What else should I know about strategic alliances and restructuring?
Strategic alliances and restructuring should be considered not only when an organization is struggling financially, as they can provide opportunities to expand into new geographies, reach new audiences, or add new services. In short, they can provide opportunities to better meet your organization’s core purpose, which is something all high-performing organizations want to do. Review the Discussion Guide or Starting Points sections for more information on the many possibilities of strategic alliances and restructuring.
Yes. Seventy percent of the executive directors who participated in research by The Bridgespan Group reported that their collaborations were successful in achieving the desired goals. Research on organizational collaborations conducted by SeaChange Capital Partners and The Lodestar Foundation puts the success rate at 80 percent.
A successful strategic alliance or restructuring takes time to plan and implement. According to research from SeaChange Capital Partners and The Lodestar Foundation, two-thirds of strategic alliances and restructuring discussions take six months or more to progress. The types of restructuring that result in a change in legal/corporate structure (mergers, parent-subsidiary relationships, and joint venture corporations) typically take longer to complete than others.
Expenses vary widely based on the complexity of the strategic alliance or restructuring. According to research conducted by SeaChange Capital Partners and The Lodestar Foundation, the one-time out-of-pocket costs of exploring or implementing a strategic alliance or restructuring can range from $20,000 to $200,000. Sometimes these costs can be partially or fully underwritten by a funder, whether a long-term funding partner committed to the organization’s success or a funder that provides targeted funding for strategic alliances and restructuring. Costs for a potential strategic alliance or restructuring should be considered within the context of the potential benefits of the agreement over time, as, many times, the short-term transaction costs are far outweighed by the long-term potential for impact.
There are some funding groups that fund strategic alliances and restructuring. Visit our Sources of Funding for Strategic Alliances and Restructuring page for more information. Even if a funder is not listed in your area, research from The Bridgespan Group suggests that funders may be open to funding these opportunities if directly asked to do so by their grantees.
It may sound too simplistic, but form should follow function and not the other way around. As described more fully in the Discussion Guide, begin by thinking through your organization’s current operating reality and external environment and the role strategic alliances and restructuring can play. Define the criteria for a potential partner, and then identify and evaluate potential partners. During partnership discussions, outline shared outcomes and desires. Once both organizations are on the same page about the goals and outcomes, you can discuss what type of structure would work best to achieve those goals.
Look around! According to research conducted by SeaChange Capital Partners and The Lodestar Foundation, strategic alliances and restructuring usually occur between organizations that already know each other well, while less than five percent involve organizations that have no pre-existing connections. As board members, you can be extremely helpful in examining your networks to identify potential partners. Existing relationships and trust can be enormously helpful as organizations set the stage for a first conversation about a potential strategic alliance or restructuring, so it’s wise to consider how board members can be helpful. That said, board members should avoid initiating a conversation with a potential partner without being empowered to do so by the full board (in cases of mergers or acquisitions) or by the executive (in other programmatic partnerships). Visit the Resources page for more information and tools for finding the right partner.
It depends. One of the biggest fears about strategic alliances and restructuring is that staff will lose jobs. While it may be true that a strategic alliance or restructuring can create duplication in roles that leads to some job loss, the majority of strategic partnerships do not result in immediate job loss. A search of organizations in the Nonprofit Collaboration Database shows that only 26 percent reported a consolidation of staff positions or of management and administration after the collaboration (177 out of 683 organizations). This compares to 97 percent of the same organizations that reported increased efficiencies and effectiveness and to 96 percent that reported a positive impact on the community.
Not necessarily. Some strategic alliances or restructurings enable each entity to maintain some version of its independent identity or brand. Some groups decide that their existing brands are so well recognized with their constituents that preserving some aspect of their brands will enable them to better serve their core purpose. Others decide that moving forward with one unified brand is more important, and that doing so will actually strengthen their ability to serve their core purpose. As long as leaders stay focused on what’s most important — serving the larger purpose — the branding question can be appropriately answered in a number of different ways.
Unlike mergers in the for-profit section, which are often done in secrecy, nonprofit strategic alliances and restructuring are not always kept confidential. In fact, there is some evidence that speaking openly about the possibility of a strategic alliance or restructuring — particularly internally with staff and other key stakeholders — can help position the partnership for success. That said, the potential partners should be very clear about how, what, and when they will share information, so as to ensure that neither party gets caught off guard or unprepared.