How Board Members Can Guide Nonprofits Through Crossroads Moments

At some point in our careers, many of us who’ve found success in business are asked to give back by serving on a nonprofit board.

Becoming a nonprofit board member is both an honor and a recognition of one’s standing in the community. For charitable organizations, adding business leaders to their boards provides invaluable access to those leaders’ brainpower, resources and connections.

As those who have served on boards can attest, managing a nonprofit is not unlike running a business. While for-profits and nonprofits vary in their financial models, they otherwise have a lot in common.

You’ll often find the same types of individuals in leadership roles: innovative, risk-taking entrepreneurs who are largely responsible for building their organizations from the ground up. During their lifetimes, nonprofits and for-profits also have similar challenges and milestones, such as a founder’s retirement or a shift in direction spurred by economic change.

When these crossroads moments inevitably arise, the responsibility largely falls to board members to steer their nonprofits toward calmer waters. If a board and leadership are planning strategically, this may include considering a merger with another organization, a strategy that can reduce financial pressures, add new capabilities and further a nonprofit’s mission.

But too often, volunteer board members and nonprofit leaders let their car get too close to the crossroads to be able to make wise decisions. Because we in Collective 54 have the long view to grow, scale and exit a business over a 15-year time horizon, I thought some of you might appreciate hearing the long view that I sometimes talk with nonprofit clients about. My hope is that this essay will spark ideas that help organizations that you’re involved with. Here are some questions you might consider asking your fellow board members and leaders in the nonprofits that you’re involved with: .

• Where does your organization stand financially? In order to really understand your options for the future, you need to understand your organization’s financial picture and be able to explain it openly to potential partners. What is your mission, who are your primary stakeholders and how do they compare to peer organizations? How do you generate and allocate revenue? Do you carry debt or depend on unstable funding sources? What external factors could impact your ability to continue operating successfully? If you’re not as resilient as you want to be, see if your financial health can be improved by making sensible changes to your income and expenses. Regardless of where you stand, identifying your organization’s strengths and weaknesses will help define what you might need in a partner, if indeed a partnership is an attractive option.
  
  
• What do you stand to gain from a merger, alliance or partnership? Merging with another organization is only one option. So, before giving it serious consideration, be clear on why it might serve your organization better than other strategies. Merging can reduce overhead costs, unify systems and expand donor and volunteer bases, amplifying your social impact. Another potential benefit can be bringing new skills or aptitudes into your organization without having to go through the normal process of hiring and training.
• What are you looking for in a partner? While either a fellow nonprofit or a for-profit business can be a suitable partner, the most important criterion is that the two organizations are fundamentally a good match for one another. It’s not enough for a partnership to look good on paper; any potential partner also needs to share your values and have a similar enough management style and workplace culture that it meshes with yours.
• What do you and a prospective partner hope to accomplish together? Envision the future for your nonprofit and consider how merging with another organization could help you reach that goal. Your objectives don’t need to be grand; they might simply involve continuing your current mission while getting help addressing a current challenge, such as leadership succession.

We find that the most energetic and forward-thinking nonprofits scan their environment constantly for mergers, alliances and partnerships. And that attention to the landscape increases when issues of leadership succession or funding instability are in the environment, either for your own organization or for potential partners. Unfortunately, we also find that many nonprofits fail to think as open-mindedly as they could, leaving them in a weak position in times of change.

As a board member, even if you’re a volunteer, your goal is to protect and advance your nonprofit’s mission. A merger is a major undertaking and, to be done successfully, involves early and sustained imagination and considerate communication with major stakeholders, including donors, volunteers and staff members. Though bringing two nonprofits together doesn’t usually involve the exchange of money, there’s still a process of negotiation and due diligence that can take close to a year even under ideal conditions.

This is a different environment than the one we all aspire to operate in when we orchestrate a successful exit as Collective 54 members. If you’re in a volunteer role where learning more would be helpful, contact me through the portal and I’d be happy to talk through the issues with you.