The Changing Landscape Strategic Structuring in the Nonprofit Sector Debbie McKeon, Executive Director NorthSky Nonprofit Network © Copyright 2010, NorthSky.

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

BoardSourceSocial Enterprise AllianceFieldstone AllianceLaPiana & 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 panelistsAngela Schuler, co-chair, board of directors, City Opera HouseGene Jenneman, ED Dennos Museum Center, board of TREATJohn 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 sectorNonprofit Sector

• More focus on negative image stereotype-need 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 sectorNonprofit 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?

• 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

• 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

Joint VentureGreat Lakes Children’s Museum, The Watershed Center, Maritime Heritage Alliance, Traverse Area Community Sailing

Management Support OrganizationOld Town Playhouse, Dennos Museum Center, City Opera House, Traverse Symphony Orchestra

Management Services AgreementA program of Rotary CharitiesFunctions as parent-subsidiary

PLACE HOLDER Goodwill/Paperworks

MergerGoodwill Industries, Paperworks Studios

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 YouContact NorthSky at:www.northskynonprofitnetwork.org231.929.3934

Debbie McKeon Extension: [email protected]

NorthSky Nonprofit Network,

a program of:

Special Thank you to: