Scale and Scope in Social Intrapreneurship: a Case Study · PDF fileScale and Scope in Social Intrapreneurship: Insights from a Case Study of Nonprofit Mergers By Charles M. Gray University

ScaleandScopeinSocialIntrapreneurship:InsightsfromaCaseStudyofNonprofitMergers

By

CharlesM.GrayUniversityofSt.ThomasCorrespondingauthor:[email protected]

+1.651.962.4301

RobinKingCooperPsychologicalAssociatesGrayKing&Associates

BeverlyC.Dusso

Tubman

PresentedtotheNonprofitCompetitionandPublicPolicy,Washington,DC,October2013.Anearlierversionwaspresentedtothe2012ResearchColloquiumonSocialEntrepreneurship,SaïdBusinessSchool,UniversityofOxford.

1  

Abstract

Thiscasestudyofnonprofitorganizationalmergerchoicesoveraten‐yearperiod

defines,illustrates,andoffersexamplesofresultingscaleandscopechanges.Weproffer

theargumentsthat:(1)changesinscopeconstitutetruesocialintrapreneurshipinsofaras

theycaptureservicedeliveryandsocialimpactopportunitiesthatextendbeyondexisting

organizationalpractice;and(2)achievementofbothscaleandscopeeconomiesinthe

nonprofitsectorshouldbeencouragedasamatteroffunderandpublicpolicies.

Keywords:nonprofit;merger;socialentrepreneurship;economiesofscaleandscope

Introduction

Thiscasestudydescribesandinterpretsthemergerbehaviorofanonprofitsocial

servicesagencyandoffersfouressentialelementsforthesocialsector“pracademic”:

Explicationofscaleandscopeconceptsinnonprofitorganizationalstructure

Illustrationofscaleandscopeconceptsinaspecificnonprofitorganization’s

entrepreneurial(“intrapreneurial”)behavior

Examplesoforganizationalsuccessasindicatedbycontinuedviabilityandprogram

synergiesresultingfromscopeandscaleeffects

Implicationsforpublicpolicy

Anadditionalintentofthisprojectistogenerateanomenclatureconvergence,bringing

long‐establishedusageintheeconomicsdisciplinetobearupondescription,analysis,and

understandingoforganizationalchangesinthesocialsector.

Asindicatedbythepaper’stitle,weseethisprocessofinternalorganizational

innovationas“intrapreneurial”behavior,asdefinedbyBrooks(2009,161):“[A]key

2  

conceptforsocialventuregrowthanddevelopmentishowestablishedventurescan

continuetobehaveentrepreneurially....Werefertothisassocialintrapreneurship,where

‘intra’referstothefactthatthebehavioroccurswithintheestablishedventure.”This

usagehastakenrootelsewhereintheliteratureaswell.

WetrackTubman,a$10million,TwinCities‐basedsocialservicesagency,through

threedistinctivemergersovera10‐yearperiod,illustratingsequentialrealizationofboth

scaleandscopechanges,inthefaceofwell‐knownchallenges(Gammal,2007;Cortezetal.,

2009).Thenextsectiondefinesscaleandscope,aswellasassociatedeconomies,as

commonlyusedintheorganizationaleconomicsliterature.Thenfollow,inorder,the

followingcomponents:areviewoftheliteratureonnonprofitmergers;ahistoryof

Tubman,includingthemergereventsandacharacterizationofthemergersaschangesin

scaleorscope;aguidetomeasurementofscaleandscopeeconomiesinthecontextofthe

logicmodel;andconclusions,includingpolicyimplicationsandasetofnextquestionstobe

pursued.

OrganizationalScaleandScopeDefined1

Ascommonlyusedamongindustrialorganizationeconomists,scaleandscopehave

specificanddistinctmeanings.Scalereferstooverallproductivecapacityasdeterminedby

existingphysicalplantcombinedwithallotherfactorsofproduction,includinglaborand

rawmaterials.Hiringmoreworkersalonemayresultinproductionincreases,butthis

                                                       1SeeChandler(1975)fortheclassicexplicationoftheseconcepts,andTeece(1980)forasubsequentclarification.

3  

wouldnotconstituteachangeinscaleintheabsenceofcorrespondingchangesinallother

factors.

Scaleeconomiesoccurwhenanorganizationrealizeslowerunitcostsdueto

producingagreatervolumeofagivenproductorservice,andtherealizedgreater

efficiencymakesthisagenerallydesirablegoal.Theseeconomiesarisefromvolume

discounts,spreadingfixedcostsoverlargeroutputs,andotherbenefitsoflargersize.

Scaleeconomiescanbeexpressedmathematicallyas:

(C1/Q1)>(C2/Q2),whereC1<C2andQ1<Q2

WhereCandQrepresentcostsandoutputs,respectively,andthesubscripts1and2refer

to“before”and“after”measures.Scaleeconomiescanarisefromorganicgrowth,orthey

canbeachievedthroughstrategichorizontalmergerswithsimilarorganizations.“Scaling

impact”,“scalingup”,and“goingtoscale”areexamplesofwhathasbecomefairlystandard

usage(Deesetal.,2004;BloomandChatterji,2009;Bradach,2003,2010).

Organizationalscopereferstotherangeofdifferentoutputsthatresultfroma

commonsetofproductivefactors.Achangeinscopewouldresultifexistinginputsand

processeswerereconfiguredtoyieldanotablydifferentoutputcombination.

Scopeeconomiesoccurwhenasingleorganizationcanproducemultipleservices

togetheratalowercostthancouldagroupofsingle‐serviceorganizations(Panzarand

Willig,1977).Mathematically,thisiswrittenfortwoorganizationsandcorresponding

servicesas:

, 0 0, ,

Bothscaleandscopeeconomiesreflectthemoreefficientresourceutilizationthat

canresultfromentrepreneurial(intrapreneurial)choices.Whilethesynergiesachieved

4  

throughexpandedscopemayseemobvious,“scopingimpact”or“scopingup”seemsnotto

havegainedthesamecachetintheliteratureoramongpractitioners.Ascompanionusage

tothecommon“scalingup,”weintroduce“scopingout”asaworkinglabelfortheeffortto

attainscopeeconomies.

Wedrawuponthewidely‐adoptedlogicmodel(Exhibit1)asanorganizingand

analyticaldevice,furtherillustratingbothscaleandscopeeffectssymbolically.Intheinitial

specification,asetofinputs()supportprogrammaticactivities()thatyieldoutputs()and

generatedesiredsocialimpacts().Scalingupcanberepresentedasanacross‐the‐board

multipleoftheinitialspecification,whilescopingoutmay—butneednot—usethesameset

ofinitialinputsforarevisedsetofactivities,withconsequentnewoutputsandsocial

impacts.

Exhibit1abouthere

Scaleeconomiesareillustratedbyaveragecostreductionsattributabletomergers

withsimilarorganizations,whilescopeeconomiesareillustratedbycorresponding

efficienciesgainedfrommergerswithcomplementaryorganizations.Theformerare

frequentlyreferredtoas“horizontal”mergers,asdistinctfrom“vertical”mergersbetween

organizationsthatareadjacentinthevaluechain(Porter,1985).Thelatter,neither

verticalnorhorizontal,havenotyetbeenaccordedasimplifyinglabel,although

“synergistic”and“symbiotic”havebeensuggested(Guthrie,2000).Anheier(2005)offers

theonlytextbook‐baseddescriptionofscopeandscaleeconomiesinthenonprofitsector,

asdepictedinExhibit2,wherewefeelthelower‐right‐handcellbestappliestothecase

developedhere.

5  

Exhibit2abouthere

Priorstudiesofscaleandscopeeconomiesinthenonprofitarenahavefocusedon

highereducation(KoshalandKoshal,2000;LaBandandLenz,2003)andhealthcare(e.g.

PreyraandPink,2006),withlittleattentiongiventosocialservices,perhapsduetothe

challengesofmeasuringsocialserviceoutput.

NonprofitMergers2

Thedispersionofspecializedknowledge,skills,andabilitiesacrossdifferent

organizationsmeansthatpotentialsynergiesgainedfromtheircoordinationnotonlygo

unrealized,buttheyareunlikelyeventoberecognized.Fruitfulcollaborationrequiresthat

recognitionofopportunitybecarriedforwardintoimplementation,oftenviamerger.

Otherstudieshaveexaminednonprofitmergers,butnonehasdrawnuponthe

distinctionsbetweenscopeandscaleeconomies(SingerandYankey,1991;Schmid,1995;

GolenskyandDeRuiter,1999,2002;Haider,2004;Toepleretal.,2004;LaPiana,2010).

Oftenscopeeconomiesaredescribedasexpansionsinprogrammingorclientservicesbut

capturedunderscaleexplanations.Thissectionoffersabriefoverviewofsomeofthekey

issuesintheuseofmergerasastrategicorganizationaltool.

Merger,acquisition,alliance,partnership,integration,consolidation—allaretouted

asapproachestobecompetitiveandexpandgeographicreachinfor‐profitorganizations

andtoenhanceorganizationalefficienciesandsocialimpactinthenon‐profitsphere.Most

organizationsofeitherilkentertheseactivitieswiththegoalofincreasingoperational

                                                       2Foramoredetailedliteraturereview,aswellasacompletedescriptionandassessmentofthemergerprocessesandoutcomes,seeourcompanionpaperCooperetal.(2012).

6  

efficiencies,creatingsynergies,andmanagingcosts,whiletheyalsomayseektoexpand

theirdiversification,footprint,andimpact.Withtheirstrongemphasisonshareholder

value,for‐profitcompaniesmustgrowandenhanceefficiencieswhichtypicallycanbe

accomplishedbyexpandingtheirmarketsharebygrowingtheircustomerbase,developing

newproducts,and/orexpandingintonewgeographieswhiletighteningtheirinternal

processes.Nonprofitenterprisesfocusonservingtheirbeneficiariesandexpandingtheir

mission.AsSchmid(1995)noted(andwhatmayseemtobetheobvious)“...themerger

shouldnotbeagoalinitselfbutratherameansforattainingthegoalofimprovingservices

forclients.”Liketheirfor‐profitcounterparts,nonprofitsmustnavigatechallengingand

shiftingmarketplacedemandsinordertomanagetheirvalue.Mergersareonestrategic

toolfororganizationalreformulationandanimportantaspectofthetideofinnovationthat

mustbeembracedforstrongsocialentrepreneurship.

Whilemergerandacquisition(M&A)activityinfor‐profitcompaniesiswidely

studied,therehasbeenlessfocusonsimilaractivityinthenon‐profitsectorevenas

economic,funder,environmentalandpoliticalpressuresincreasinglyhavepressednon‐

profitenterprisestocreativelyaddresstheirorganizationalgoalsandefficiencies(Kimand

Bradach,2012;GoleskyandDeRuiter,1999,2002;Schmid,1995;SingerandYankey,

1991).Oftenbasedoncasestudies,comparativeanalyses,andprocess‐orientedissues,

researchinthenon‐profitsectorcanbenefitfrommorequantitativeapproachestoscale

andscopeeconomiestodemonstratethemoreefficientresourceutilizationthatcanresult

fromintrapreneurialchoices.

Despiteloftystrategicvisionsandgoals,mergersshouldbeapproachedwithcareful

thoughtandcaution.Inthecorporateworld,morethanhalfofmergersandacquisitionsin

7  

thefor‐profitworldtypicallydestroyvalue,arefinancialdisappointments,andfailintheir

intendedpurpose(Schmid,1995;SingerandYankey,1991;Viscio,Harbison,Asinand

Vitaro,1999;Christofferson,McNishandSias,2004).Alltoooften,thecostsnotablyexceed

thebenefits,lendingcredencetotheoft‐citedphrase“thewinner’scurse”(Thaler,1992).

Mergersareriskyandcomplexventures,evenifsuccessmeasuresmaybesomewhat

differentlydefinedinthenonprofitsphereand,asnotedbyLaPiana(2010),mergersmay

notfailasfrequentlyinthenonprofitasinthecorporateworld.

KimandBradach(2012)notetremendousgrowthinthenumberandsizeofUS

nonprofitsduringthe2000sandthatthebiggestnonprofitshavegottenbigger,albeitnot

necessarilyduetomergeractivity.Theyfurtherpointout,“Butbignonprofitsarenota

socialpanacea:thejuryisoutonwhetherscalingorganizationswilltranslateintoscaling

impact.Although‘goingtoscale’hasgainedcurrency,thereisanemergingsetofquestions

abouthowsuchscalelinkstolocalcommunityengagement,whichmaybealinchpinof

lastingsocialchange”.

Whilethemajorityofstrategiesusedtoadapttounexpectedexpensesorfunding

restrictionsinMcMurtry,NettingandKetner’s(1991)surveyfocusedonmanaging

productivityandaugmentingrevenue,26.8percentofrespondingagenciesconsidered

mergingwithotherorganizations.Similarly,manyyearslater,Cortez,et.al.(2009)citeda

BridgespanGrouppollofnonprofitexecutivedirectorsthatfoundthat20percentof

respondentsindicatedthatmergerscouldplayaroleinrespondingtoeconomicdownturn.

Thesestudiesreportedevidencethatratesofmergersandacquisitionswerebroadly

similaramongsmallnonprofitsandfor‐profits;however,largenonprofits($50Mand

above)hadasignificantlylowerrateofmergerthansimilarlylargefor‐profitcompanies.

8  

Gammal(2007)foundthat8.5percentof200organizationsstudiedinTheStanfordProject

ontheEvolutionofNonprofits(SPEN)hadundertakenmergersandprogramacquisitions

sincethe1970s.

Mergerdecisionsshouldbedrivenbystrategicobjectivesthatfurtherthe

organization’spurposeandstrengthenitseffectiveness;unfortunately,inmanyinstances,

thestrategicrationaleforamergerisreactiveratherthanproactive.Manymergersarein

responsetocrisiscreatedbytheeconomicenvironment,financialproblems,orleadership

voids.Reactingtocrises,suchasanorganizationinfinancialdifficultyorexperiencingthe

lossofkeyleadership/managementtalent,maydistractfromthenecessitytoplacea

mergerdecisioninthecontextofmarketforcesandvaluepropositions.AstheSPENstudy

(Gammal,2007)contended,“moneyisnottherightreasontomerge.Butmissionmaybe.”

AstheBridgespanGroupnotedinCortezetal.(2009),anorganizationshouldask

“Howdowebestfulfillourorganization’smissionandstrategytobeeffective,andisM&A

abetteroptionthanotheralternatives?”Viewedasameanstoanendratherthananendin

itself,successfulorganizationslookatmergersaspartofanoverallstrategytoextendtheir

expertise.Theyconsiderthestrategicfitwithservices(gaps,emergingneeds,

programmaticcompatibility),withgeography(criticalmass,vulnerableareas,

opportunities),withtheorganizationalculture(mission/vision/values,board,

management),andwithfinancialstructuresandissues(risk,viability,cost/benefit,funding

sources).

ThefindingsoftheStanfordProjectontheEvolutionofNonprofits(SPEN)suggest

that“nonprofitsneedtosavealotmoremoney,budgetalotmoretime,andgettoknow

eachotheralotbetterbeforewalkingdowntheaisle.Otherwise,theymayfacethefatesof

9  

manycoupleswhorushtothealtar:unhappymarriagesorcostlydivorces”(Gammal,

2007).

Althoughresearchoftenfocusesoncostsavingsafteramerger,LaPiana(2010)

pointsoutthatcloserinspectionoftenrevealsthat“themergeritselfdidnotsavethe

money.Instead,itcreatedastructureinwhichmanagementwasabletomakethetough

decisionsthatultimatelyledtobetterfinancialfooting...”Inotherwords,amergerbyitself

maynotsolvefinancialproblems,butthisintrapreneurialfocusmayprovideastronger

structurethatfostersleadership,innovation,andefficienciesthatultimatelyincrease

outputsandoutcomes.

Judgingtherelativesuccessorfailureofmergersrequiresdeeperanalysisofa

varietyofmeasuresofbenefitsandcosts.Evenwhentheanticipatedbenefitsarenot

forthcoming,otherbenefitsmayaccrueandonetypeofpotentialfailuremaysuccessfully

bedodgedevenasanotherunexpectedlyarises.

TubmanHistory

TheHarrietTubmanWomen’sShelterwascharteredin1976andopenedthe

followingyearinaMinneapolisresidentialneighborhoodinresponsetothelong‐standing

needforshort‐termhousingforfemalevictimsofdomesticviolenceandtheirchildren.

TheTubmanShelterwasthethirdsuchcrisisfacilityintheUS;thefirstwasjustacrossthe

MississippiRiverinSt.Paul.Thesesheltersprovidedwomenwhowereabusedasafe

placetotaketheirchildrenandbeginrebuildingtheirlives.

ThefirstTubmanshelteroccupiedtworenovatedduplexes,withacapacityof29

beds,andtheywerefullthesecondnight.Withacombinationofstate,philanthropic,and

10  

UnitedWayfunding,theshelterprogramsexpandedoverthenext15yearstoincludelegal

andhospitaladvocacy,24FTEemployees,100plusvolunteersandanannualbudgetof

$680,000,servingabout700womenandchildreninshelters,andanother1500inthe

hospitalsandcourts.

Acombinationofgrowingneedandbuildingdeteriorationledtoacapitalcampaign

andthe1995openingofanewfacility,HarrietTubmanCenter(HTC),with75beds,

excellentsupportspaces,newservicesandpartneragenciesonsite,licensedchildcare,

computerlabsandmore.Withanannualbudgetof$3.5million,65FTEemployees,and

500volunteers,Tubmanprovidedexpandedinterventionandpreventionprogramsinthe

schools,courtsandhospitals.

Againstthisbackdrop,Tubmancommenceduponaseriesoforganizationalmergers,

whichwehavehereincharacterizedassocialintrapreneurship(CornerandHo,2010;

KistruckandBeamish,2010).Exhibit3liststhesemergersandclassifiesthemasscaleor

scopemergers.Thefollowingsectionsdescribethemergersinsufficientdetailtosupport

theseclassifications.

Exhibit3abouthere

Thefirstmerger.

Afternearly25yearsoforganicgrowthandtheimplementationofadditional

programming,Tubmanmergedin2002withsuburban‐basedFamilyViolenceNetwork

(FVN),anorganizationsimilarinmanywaystoTubman,andwasrenamedTubmanFamily

Alliance.FVN’sandHTC’sprograms,resources,andoutputsweresimilar,including

shelters,legaladvocacy,school‐basedviolence‐preventionclasses,andheftyuseof

volunteers.Thoughtherelativeprogrammaticemphasesandclientdemographicsmay

11  

havebeendifferent,theoverallfocusonfamilyviolencewasthesame,asillustratedbythe

respectivevisionandmissionstatementssummarizedinExhibit4.Thenewcombined

agencyoperatedsuchthatbothstaffsincorporatedbestpractices,includingthoseadopted

fromcounterpartsofthemergerpartners.

Exhibit4abouthere

Thesecondmerger:TubmanandChrysalis3

AswithHTCandFVN,Chrysalis,ACenterforWomen(CCW),alsowascreatedinthe

mid‐1970’sintheTwinCities,atimeofnewcommunityenergyfocusedonwomen’sand

familyissues.Chrysaliswasthefirstwomen‐centricmentalandchemicalhealthclinicin

thenation,andChrysalishadcollaboratedinformallywithTubmanfromtimetotime.4In

2007,largelyforfinancialreasons,Chrysalis,soughtamerger.TFA’sstrategicplanalready

includedtwocompatibleobjectives:

Developmentofalicensedmentalandchemicalhealthclinictoserveexisting

clients

“[M]ergersandotherlimitedpartnerships”asameansofextendingimpact.

Inthisinstance,morenearlya“symbiotic”merger,bothagencieswerededicatedto

servingwomenandtheirfamilies,alongwithsomeprogrammingformen,buttheservices

                                                       3 InitialinquiryintoscopeaspectsoftheTubman‐ChrysalismergerwascarriedoutasaclassprojectbyMBAstudentsSeanElder,KelseyLuers,andTimWells,underthedirectionofCharlesM.Gray. 4Ostrower(2005)exploresthenatureofinformalcollaborationsorpartnerships.

12  

providedwerecomplementaryinnature,assuggestedbythecomparativevisionsand

missionsdepictedinExhibit5.Chrysalisofferednoshelters,TFAhadnolicensed

clinicians,andwhilebothprovidedsignificantlegalservices,theprogramsandapproaches

weredifferent.TFAwasmetroorstatewide,whileCCWwassubstantiallyMinneapolis

centered.Anadditionaldistinctionwasthatmostincomeforon‐goingCCWclinical

programswasfee‐based,subjecttoaslidingscale,whileTFA’searningscamefromlarge

governmentcontractsandgrants,aswellasprivatephilanthropy.Bothreceivedprivate

sectorgrantsforinnovationorexpansionthroughtheyears,andbothhadstrongindividual

support.Clientdemographicsofthetwoagencieswerenearlyaperfectmatch;theyall

neededsupportprovidedbyeachagencyinordertotransformtheirlives.TFA’sstrategic

planincluded,asanexplicitobjective

Exhibit5abouthere

Thethirdmerger:TubmanandElderCareRightsAlliance

Inmid‐2011,ElderCareRightsAlliance(WCRA)approachedTubmantoconsiderits

acquisition,againtoscope‐out,butalsotopositiontheexpandedorganizationtoaddress

theneedsofagrowingseniorpopulationmoreeffectively,consistentwithyetanotherof

Tubman’sobjectives.

ECRAwasarelativelyyoungorganization,havingbeenestablishedin2009,andwas

establishedtoadvocateforthelawsandeducationthatcaregiversandseniorsneededtobe

safefromabuseandneglect.Themergerwascompletedinthesummerof2011,andscope

effectshavenotyetbeenfullyrealized,butareviewoftheirmissionandvisionstatements

(Exhibit6)indicatesthatTubmanhasacquiredexpertiseinassessingneedanddelivering

servicestoanagingpopulation.

13  

Exhibit6abouthere

MeasuringEconomiesofScaleandScope5

Weoriginallyintendedtocomparebefore‐and‐afteroutputunitcostmeasures

associatedwitheachmergertoillustratetheattainmentofindicatedeconomiesandto

makeacasethat“scopingout”canbeasimportantas“scalingup”inpursuitofbroader

effectivenessandgreaterefficiency.6Thishasprovenmoredifficultthananticipateddueto

lackofreliablepre‐mergeroutputdatafortheacquiredorganizations.

Exhibits7&8abouthere

Westillhopetofocusonandincorporatefouroftheseveralpotentialoutput

measuresapplicabletoacombinedTubman:(1)fortheentireagency,anunweightedsum

ofclientsserved,allprograms,exclusiveofpublicinformationpresentations,crisiscalls,

andresourcecounselingcalls;(2)forresidentialservices,annualresidentdays;(3)for

legalservices,numberoflegalclientsserved;and(4)forcounselingservices,thenumber

ofcounselingclientsserved.However,thiswillrequireadditionaldeepdigginginto

archivedinformation,theorganizationofwhichwasplacedonholdinthefaceofmore

urgentfinancialandservicedeliverychallenges.

                                                       5Asizeableliteratureaddressesaccountabilityandimpactaspectsofthenonprofitsectoringeneral.Foraccessibleperspectives,seeColbyetal.(2004)andCunninghamandRicks(2004).6Ourcompanionpaper(Cooperetal.)moreexplicitlyassessesthemergerprocessesinthecontextofchangesintheorganizationalarchitecture—assignmentofdecisionrights,performanceevaluation,andincentiverewards—thatareassociatedwithmoreefficientinternaloperations.

14  

RelevantCosts

Totrackcostperunitofoutput,orcostperclientserved,weincorporatetwo

differentcostmeasures:directcosts,definedasprogram‐specificvariablecostsonly;and

totalcosts,definedasdirectcostsplusallocatedfixedandoverheadcosts.Forillustration

purposes,welimitourdisplaytopre‐andpost‐mergerlegalserviceexpendituretrendsof

ChrysalisandTubman,respectively,inExhibits7and8.Inbothinstances,theupward

trendappearstohavemoderated,butwithoutcorrespondingoutputdata—andthe

passageofabitmoreadjustmenttime—wecannotyetassessoverallefficienciesgained.

Exhibits7&8abouthere

Summary,Conclusions,andFutureDirections

AsindicatedinExhibit9,Tubmantodayisa“multiproduct”organizationwitha

presenceinmultiplesocialsectors,includingfamilyviolence,chemicaldependency

counseling,mentalhealthcounseling,legalservices,andeducation.Thisbreadthhasbeen

achievedlargelythroughtherealizationofbothscaleandscopeeffects,bothbyorganic

growthandbyaseriesofhorizontalandsynergisticmergers.While“goingtoscale”may

extendaninitialentrepreneurialvisiontonewmarketsandbeneficiaries,“goingtoscope”

(tocoinaphrase)entailsrecurringentre/intrapreneurialalertnesstoopportunitiesfor

exploitingexistingresourcebaseinnew,moreefficientandeffectiveways.

Nonprofitmergershavenottodategeneratedmuch,ifany,concernonthepartof

policymakers.Indeed,fundingagenciesaremorelikelytoencouragemergersorother

coordinatedeffortsinpursuitofoperatingeconomiesthatwillleveragegrantfunds.The

lackofresidualclaimants,plusongoingoversightbystateattorneysgeneralandother

15  

externalbodies,seemsgenerallysufficienttoassuageconcerns,occasionalinstancesof

rent‐seekingbehaviornotwithstanding.

Exhibit9abouthere

Whatisleftforusandforotherresearchersistodevelopclearindicatorsofscale

andscopeeconomies,withreliablemeasuresofoutputs,butalsodrawinguponwhatwe

canascertainaboutsocialimpacts—thechangesthatsocialentrepreneursmakeinthelives

oftheirstakeholders.

16  

WorkCited

Anheier,H.K.2005.NonprofitOrganizations:Theory,Management,Policy.Routledge.

Bloom,P.N.,andChatterji,A.K.2009.“ScalingSocialEntrepreneurialImpact,”California

ManagementReview,51,3:114‐133.

Bradach,J.L.2003.“GoingtoScale:TheChallengeofReplicatingSocialPrograms”,Stanford

SocialInnovationReview,Spring:19‐25.

Bradach,J.L.2010.“ScalingImpact,”StanfordSocialInnovationReview,Summer.

Retrievedathttp://www.ssireview.org/site/printer/scaling_impact/

Brooks,Arthur.2009.SocialEntrepreneurship:AModernApproachtoSocialValue

Creation.PearsonPrenticeHall.

Chandler,Alfred.1975.ScaleandScope:TheDynamicsofIndustrialCapitalism.Belknap

PressatHarvardUniversityPress.

Christofferson,S.A.,McNish,R.S.,andSias,D.L.2004.“WhereMergersGoWrong”,The

McKinseyQuarterly,Number2.

Colby,Susan,Stone,Nan,andCarttar,Paul.2004.“ZeroinginonImpact:InanEraof

DecliningResources,NonprofitsNeedtoClarifyTheirIntendedImpact”,StanfordSocial

InnovationReview,Fall:24‐33.

Cooper,R.K.,B.C.Dusso,andC.M.Gray.n.d.“LeadershipandGovernanceChallengesof

SequentialNonprofitMergers:TheCaseofTubman.”Unpublishedworkingpaper.

Corner,P.D.,andMarcusHo.2010.“HowOpportunitiesDevelopinSocial

Entrepreneurship,”EntrepreneurshipTheoryandPractice,July:635‐659.

17  

Cortez,Alex,WilliamFoster,andK.S.Milway.2009.“NonprofitMergersandAcquisitions:

MoreThanaToolforToughTimes.”Bridgespan.Retrievedat

http://www.bridgespan.org/nonprofit‐m‐and‐a.aspx.

Cunningham,KatieandRicks,Marc.2004.“WhyMeasure:NonprofitsUseMetricstoShow

ThatTheyAreEfficient,ButWhatIfDonorsDon’tCare?”StanfordSocialInnovation

Review,44‐51.

Dees,J.G.,Anderson,B.B.,,andWei‐Skillern,Jane.2004.“ScalingSocialImpact:Strategies

forSpreadingSocialInnovations”,StanfordSocialInnovationReview,Spring:24‐32.

Gammal,D.L.2007.“TheMergerProposal:BeforeYouSay‘IDo”—Whynonprofitsshould

bewaryofmerging,”StanfordSocialInnovationReview,Summer:47‐51.

Guthrie,Moira.2000.Mix,Match,Merge?IssuesandOptionsforCharitiesConsidering

MergersandOtherPartnerships.VolprofTelethonFellowshipReport.Retrievedat

http://www.lhf.org.uk/Publications/MixMatchMerge.pdf

Haider,Donald.2004.“CommonBonds:TwoChicagoNonprofitJobTrainingPrograms

findStrengthandStabilityinaMerger,”StanfordSocialInnovationReview,Summer:69‐

74.

Kim,PeterandBradach,Jeffrey.2012.“WhyMoreNonprofitsAreGettingBigger”,Stanford

SocialInnovationReview,Spring.

Kistruck,G.M.,andP.W.Beamish.2010.“TheInterplayofForm,Structure,and

EmbeddednessinSocialIntrapreneurship,”EntrepreneurshipTheoryandPractice,July:

735‐761.

Koshal,R.K.andManjujlikaKoshal.2000.“DoLiberalArtsCollegesExhibitEconomiesof

ScaleandScope,”EducationEconomics,8,3:209‐220.

18  

Laband,D.N.andB.F.Lentz.2003.“NewEstimatesofEconomiesofScaleandScopein

HigherEducation,”SouthernEconomicJournal,70:172‐183.

LaPiana,David.2010.“MergingWisely,”StanfordSocialInnovationReview,Spring:28‐33.

Ostrower,Francie.2005.“TheRealityUnderneaththeBuzzofPartnerships”,Stanford

SocialInnovationReview,Spring:34‐41.

Panzar,J.C.andR.D.Willig.1977.“EconomiesofScaleinMulti‐OutputProduction,”

QuarterlyJournalofEconomics,91:481‐493.

Preyra,Colin,andGeorgePink.2006.“ScaleandScopeEfficienciesThroughHospital

Consolidations,”JournalofHealthEconomics,25,6:1049‐1068.

Schmid,Hillel.1995.“MergingNonprofitOrganizations:AnalysisofaCaseStudy,”

NonprofitManagementandLeadership,5,4:377‐391.

Singer,M.I.andJ.A.Yankey.1991.“OrganizationalMetamorphosis:AStudyofEighteen

NonprofitMergers,Acquisitions,andConsolidations,”NonprofitManagementand

Leadership,1,4:357‐369.

Teece,D.J.1980.“EconomiesofScopeandtheScopeoftheEnterprise,”JournalofEconomic

BehaviorandOrganization,1:223‐247.

Thaler,R.H.1992.TheWinner’sCurse:ParadoxesandAnomaliesinEconomicLife,

Princeton,NewJersey:PrincetonUniversityPress.

Toepler,Stefan,CaraSeitchek,andTheresaCameron.2004.“SmallOrganizationMergers

inArtsandHumanities,”NonprofitManagementandLeadership,15,1:95‐115.

Viscio,A.J.,Harbison,J.R.,Asin,Amy,andVitaro,R.P.2002.“Post‐mergerIntegration:What

MakesMergersWork?”Strategy+Business,Sept.30,FourthQuarter1999,Issue17.

19  

Abouttheauthors

CharlesM.GrayProfessorofBusinessEconomicsandSeniorFellow,CenterforNonprofit

Management,OpusCollegeofBusiness,UniversityofSt.Thomas.

RobinKingCooperCounselingandindustrialorganizationpsychologistandprincipal

consultantwithGrayKingandAssociates.

BeverlyC.DussoPresidentandexecutivedirectorofTubman.

20  

Exhibit1‐SimplifiedLogicModelStagesandDefinitions

WithScaleandScopeIllustrations

Inputs Activities Outputs(Q) Outcomes(B)Resourcesutilizedinprogramoperation,includingemployees,volunteers,equipment,supplies,andcapitaloutlays.

Allactivitiesconductedinprogramoperation.

Measuresthatindicatethevolumeofactivities,includingnumberofdirectbeneficiaries.

Actualindicatorsofsocialvalueaddedasaresultofprogramoperation,includingchangesinbeneficiarycircumstances.

InitialspecificationI1,I2,…In A1,A2,…Aj Q1,Q2,…Qk BI

ScalingupaI1,aI2,…aIn bA1,bA2,…bAj cQ1,cQ2,…cQk dBI

ScopingoutI1,I2,…In,In+1,… A1,A2,…Aj,Aj+1,… Q1,Q2,…Qk,Qk+1,… BI,BII,…

21  

Exhibit2‐ScaleandScopeEconomiesforNonprofitOrganizations

Limitedscope ExpandedScope

LimitedscaleSingle‐serviceagency

Size:small

Multiple‐serviceagency

Size:smalltomedium

Expanded

Scale

Mergedsingle‐serviceagencies

Size:mediumtolarge

ConglomerateNPO;Tubman

Size:large

Source:AdaptedfromAnheier(2005,156).

22  

Exhibit3‐OrganizationsMergingwithTubman

Year MergingOrganization TypeofExpansion

2001 FamilyViolenceNetwork Primarilyscaleexpansion

2007 Chrysalis Primarilyscopeexpansion

2011 ElderCareRightsAlliance Primarilyscopeexpansion

23  

Exhibit4‐TubmanandFamilyViolenceNetworkVisionandMissionStatements,2000

HarrietTubmanCenter FamilyViolenceNetwork

Vision Communitiesfreeofviolence

We believe that the choices of our clients

should be respected and that services

provided by our agency should be

individualized to meet our clients' self-

identified needs and goals, as well as be

culturally appropriate

Mission

Toadvocateforsocialchangethathelps

familiesandcommunitieslivefreeof

violence,andtoprovidewomenand

childrensafepassagefromabuse.

FamilyViolenceNetwork,in

partnershipwithourcommunity,will

worktopreventfamilyviolence,

promotenurturingfamilyrelationships,

andincreasetheself‐sufficiencyof

personsimpactedbyfamilyviolence.

24  

Exhibit5‐TubmanandChrysalisVisionandMissionStatements,2007

TubmanFamilyAlliance Chrysalis

Vision

Safeandhealthyindividuals,families

andcommunities

None

Mission

Promotesafeandhealthyindividuals,

familiesandcommunitiesthrough

promisingandbestpracticesin

education,interventionandprevention.

Providewomen‐centricindividualized

mentalandchemicalhealththerapyand

legalcounseltotransformwomen’s

livesandfamilies.

(Adaptedfromanextensive3‐pagephilosophystatement.)

25  

Exhibit6‐TubmanandElderCareRightsAllianceVisionandMissionStatements,2011

Tubman ECRA

Vision

Safeandhealthyindividuals,families

andcommunities

Withover30yearsofexperience,asa

non‐profitorganization,servingelders

andpeoplewithdisabilitiesreceiving

long‐termcare,wecontinuetoadvocate

forqualityandassistpeopleinsecuring

neededcare.Wepromotenursing

homeResidents’Rights.Weprovide

guidancetofamilyandfriendcaregivers

seekingknowledgeaboutrights,

responsibilities,andresourceswithin

thelong‐termcaresystem.

Mission

Promotesafeandhealthyindividuals,

familiesandcommunitiesthrough

promisingandbestpracticesin

education,interventionandprevention.

Promoteindividualized,respectfulsafe

andhealthycareformMinnesota’s

vulnerableadultsandtheaging

population;andempowerandeducate

theseclients,theirfamilies,caregivers

andprofessionals.

26  

Exhibit7–DirectCosts,ChrysalisandTubmanLegalServices

Pre‐andPost‐Merger

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2005 2006 2007 2008 2009

Chrysalis

Tubman

27  

Exhibit8–DirectCostsPlusAllocatedSupportCosts,ChrysalisandTubmanLegal

Services,Pre‐andPost‐Merger

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2005 2006 2007 2008 2009

28  

Exhibit9‐TubmanToday

Tubman’scomprehensiveprogramsinclude:

EmergencyShelterformorethan1,500womenandchildrenatthreesheltersites,

witha43‐dayaveragelengthofstay.Thevastmajorityofthoseadmittedarepersonsof

color;andapproximately650childrenunderagenineareamongthoseshelteredevery

year.Onaverage,closeto90percentofthecrisisclientshavelow‐incomesorno

incomeatall.

TransitionalServicesformorethan300individualseachyear,includingin‐home

visits,careerandeducationalcoaching,publicassistanceadvocacy,andhousing

placementandassistance.Onaverage,morethanhalftheclientsarepersonsofcolor.

ChildandFamilyServicesincludingapproximately50supportgroupstomorethan

800childrenandtheirfamilies,169familyactivitiesand23creativeartsnightsfor

childrenandfamilieseveryyear.Of848childrenreceivingdirectservices,356were

underagefour,andanother249rangedinagefromfivetonineyearsold.

LegalServicesformorethan2,000individualsinthreecountiesannually;assisting

victimsincivilandcriminalcourttogainneeded,life‐savinglegalprotections.The

majorityofthoseservedarebetween25and34yearsoldand90percentofthemhave

low‐incomes.

CommunityOutreachtomorethan7,000peopleannuallyviapresentationsatjoband

educationalfairsandeducationinfaith‐based,socialservice,youth,civic,businessand

othercommunitysettings.

29  

ViolencePreventionProgramming(VPP)tomorethan8,000studentseachyearat

approximately30metroareaschoolsinHennepin,RamseyandWashingtoncounties.

ThevastmajorityofVPPclientsarebetween15to17yearsold.

CounselingandTherapeuticServicesformorethan200menandwomenwith

abusivebehaviorsannually.

‐MentalHealth

‐ChemicalDependency

24‐HourHelpLinecrisisinterventionforcloseto20,000individualcallseachyear.