Challenging Times for Nonprofits
In this special guest post, United Way President and CEO Sarah Caruso focuses on mergers and acquisitions in the nonprofit sector:
As everyone is aware, public sector funding is shrinking and the actual cuts are just beginning. Meanwhile, demand for services is at or near an all-time high. This is a recipe for an unsustainable system of health and human services in Minnesota.
Our community has benefitted greatly from having a healthy nonprofit sector. While the economy was strong, the nonprofit sector experienced unprecedented growth, as indicated in the accompanying graphic. Now, in the midst of a long-term economic downturn, it’s likely the nonprofit sector will contract.
In the coming months, all of us will be making difficult trade-offs between mission and the financial viability of programs. In the end, however, we still want and need a strong and vibrant community. By doing thoughtful work together in the area of mergers and acquisitions, I believe we can ultimately make the nonprofit sector stronger. This quarter, I would like to tell you how United Way is strengthening the community through support of mergers and acquisitions in the nonprofit sector.
A Catalyst for Mergers
In 2001, the United Ways of Minneapolis Area and the St. Paul Area merged to become Greater Twin Cities United Way. Forward-looking board members and community leaders like Ted Weyerhaeuser, Jim Campbell, and Bill George and dedicated volunteers from both cities helped bring about our merger. Ten years later the assessment from our donors and partner agencies is that our merger was a success. Most important, people in need in our community are receiving high-quality and cost-effective services.
Over the past decade, most other nonprofit chapters with offices in both Minneapolis and St. Paul have merged with United Way support, including the Boy Scouts, Girl Scouts, Red Cross, and the Boys & Girls Club. Most recently, the YMCAs in Minneapolis and St. Paul made a decision to merge effective January 1, 2012. I can personally attest to the care and thoughtfulness than has gone into planning the YMCA merger. It’s an excellent example of large-scale change.
The term capacity building may not be glamorous, but it’s essential for making sure that the human services sector is strong, efficient and effective. One of the main goals of our work at United Way is to build the capacity of the human services sector to serve those in need.
Smart Investments, Successful Mergers
Service agencies, just like corporations, need to be lean and efficient in order to be as effective as possible. United Way seeks to lead by example in this area by keeping our administrative costs at about 12 percent. In our community impact work, we invest in the highest impact programs—those programs that are both cost-effective and have measureable outcomes.
We will also continue to support mergers and acquisitions. Since 2009, United Way has made it possible for 12 of our partner agencies to successfully merge with similar agencies in the community.
This means that 24 agencies combined infrastructure and leveraged services to save the community a self-reported $8 million that can now be directed towards serving clients.
United Way has also supported an additional 68 partner agencies in creating strategic plans and fund development plans, and exploring alliances to increase capacity and lower costs. Over the past three years, we have invested $2 million to help 80 United Way-funded nonprofit agencies merge or build capacity.
Resources for Tough Times
There are a broad range of activities that fall under this umbrella, including mergers, program acquisition, and dissolution. Organizations must now look beyond themselves for solutions. At United Way we hope to provide encouragement, resources and role-modeling of this behavior:
- Grants United Way will continue to provide grants to help our partner agencies plan with due diligence. These grants support mergers and provide hands-on technical assistance from MAP for Nonprofits. Partner agencies interested in applying for 2012 grants should contact Caty Jirik, director of community impact management and operations, at (612) 340-7579 or firstname.lastname@example.org.
- Research In partnership with MAP for Nonprofits and Wilder Research, we are funding a major study on the success of nonprofit mergers in the Twin Cities that will be released in 2012.
- Forums Advocating systems change in the nonprofit sector has been a central theme of our United Front 2009, 2010 and 2011. In these well-attended, half-day meetings, we have brought in experts from business, academia and the social service sector to help the nonprofit community understand and plan for the many changes that are upon us. This new normal is one of shrinking public resources, increased need and growing demands for quality and accountability in program delivery. Our United Front 2011, held in October, added the concept of “collective impact.” Mark Kramer, founder and principal at FSG, asked the 700 participants, “How can we get more done, at the same cost, by working together?” Kramer sagely reminded us, “There are no silver bullets for these complex problems, but there is silver buckshot which, if well-conceived, coordinated and measured, will make a difference.”
New Models for the New Normal
This is an unprecedented time for us. Other nonprofit leaders, board and community members all have a role to play. In my personal experience, a decision by a board to merge with another seems extremely difficult and emotional, with the higher purpose of meeting mission often subjugated to issues of legacy and tradition.
Nonprofit boards need to reassess current business models and challenge their organizations to make long-term, strategic decisions about the future of their organizations. I urge you to reflect on this and think about organizations you are involved with in this new normal—all in the hope of maximizing the services we provide to those most in need.
I hope you have found this update informative. I welcome your feedback about this update and about United Way’s work. I can be reached at (612) 340-7589 or email@example.com.
Thanks for all you do to make this community better for all of us.
President & CEO