able to present a new giving opportunity, resulting in a gain of about three thousand new donors in the first year alone. Also, having a single provider, people were less confused about which to support. (Porter 2011)

3. Unlike the first two cases, a third set of organizations realized that one of them desperately needed help and initiated a discussion about how the stronger could best serve the other. Upon examination of the differences in culture and programs, the more established organization offered to come alongside the weaker one and support its reorganization and strengthening through mentoring; leaving intact both viable organizations continuing to serve the community. (Anon 2011)

These are examples of merger, acquisition, and collaborative assistance (or mentoring), respectively. Although these narratives are brief—without detailing issues and processes—they serve to illustrate that every situation calls for its own remedy for a successful outcome. The critical issue is finding the process and outcome that best sustains the mission of the organization and serves the community. Some cases may require amending the mission – or, if there is no longer a recognized related need, to dissolve the organization.

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 4

“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

Organizational Reluctance

A reluctance to act is often due to complacency based on many fruitful years of funding and stable compensation. Many larger nonprofits began to model for-profit corporations, and nonprofits became attractive destinations for the corporate executive. The reluctance of the government to provide oversight of the nonprofit sector also played into this contentment, until issues began to crop up in larger, national nonprofits. Revelations of high compensation and benefits invited investigation, and the Sarbanes-Oxley Act of 2002 began to be increasingly enforced upon the nonprofit public benefit corporations on a larger scale. Recently, the U.S. Congress started holding extensive hearings about nonprofits. Until these troubles began to manifest themselves, there were few market forces to compel additional governance, consolidation, or restructuring of nonprofit organizations.

This lack of discipline led to inadequate regular and rational methodologies of measuring services and outcomes. Some business-savvy nonprofit leaders do not necessarily differentiate between sectors, and similarly fail to recognize that one does not measure nonprofit performance in the same manner as for-profit businesses. Equally detrimental, many nonprofits lack discipline in developing consistent and rational methods of assessing output and tracking. Jim Collins, in Good to Great and the Social Sectors gets direct in this matter when he admonishes the leader that “It doesn’t matter whether you can quantify your results. What matters is that you rigorously assemble evidence—quantitative or qualitative—to track your progress.” (Collins 2005, 7) Many nonprofits merely lack the know-how or resources to measure their program results. However, this information can be critical for improving their activities and reporting to funders. While nonprofits were formed with the best of intentions, merely “doing good” is not sufficient in light of economic downturns.

With wise foresight Peter Drucker, in Managing for the Future: 1990s and Beyond, warned of the temptation of resting on the “goodness of our cause.” There needs to be a shift from the “good cause” mentality to one of accountability and results [with a view of ROI]. Unfortunately, nonprofit organizations develop a strong emotional attachment to [services they provide] and a resistance to facing reality. Drucker provides an illustration of this resistance to change from an old medical saying: “‘As long as the patient eliminates there is a chance. But once the bowels and the bladder stop, death does not take long.’ If organizations cannot get rid of their waste products, they poison themselves. They must organize abandonment.” (Drucker 1993, 206, 229, 340 brackets mine).

Facing Reality & Awareness

Henry Cloud, in Integrity: The Courage to Meet the Demands of Reality discusses the need to face up to new realities and question what the world is really like – rather than rest on assertions and assumptions that made sense a few years ago. Many nonprofit leaders do not desire quantitative feedback, but it is only by looking at reality will we see our true strengths and weaknesses. Once a leader accepts reality he or she can examine how to best develop assimilation and accommodation . . . to change and adapt the organizational culture and context (Cloud 2006, 116-117, 133-138).

There needs to be both awareness that something has changed, and someone in a “strategic position” to effect change. Some conditional awareness that can motivate this process for change is a:
• Need to change managerial strategy
• Need to make the organizational climate consistent with individual and environmental changes
• Need to change cultural norms
• Need to change structure and roles
• Need to improve (or introduce) intergroup collaboration
• Need to open up the communications system
• Need for better planning
• Need for coping with problems of merger
• Need for change in motivation of the workforce
• Need for adaptation to a new environment

Any one, or a combination of conditions, too long ignored may bring about the decline of an organization and the need for examination of reorganization and/or restructuring, including consolidation or merging with another entity or if needed, acquisition. Glenn Parker, writing in Organizational Development, discusses conflict and denial as conditions that call for assessing the organization (Parker 2006, 664).

In this scenario, there has likely been an ongoing ignoring or denying of dysfunction that begged to be addressed, but the hesitancy to recognize a shift in reality, or new paradigms, leads to a weakness in the organization. Whether it is prior to, or subsequent to a merger, the failure to address the human problems is inevitably destructive to the health of the organization (Beckhard 2006, 10). This dysfunction has the most likelihood of affecting staff cohesiveness and organizational synergy; thus furthering the demise of the organization. Before such injurious effect is realized, a leader should begin to investigate options for the survival of the organization.

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 3

“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

CULTURE AND CONTEXT

In Cultivating Communities of Practice E. Wenger notes that multiple changes happen when companies are restructuring internal and external relationships in response to a shifting market (Wenger, McDermott and Snyder 2002, 6). Most nonprofits have such an idealistic view of themselves and their mission that they refuse to see the changing landscape around them. When they do recognize external issues threatening their existence, it is often too late. In a context of economic struggle or other negative external force, this protective culture serves to weaken rather than strengthen. Ken Berger warns that “All too often, self-preservation trumps mission” (Gose 2008).

Founder’s Trap
One self-preservation issue in declining organizations is the older founder-leader, or long-term executive and/or board members, clinging onto what “once was.” This can result in a loss of both innovation and the deterioration of the organization’s lifecycle; either stalling in what Adizes refers to as a "Founder’s Trap," or aging into "Aristocracy" or "Bureaucracy." * Today, it can be seen as reluctance to pass one’s mantle to the new generation of leaders. While it may be a founder-leader imagining he or she is being loyal to what they gave birth—or a board member who has invested personal wealth to keep the organization afloat—these leaders are actually displaying a character of blind and selfish ownership; this runs counter to steward leadership. Condon is unabashedly bold as he states that service organizations that were “started with fire and zeal settled into hidebound bureaucracies” (Condon 2009).

The steward leader must learn when it is best to let go and allow an organization to grow beyond his or her capabilities. It is often the organization itself that will provide the indication of a need to step away. However, a reluctance to release the reins of power and position may keep them hanging on until there remains no other option than a merger or acquisition . . . or death of the organization (Blackaby and Blackaby 2001, 257-259).

*- For a full discussion of Organizational Lifecycle please see: Adizes, Ichak. Managing Corporate Lifecycles. Santa Barbara: Adizes, 2004.

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.

Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 1

“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

TABLE OF CONTENTS *-in this blog
*Introduction
Current Nonprofit Environment
Context and Culture
-Founder’s Trap
-Organizational Reluctance
-Facing Reality & Awareness
Options for Change
Case Studies
Stewarding Change
-Resistance
-Responding to Change
Human Assets
Critical Considerations
-Analysis
-Decision
Conclusion
Bibliography
Appendix


INTRODUCTION
This journey began simply enough with a casual lunch as I met with a board member of a local nonprofit ministry. It was not the first time someone sought my advice, so this did not seem out of the ordinary . . . except that his ministry is similar to ours at Long Beach Rescue Mission (LBRM) and I performed a limited exploratory examination of it four years prior when I arrived in Long Beach. It is one of two smaller, somewhat struggling ministries to homeless persons in Long Beach, and both duplicate most, if not all, our services. Thus, my interest was piqued when asked to meet with X. I will refer to his ministry herein as “ABC.”

Following the usual queries on how we had reorganized our programs, repaired and expanded our public partnerships, and revitalized our fund development, I was surprised when he asked if LBRM would consider discussing the potential of a merger. He had thoroughly researched LBRM, and followed our progress since my arrival. His conclusion was that LBRM’s involvement was an opportunity for ABC to sustain its ministry. Honored and humbled that he felt we could carry this organization’s vision forward, I assured him that I would help in whatever way I could, even if it did not result in a joint venture – as ABC’s ministry was too critical for the community to lose. He agreed with me that obtaining permission from my board was necessary prior to moving forward with further investigation – which I acquired.

While the obvious challenges were there: rising expenses; falling income; liquidating assets to fund budgeted operations; aging infrastructure; focusing on core services; and increased isolation in the community, the result of our additional discussions and my subsequent assistance did not produce a positive result for ABC, or for the board member. I erred in assuming his position at ABC would carry weight and respect on the board. I also assumed too much in perceiving the culture and development of our respective ministry organizations as being similar, and in thinking that ABC’s tenuous financial situation would lead the board to look favorably upon his proposal. I recognized I had much to learn; thus my desire to further study the subject of mergers.

Although that process did not result in subsequent action with us on the part of ABC, through that process I recognized my lack of familiarity with, and knowledge of, the numerous issues related to mergers and acquisitions. It is my hope that this research will enable me to be more aware of the related issues, and thereby aide other organizations and their leaders in this process.

The focus of this project is developing sufficient knowledge and understanding of the elements of organizational development pertaining to the potential merger of nonprofit organizations in general, and more specifically with how to steward the process of considering joint ventures. My learning objective is that I would be able to form a plan from which an introductory assessment of an organization can be made to determine whether alliance, merger, acquisition, or dissolution is necessary, and how best to initiate such a plan for a successful outcome for both organizations – as well as develop curriculum for a workshop on mergers.

While researching the subject I found abundant material for the actual procedure of a merger plan; however, only a modest amount of discussion on analyzing the existing external environment and the internal organizational development and culture of those facing potential restructuring. In this discussion I will examine the context of organizational development and the existing culture which may necessitate a consideration for change in the delivery of services, or the future of the organization and its ministry. I will then briefly describe the options for this change and the initial considerations required in making the decision to pursue a merger. I will conclude with a discussion of several crucial elements of stewarding the change.

Due to the limitations of this discussion, and the abundant material available for aiding the actual process of a merger or acquisition, I will focus primarily on an examination of current organizational environment, culture, available options, and stewarding change. I will introduce only briefly an outline for the merger or acquisition process itself.