When people think of partnerships, they typically think of them as being between for-profit organizations. However, partnerships are oftentimes essential for nonprofits, because working with other agencies, through collaborations, alliances, or even through merger, can greatly benefit everyone involved. It also opens opportunities to more diverse and efficient programs, enhanced service integration, and cost reduction, as well as develops new networks and audiences for the future.
1.) What kind of partnership is best for my organization?
Partnerships can happen at many different levels – government/nonprofit, nonprofit/nonprofit, and for-profit/nonprofit. The first step is deciding on a partnership level that best aligns with your organization’s message and goals.
Nonprofit/for-profit partnerships are designed to meet a social issue that neither organization can tackle separately, provide joint benefits to both entities, and provide ways for for-profits to better align with a nonprofit’s mission.
We often see instances where a nonprofit develops a project, submits an application, and a governmental organization agrees to fund part of the project. This is actually happening more as government agencies continue to shrink the resources that they provide to nonprofit organizations.
We are seeing certain shifts within the sector that are pushing nonprofits into a position where they really need to consider some level of partnership, whether that is collaboration between organizations, partnering/shared services, affiliation, or even a potential merger. Factors that have triggered these types of partnership include limitations on administrative spending, competition for resources, lack of expertise or resources, and more.
2.) How do I pick the right partner, and how do we proceed?
Picking an appropriate partner can be difficult. It has to do with the level of engagement you are going to have with the partner. As in any relationship, you want to pick a partner that is going to elevate your organization and not drag you down.
Your organization also needs to consider that when you partner, there are multiple ways you can come into the relationship – as a dominant agency, as equals, or as the smaller agency. For instance, if you are having serious financial issues, you may not have a lot of options as to who you partner with. While a strong and healthy organization may have the ability to be more discerning.
When it comes to deciding on the right partner, the steps in the process should include:
- Determining the need for collaboration and at what level.
- What are you trying to accomplish and who in the field is the best at it?
- Research potential partners. What other collaborations do they have? How have they worked?
- What are the challenges to implementation, and what could go wrong?
- Go through a “due diligence” process. Determine if the challenges can be alleviated, how the partnership will work, what roles different parties will play in the process, how systems and communications will be effectively integrated, what governmental approvals are needed, etc. Take your time through this process
- Implement the collaboration. This should be done formally so that everyone understands their responsibilities.
3.) How does an organization find like-minded organizations to partner with?
When you consider there are more than 3,500 nonprofits on LI and another 35,000 in the NY Metropolitan area, the level of operational overlap is tremendous. There is no magic answer to this question, but you may want to consider joining trade associations, hanging out where other nonprofits hang out (be in the room), doing research online, talk to funding sources, etc.
It’s no different for a small or large organizations; the key is to network with other nonprofits (look for umbrella organizations – Nonprofit New York, AFP, IAC, etc.), take the time to research and find out what other nonprofits do, think strategically and look for ways that you can provide a benefit to other organizations through shared services.
We would also suggest thinking out of the box. Don’t always look for organizations that do what you do, look for organizations that operate on the periphery or provide resources that could enhance your organization or one of your programs.
4.) What is the overall continuum of partnerships?
When you look at partnerships/collaborations, they can be very casual (referring business back and forth, for instance). They could also be very formal, such as a merger, or anything in between. From our experience, there are four main aspects of partnerships:
- Casual Association: This is when colleagues that know each other reach out to each other for advice, to refer clients/services, etc. Usually not a formal association or agreement.
- Joint Services: This is where some level of integration of services has occurred between two or more organizations. Maybe they run a joint program, a joint fundraising event, etc.
- Shared Services/Management: When organizations maintain their separate identity, but they become linked at one or more level.
- Formal Merger: One or both organizations cease to exist, and the two organizations become one.
5.) Does it make sense for organizations to merge and what should be considered in the process?
There are a lot of reasons why organizations should consider merging. One thing to keep in mind is that you always want to approach a relationship in a position of strength. As a result, it is important for organizations to understand trends in the marketplace and be realistic about the future.
During a merger, it is important to properly understand and document expectations. What is your role in the partnership? What is expected of you? How will your performance be measured? Is everything documented within an agreement?
It is vital to establish appropriate and effective lines of communication and integration of systems so that the processes, where possible, are seamless to the consumer/client. You need to deliver on expectations and properly document service delivery.
It is also important that you understand regulations and compliance. You do not want your noncompliance to result in takebacks of funding for you or your partner, or loss of a contract.
Finally, you need to consider the legal aspects of a merger. This is where having the right professionals in place can be totally invaluable.
Every organization, and their Boards should be focused on some level of partnership/collaboration. In the sector today, where there is competition for funds, greater needs for services, and increased government regulations with decreased funding, being able to do more with less through effective partnering is essential to the long-term health of every organization.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.