September 30, 2011

What Trustees Should Know About Collaboration Options

Holly Hall, an editor at The Chronicle, is contributing guest posts based on her reporting from the annual meeting of BoardSource, an organization that seeks to help trustees to do their jobs better. The conference took place last week in Atlanta.

As charities face money woes and increases in requests for help, some groups have decided to merge with other organizations. But mergers aren't the only way to reduce overhead and grow more efficient, said Jean Butzen, an Evanston, Ill., consultant.

Ms. Butzen, who has worked with many groups on what she called "strategic restructuring," said that charities must carefully evaluate alliances because the risks are high—but so are the potential returns.

She outlined four types of collaboration that are helping charities across the country deliver services more efficiently, often at lower cost:

Joint-venture partnerships. Two or more nonprofits can share a business, a building campaign, or other project. For instance, a charity that finds work for people with disabilities and another one that provides technology to the needy created a business to clean up technology waste. The business employed people served by both organizations, and the two groups share the revenue.

Management-service organizations. A group of nonprofits that have similar needs,  such as hospitals or United Ways, form a separate tax-exempt organization that provides accounting, annual audits, human resources, online databases, or other services. This type of arrangement usually saves the member groups money while allowing them to concentrate on their missions.

Shared-service alliances. Day care charities or other groups that are similar in size and mission often divide up specialties, like screening new employees or billing.  The groups in the alliance pay the organization that provides those services, often at lower cost and  better quality than what they can get independently.

Parent subsidiaries. Organizations that work on related causes, such as providing housing for people with disabilities or adult day care, set up a single "parent" organization. Each group then decides which services (such as financial reporting, custodial and grounds care, fund raising) it wants the parent to assume so it doesn't have to.

Has your group tried any of these approaches? Do they work? Let us know.