For Funders

As a funder, you have a unique vantage point.

In your grantmaking, you may see organizations that are working in similar or complementary areas. For many funders, that perspective instills a strong desire to see more nonprofits come together to work in partnership, and to invest in supporting those that are doing so.

Guidance and Suggestions

If you are a funder and are exploring ways that you can support strategic alliances and restructuring in your community or area of grantmaking, we offer the following guidance and suggestions:

Be supportive, but not pushy.

Funders can play an important role in supporting strategic alliances and restructuring, but must be mindful of the power dynamics, and the risk of being too pushy. “There is a power dynamic you need to be very careful about,” explains Kate Guedj, vice president and chief philanthropy officer at The Boston Foundation. “We have seen funders trying to force mergers … and it will work for a couple of years but fall apart.”1

The strategic partnerships that work are the ones where two or more organizations are coming together out of a sincere desire to work together. If funders are too involved or prescriptive, there is a risk that nonprofits will feel forced, which can backfire in a number of ways, the worst of which is a strategic partnership that goes through, but is not ultimately successful.

Rethink assumptions about cost savings.

Some funders have expressed disappointment about their investments in nonprofit strategic alliances and restructuring, because they were hopeful that it would be a strategy for reducing organizational costs in a way that would enable them to reduce their grantmaking. The reality is that most strategic alliances and restructuring require funds for exploration and implementation, and most organizations do not experience major cost savings, at least in the short term.

“The whole question of cost-savings is more nuanced than many people believe. In our experience, saving money is neither necessary nor sufficient motivation for collaboration.”

John MacIntosh, the SeaChange-Lodestar Fund for Nonprofit Collaboration

According to David LaPiana of LaPiana Consulting, “Despite conventional wisdom, mergers themselves do not generate revenue or reduce expenses. In the short term, they actually require new money for onetime transactional and integration costs. Even in the long term, the act of merging itself did not lead to substantial cost savings for the vast majority of the mergers my firm has facilitated. Merged nonprofits can roll together annual audits, combine insurance programs, and consolidate staffs and boards. But they are also bigger and more complex and require more and better management—a cost that often exceeds the savings from combined operations.”2 John MacIntosh, who manages the SeaChange-Lodestar Fund for Nonprofit Collaboration, echoed this sentiment: “The whole question of cost-savings is more nuanced than many people believe. In our experience, saving money is neither necessary nor sufficient motivation for collaboration.”3

And yet, there is reason to be optimistic about the potential financial impact of strategic alliances and restructuring, particularly those forms of partnerships that result in consolidation of administrative functions. According to an article by Lois Savage of The Lodestar Foundation and MacIntosh, “Even if the savings are modest relative to the total scale of the combined organization, they may be very important at the margin and will often come from a reduction in the type of expenses that are the most difficult to fund – overhead.”4

Help organizations build trust and familiarity.

Any strategic alliance or restructuring requires trust and familiarity between organizational leaders, so one of the most powerful things foundations and other funders can do is to help nonprofit organizations and their leaders get to know each other. According to Savage, “The best thing a funder can do is create an environment where organizations can get to know each other and develop this trust.”1

Some foundations do this formally by bringing together groups of nonprofits that are interested in learning more about opportunities for strategic partnership (see the Nonprofit Sustainability Initiative, as one example), while others do it more informally by hosting grantee convenings or other capacity-building efforts that enable leaders to interact with and get to know each other. Debra Jacobs of The Patterson Foundation said, “We let relationships bubble up, encourage organizations to sit down with others and talk.”1

Provide flexible funding for exploration…and beyond.

In addition to other potential fears or concerns, the cost of restructuring can prevent nonprofit leaders from exploring and implementing a strategic alliance or restructuring. One of the best things a funder can do to support strategic alliances and restructuring is to provide flexible cash grants that support an organization – or set of organizations – as they consider options for strategic partnership. LaPiana said, “Many nonprofits fear that funders view partnering as a sign of weakness. Funders can address this fear head on by announcing the availability of grant support for mergers and other partnerships.”2

“It is also important for funders to allow nonprofits the space to truly explore the various restructuring options without the concern of pre-defined outcomes from funders or meddling by funders…Nonprofits need to have ownership of the process to fully and authentically engage in this work. We as funders need to trust the leadership of the nonprofits that we are supporting and their commitment to this work without being wedded to any particular outcome.”

Joanna Jackson, the Weingart Foundation

While funding for implementation may be more structured, funding for exploration of strategic alliances and restructuring should be extremely flexible in structure, timing and expectations. This enables organizations to follow the natural flow of exploration and consideration, rather than becoming its own force for specific outcomes or timelines. As Joanna Jackson of the Weingart Foundation said in her report on the Nonprofit Sustainability Initiative, “It is also important for funders to allow nonprofits the space to truly explore the various restructuring options without the concern of pre-defined outcomes from funders or meddling by funders…Nonprofits need to have ownership of the process to fully and authentically engage in this work. We as funders need to trust the leadership of the nonprofits that we are supporting and their commitment to this work without being wedded to any particular outcome.”

LaPiana recommends funders consider a phased approach for funding mergers, which is also applicable to many other formalized strategic alliances and restructuring: “To invest swiftly in partnerships, funders should also use phased grants that first cover negotiation costs and then pay attorney fees. Only after the parties agree to a deal should the funder support implementation. This approach incentivizes the right behavior—doing what is best for the organization’s mission—and discourages faux partnership attempts that aim to attract funding.”2

Despite the potential complexity of this type of funding, Savage and MacIntosh encourage funders to focus on the tremendous value of doing so. They say: “Funders find it difficult to support collaboration because of the nature of the grants – fast, small, process-oriented, confidential – are so different from the programmatic, capacity-building, and other grants they consider year-over-year.  In effect, funding the collaboration is a highly-leveraged capacity-building grant.”4

Set a strong example.

Finally, leaders in the philanthropic sector highlight how important it is for funders to model collaboration in the way that they themselves operate, and to avoid behaviors that can stymie collaboration amongst nonprofits:

“Foundations often expect grantees to partner and collaborate, as if it should be inherently embedded in how nonprofits operate. However, foundations do not always hold ourselves to the same expectation. Yet, collaboration done right among foundations can yield the same positive benefits. Leveraging our resources allows us to serve more and/or go deeper with those that we serve. We benefit and learn from other funders’ experience and expertise on the communities, nonprofits and issues we are facing. The collaborative can also spur greater creativity, diffuse risk and more effectively support field-wide learning.”

Joanna Jackson, Weingart Foundation

“Funders should model partnership, and not just preach it. Nonprofit leaders note that their funders urge them to collaborate but seldom follow their own advice. Funder partnerships can both demonstrate the power of working together and give the funders credibility in the eyes of their grantees.

“As funders complain that there are just too many nonprofits, they should also recall their own role in founding, growing, and rescuing many of the very same groups that are now in grave financial trouble. In good times, foundations develop new interests. They find holes in the tapestry of needed services and encourage the creation of new programs—as well as entirely new nonprofits—to fill the voids. They then buffer their grantees from the vagaries of the market. When grantees cannot generate adequate revenues from membership, sufficient gifts from donors, or a sustaining level of earned income from their operations, funders step in with well-timed grants that stave off the inevitable crisis. Then, when a recession shrinks foundation endowments, or the foundation shifts its funding priorities, it complains that there are too many nonprofits competing for its funds.”
David LaPiana, LaPiana Consulting

Additional Reading


Learn more on current funding initiatives to support nonprofit strategic alliances and restructuring, or add your name to a growing list of funders who are investing in strategic alliances and restructuring.


  • 1 Why Nonprofit Mergers Continue to Lag, Smith Milway, Orozco & Botero, Stanford Social Innovation Review, Spring 2014.
  • 2 Merging Wisely, David LaPiana, Stanford Social Innovation Review, Spring 2010.
  • 3 A New Source for Funding Nonprofit Mergers and Collaborations, Jean Butzen, Stanford Social Innovation Review, August 2011.
  • 4 The Myths and Reality of Nonprofit Collaboration: Observations from Six Years in the Trenches