Introduction to Nonprofit Strategic Restructuring Part 2: Reviewing a Potential Restructuring Strategy
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Strategic restructuring occurs when two or more nonprofits decide to combine their programs or business structures in order to maximize their missions. In part 2 of our Introduction to Restructuring presentation, we'll show you how to: - identify your restructuring strategy - select partner criteria - how to approach your potential partner - create a partnership committee
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Introduction to Nonprofit Strategic Restructuring Part 2: Reviewing a Potential Restructuring Strategy
- 1. Introduction to Nonprofit Strategic Restructuring A Three-Part Webinar Series PART II Mary Anderson, Senior Managing Consultant M+S Consulting
- 2. Last Session We Discussed… • The definition of restructuring & its key drivers (economic forces, pressure to raise unrestricted funding, etc.) • The range of nonprofit collaboration models (strategic restructuring spectrum) • The benefits of restructuring (improving market position, increasing service offerings, etc.) • The types of structures (joint ventures, MSOs, shared service alliances, parent/subsidiary, mergers) • The downsides/difficulties of each
- 3. Review a Potential Strategic Re-structuring Strategy
- 4. Phase 1: Identify a Strategy 1. Create a Strategy Committee 2. Review your strengths, weaknesses, opportunities, and threats 3. Review all possible strategies to address your weaknesses and threats, including strategic re-structuring strategies 4. Determine which strategies best leverage your strengths and opportunities
- 5. What is Motivating you to Collaborate? • What does your SWOT tell you? • Do you need to improve finances? • Do you need to gain access to a larger skill set? • Do you need to expand your programs? • What would you gain from a SR collaboration?
- 6. Identify Your Goals for a SR Strategy • Based on your SWOT analysis, determine your organizational goals • These goals will clarify your strategic restructuring strategy • Write down your goals with clear metrics
- 7. General Motivations for SR Collaborations • Better market positioning • Larger market share • Higher public profile • Greater political influence • More strategic fundraising • Larger staff, greater specialization of functions and provision of more services • Creation of a continuum of services that is coordinated • Better economies of scale
- 8. Select Partner Criteria • Identify the criteria for a potential partner to help you achieve the goals • The goals should be the driver in terms of establishing the partner selection criteria • Draft the partner criteria and vet the criteria until you are satisfied with the final list • Identify the criteria which describes your own agency’s strengths • Be sure to include trust of the partner, and mission alignment
- 9. Brainstorm Potential Partners • Using the criteria, identify all the nonprofit agencies which you believe meet, or nearly meet, your criteria • Discuss each one and rank them in terms of your criteria, from your first to your last choice • Do additional research quietly on the list, if need be, to resolve questions • Identify your first, second, and third choices to approach for a discussion on potentially collaborating
- 10. How to Approach a Potential Partner: Possible opening lines: “I’d like to talk about the future of our two organizations.” “Would you be interested in going out for coffee to talk about the potential of our organizations working more closely together?” “I’ve been thinking about the future of our organization and I feel like I need to collaborate more seriously. Would you like to have coffee to talk about it?”
- 11. Phase 2: Creating a Partnership Committee 1. Create a Partnership committee to design a process for approaching and selecting a prospective partner(s) for the strategy 2. Select the goals to be achieved 3. Select the criteria for the prospects 4. Identify your prospects 5. Set up meetings with your prospects 6. Meet as many times as needed
- 12. Phase 2, continued… 7. Report back to the Partnership committee on the results of your initial meetings 8. Narrow your list further according the results of your meetings 9. Discuss the findings – do you need more meetings? If so, continue meeting with your top prospects 10. Keep reporting to your Partnership Committee on the results of conversations 11. When you and your potential partner are ready to proceed, then report to your Board of Directors
- 13. Phase 3: Negotiating a Letter of Intent • Negotiations Parameters • Process to be followed • Participants and roles • Timeframe
- 14. Letter of Confidentiality • Specifies how documents will be handled • Should be approved by each Board • Signed by the Board Chair
- 16. Coming Up: -Negotiating and Implementing a Merger or Collaboration Agreement - Memorandum of Understanding Part III: October 9, Noon, CST
Editor's Notes
- Welcome back to our second webinar in our series on nonprofit strategic restructuring. Before we begin, a few logistics. --First, in order for everyone to be able to hear, I ask that each of you mute your phone and turn down the volume on your computer. That way will not get any feedback or background noise. --Second, because we have so many participants, I will take questions at the end of the presentation. At that point you can unmute your phone to ask a question, or type your question during the presentation by clicking on the chat icon on the orange bar at the top of your screen. --Finally, we will be recording this Webinar so it will be available to you for your reference on our website, at www.missionplusstrategy.com --Any questions before we begin? --Great. We will now begin taping [CLICK ICON WITH 3 DOTS AND SELECT “RECORD”] Welcome to our second webinar in our series on nonprofit strategic restructuring. My name is Mary Anderson, and I am Senior Managing Consultant for Mission + Strategy Consulting.
- In our first webinar, we discussed five different topics: --We defined restructuring and discussed many of its key drivers --We discussed the range of collaboration models, as well as the levels of organizational integration each required. --We identified many of the benefits of restructuring, especially the administrative savings. --We examined several different restructuring models . . . * Joint venture partnerships * Management Service Organizations * Shared Service Alliances * Parent/subsidiary models * and Mergers --We also discussed some of the downsides and difficulties of each of these models
- Today, we will talk about How you Review a Potential Strategic Restructuring Strategy. We will walk through the steps you need to take to identify your strategy, to select a partnership, and to create a partnership process. We will also discuss how to create a Letter of Intent.
- Let’s begin by talking about the 1st Phase – Identify a Strategy The nonprofit sector is not very good about thinking about strategy. But strategy is extremely important – strategy is the MEANS for an organization to achieve its MISSION. So to start this process, go back to strategic planning principles: --Create a Strategy Committee: a core group of board members and organizational leaders who will explore restructuring from a strategic lens. --Go through the process of a SWOT analysis * Identify and review your organization’s internal Strengths and Weaknesses * As well as your organization’s external Opportunity and Threats This is critical because you want your strategy to be driven from this SWOT analysis. Once you have your SWOT, its time for the Committee to review ALL the possible strategies that leverage your Strengths, address your Weaknesses, take advantage of Opportunities, and mitigate Threats. And Strategic Restructuring can be one of those strategies. Strategic Restructuring is a new concept for many boards and organizations, so keep raising it as a possible strategy to educate your board.
- So, What is Motivating you to Collaborate? [read slide] All of these are questions to ask your Strategy Committee to get members thinking of the benefits of working with another organization or multiple organization around specific issues and goals.
- It’s very important to Identify your Goals for a strategic restructuring strategy, for these goals will guide you to the right structure. --Determine these goals using your SWOT analysis * You can articulate these goals in GOAL STATEMENTS with clear metrics that articulate the SWOT issues. * Now the goals don’t just have to apply to weaknesses and threats, they can also relate to leveraging strengths and opportunities. e.g. Expand successful job training program to 200 additional clients within 2 years Now the purpose of these goals are they are the Goals of the Strategic Restructuring is supposed to achieve. Let me provide you some examples of Strategic Restructuring Strategy Goals: --Financial Goals: e.g. Increase unrestricted funds by 30% --Geographic Goals: e.g. Expand service area to cover Northwest IL --Client-service Goals: e.g. (Wisc example) Expand vision services to beyond adults to children as well. **Client-service Goals the most common goals of Restructuring Strategies**
- What are the general motivations for organizations to engage in Strategic Restructuring Collaborations, such as a merger or a joint-venture partnership? Studies have shown a variety of motivations (we have gone over these before): [read a few from the slide]
- Now your Committee needs to determine Partner Selection Criteria – how do you chose your Collaboration Partner? --Your GOALS should drive your criteria. So, for example, the example with the Wisconsin organization for the visually impaired. They wanted to expand services to infants and children. Therefore one of their partner criteria was for a partner organization to provide services to this age group. --Once you’ve drafted your criteria and vetted them to your satisfaction, you need to explicitly identify your own organization’s strengths. --Finally, you want to make sure you include the criteria of TRUST and MISSION ALIGNMENT. These 2 basic criteria are the foundation of any successful partnership.
- Now that you have your criteria, you are going to brainstorm a LIST of POTENTIAL PARTNERS. [read slide] Basically, who does the best job of helping your organization achieve your goals?
- Okay, so we are going to take a moment to suggest how you approach a Potential Partner. How do you have that first conversation? [go through lines] --Remember, you want to build TRUST, so how you act in these first few conversations reflects how you will be as a partner. --We always stress the importance of TRANSPARENCY in these discussions as well as CONFIDENTIALITY. * If you are talking to more than one organization, let them know that. * But also let them know these conversations are confidential and you will not reveal them, just as you will not reveal who else you are in discussions with.
- So, in order to execute on the “matchmaking dance” of finding your potential partner, how do you do it? First, you create a Partnership Committee. --This Committee is different than your Strategy Committee, for this Committee is going to create the PROCESS and conduct the OUTREACH to the potential partner organizations. --The first 4 actions of the Committee we have already discussed. * Goals to be achieved for a Strategic Restructuring * Criteria for the prospects * and Identification of potential prospects --Now members of the Committee need to schedule meetings with prospects to introduce this concept and start the conversation. * This is usually NOT one meeting, but the first of several conversation to determine interest, build trust, and explore opportunities. (It is a bit like dating!) * Meetings with prospects can be conducted by the E.D. or Committee members or both – depends on the personality of the Board and their level of involvement.
- --After the initial meetings, members of the Committee report back to the group. * Who is interested, who is not, and why? * What were the questions raised? * What have we learned? --Then the Committee should narrow the list of potential organizational partners. * It may narrow down to a handful of organizations, or maybe only one. --Determine whether you need additional meetings with some of the organizations. * What additional information do you need or want to provide? --As conversations continue, have formal report-backs to the Committee. --Once a potential partner becomes clear, and both organizations decide they want to proceed, the Committee should report back to the full Board of Directors.
- Now we have 2 organizations that want to explore a formal collaboration. --Whether that is a merger or other structure. Now we move into the 3rd phase – the Letter of Intent The LOI basically sets the parameters for the discussions, or the “rules of the game” --it Identifies the parameters of the Negotiations *such as what items need to be discussed. --it also Identifies the Process to be followed * such as the order of documents to be exchanged; how communications internally and externally should be handled. --it also Identifies the Participants and the Roles * Who is the main contact point for communications? * Which Board Members will be involved in discussions? * How and When will the 2 Board of Directors be informed? --and finally the Timeframe for discussions – this keeps discussions going, and doesn’t allow for purposeful delay.
- The LOI transparently makes clear not only WHAT types of documents will be exchanged at this point, but HOW, thus ensuring confidentiality. The LOI should be approved by each Board, so each Board of Directors understands the process has the same expectations. As organizational restructuring is the responsibility of the Board, the Board Chair should sign the LOI after the vote.
- So, we have provided you a lot of information on How to chose a process, How to choose an organizational partner. I’d love to answer any of your questions. Feel free to unmute your phone to ask, or click on the chat button on the bar at the top of your screen.
- Coming up: Our 3rd Webinar will be on Thursday, October 9 at noon Central time. In our 3rd Webinar we will cover: --How to NEGOTIATE and IMPLEMENT a strategic restructuring. --and WHAT should be included in a MEMORANDUM of UNDERSTANDING. We look forward to you joining us at our next Webinar. Please fill out the evaluation form at the end of the Webinar. Your feedback is important to us. Until next time, Thank you and Have a Great Day.