The Changing Landscape
Strategic Structuring in the
Nonprofit Sector
Debbie McKeon, Executive Director
NorthSky Nonprofit Network
© Copyright 2010, NorthSky Nonprofit Network. All rights reserved.
Acknowledgements
BoardSource
Social Enterprise Alliance
Fieldstone Alliance
LaPiana & Associates
Today’s Agenda
• Setting the Stage: Some Trends
• What this means to the nonprofit sector
• Strategies and Tools to facilitate work
• An introduction to Strategic Structuring
• Our region’s early innovators: our panelists
Angela Schuler, co-chair, board of directors, City Opera House
Gene Jenneman, ED Dennos Museum Center, board of TREAT
John Noonan, ED Great Lakes Children’s Museum & Discovery Center
What trends are we seeing?
Government
• Transfer of responsibility for some
programs/services to others
• Unfunded priorities
• Increased focus on economic drivers
• Seeking innovators
• Delayed payments on contracts
• Reduction in funding of program/service
administrative costs
• Increased focus on volunteerism
What trends are we seeing?
Business
• Developing corporate social
responsibility platforms
• Recognizing triple bottom line
• Propagating concept that social good
needs to “act more like a business”
• Descriptors as “economic drivers”
• Launching social enterprises
• Accessing philanthropic capital
What trends are we seeing?
Philanthropy
• Leveraging funds is highly valued
• New recipients: BRIs, Aggregated Capital,
PRIs-L3C
• Increased desire to fund economic drivers
• General operating support grants increase
• Greater direct involvement
• Focus on ROI, sustainability, capacity
building-a healthy organization, not only
an important program
What trends are we seeing?
Societal
• Local vs. global-complex challenges, many
choices of where to help
• Communication vehicles changing rapidly
• Greater emphasis on volunteerism
• Impact of next generation-view new ideas
as normal and uncontroversial
• Some individuals believe “To make an
impact I need to do it myself”
What this means to nonprofit sector
Nonprofit Sector
• More focus on negative image stereotypeneed to “operate more like a business”
• New messages relating mission to
economic drivers
• More types of entities competing for
philanthropy
• External demands to collaborate
• Drive to reduce duplication of services
• Younger generations form organizations
What this means to nonprofit sector
Nonprofit Sector
• Increased focus on sustainability-generally
under capitalized business model
• Greater demand for transparency
• Demand sophisticated financial management
• Scope & complexities of problems increasing
• More focus on academic preparedness for
leadership vs. from program specialists
• Growing evidence problems are systemic
and structural vs. cyclical and self-correcting
What this means to nonprofit sector
“At least 100,000 nonprofits nationwide will be
forced to close their doors in the next two years.”
Paul Light, Professor Public Service, New York University
“Though the economy may be stabilizing, there is
no going back to business as usual for the
nonprofit sector. Going forward requires us to
envision a different future for our organizations.
But only those boards that are willing to
transform themselves will succeed in
transforming their organizations.”
Linda Crompton, President & CEO, BoardSource
How are nonprofits responding?
A transformation in thinking. . . .
• Transformative Governance
• From networked organization to network of
organizations: a systems approach
• Professional development
Network of Organizations
From networked organization to network of
organizations:
“Instead of a myriad of institutions all operating
in isolation from, and often in competition with,
each other, the new landscape is likely to
resemble a honeycomb with allied entities that
share resources.”
BoardSource
Network of Organizations
• “Old” sources of power, having control over
information, disappear when that information
becomes largely free
• Mutual back scratching replaced by dynamic
groups committed to sharing power and
knowledge
• New forms of relationships emerge or risk
isolation and lack of resources
• Well designed strategic partnerships will
maximize and leverage resources
Why-what is the goal?
• Better meet community need/the mission &
give context to work
• Alignment between mission, organizational
capacity and capital that ensures
continuation of the work, competency and
impact and opportunity to grow and scale
• Steward & leverage community resources:
work as efficiently, effectively, affordably and
with least environmental footprint
as
possible
What’s happening in the NP sector?
Adoption of new strategies and tools. . . . .
• Strategic structuring/restructuring
• Revenue diversification
• Social enterprise
• Professional development in financial
management and capital structures
• Professional development in
technology & evaluation to be a
performance driven organization
What is strategic structuring?
• Continuum of partnership options for nonprofits
• Use of partnerships to more effectively achieve
an organization’s mission
• Different from collaboration: Change in areas of
control
• Valuable tool for organizations
What is strategic structuring?
LaPiana Associates:
Role in Strategic restructuring
•Leader, research
•Leader, develop process, recognized best practice
•Leader, training consultants to use process
•Leader, facilitation using the process
NorthSky
•Kellogg Foundation funded intensive training w/LaPiana
•Co-consulted with LaPiana using process
•Facilitates strategic structuring using modified process
What is strategic structuring?
Why do Nonprofits consider partnerships?
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•
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Improve quality of services/programs
Maximize financial resources
Take advantage of new opportunities
Expand range of services/programs
Serve more clients/audiences
Improve program outcomes
Leadership challenges
A tired board
Achieve administrative efficiencies
What is strategic structuring?
From organizations that have done strategic
structuring. . . . .
Critical Success Factors:
• Staff/board member championed the alliance
• Positive past experiences with collaboration
• Board leadership/encouragement/support
• Organization risk-taking/growth orientation
• Positive board-executive relations or used as
change agent
• Mission compatibility
What is strategic structuring?
To Start The Process
• Self assessment-Know Yourself
motivators, desired outcomes, critical issues,
organizational factors, financial assessment
• Potential Partner assessment-What adds value
trust, past experiences, “usable skills and assets,
cautions and challenges, mission/program
compatibility and complementarities, financial
condition
• Board resolution to explore
What is strategic structuring?
Potential Roadblocks
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Concerns over autonomy
Lack of trust
Lack of leadership
Self-interest
Organizational culture
Trying to do it on your own without outside
assistance—facilitator plays important role
Some Strategic Structures
A program of Rotary Charities
Functions as parent-subsidiary
PLACE HOLDER
Joint Venture
Great Lakes Children’s Museum,
The Watershed Center, Maritime
Heritage Alliance, Traverse Area
Community Sailing
Management Services Agreement
Goodwill/Paperworks
Merger
Goodwill Industries, Paperworks Studios
Management Support Organization
Old Town Playhouse, Dennos Museum Center,
City Opera House, Traverse Symphony Orchestra
Wisdom from our panelists
•Describe the type of structure you have
and process followed to develop it
•How is it going?
•Nuggets of wisdom for others considering
this work
Recap of lessons learned
•Seek assistance-start with NorthSky
•Just because it is a good opportunity
doesn’t mean your organization should
be doing it
•Plan for impact the new structure will
have on the existing organizations
•Assure appropriate expertise exists within
team engaging in strategic structuring
•Be prepared to work very hard
•Don’t under estimate organizational
culture-key to success
What are some of the risks?
• Unrelated Business Income Tax
• Risk management exposure
• Partnership Taxation/controlled corp.
• Negative affiliation- - - brand/reputation
• Risk to charitable status
• Drains capacity of existing org.
instead of enhancing
• Mission drift
Questions & Comments
Thank You
Contact NorthSky at:
www.northskynonprofitnetwork.org
231.929.3934
Debbie McKeon
Extension: 207
dmckeon@northskynonprofitnetwork.org
NorthSky Nonprofit
Network,
a program of:
Special Thank you to: