Strategic Restructuring: “The Survival of the Fitting”

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According to David LaPiana, who participated with Chapin Hall in a study on the topic released in 2000, strategic restructuring occurs when two or more organizations work together in an ongoing relationship to augment their program or administrative capacity. The types of endeavors included under this term run the gamut from loose coalitions to full-on mergers. Contrary to the belief that many of these efforts are taken up of necessity by organizations concerned about efficiency, these projects are generally approached with great creative spirit and are most often fueled by concerns about mission effectiveness.

We have chosen seven examples from around the country that we believe exemplify the principle of restructuring for optimal effectiveness. You will see that they include a California-based umbrella organization for action-oriented, bureaucracy-averse environmental groups, a wonderfully creative solution to unreasonable federal restrictions to serving immigrants devised by three Boston area legal services groups, and a complex effort to enhance program and staff development across child and family resource agencies in Portland, Oregon.

While almost all of us have had the experience of close collaboration, we hope that these stories from elsewhere give you ideas of your own in thinking about what further possibilities for optimal effectiveness might exist beyond the boundaries of your single organization.

The Big Funding Swap, Bob Sable, executive director, Greater Boston Legal Services (GBLS), Boston, MA

“In 1995 Greater Boston Legal Services and Cambridge and Somerville Legal Services (CASLS) suffered enormous cuts in our federal funding. Then, in January of 1996, Congress imposed unprecedented conditions on the remaining legal services funding—among the many restrictions, we couldn’t represent undocumented immigrants, bring class action suits, or represent clients in rule-making proceedings. They said not only could we not do it with their money, but if we accepted any federal money we couldn’t use any other money to do these things. The federal funds represented $1.2 million out of a $7 million or $8 million budget—for CASLS, the situation was even more dire.

“Our initial reaction was that it was too much money to give away—there were a lot of other activities we could do. But the more we thought about it, the more we realized it would cut the heart out of what we are about. For example, the organization was founded in the 1900s, and had heavily represented immigrants for all of its history. CASLS also had a large immigration practice—and if they didn’t take the money, they’d go under. They approached us about a merger, and we started trying to figure out how to do without federal money.

“With the aim of keeping the federal money in the community but isolating it so that we wouldn’t be subject to restrictions, we approached another project working on non-restricted areas, Volunteer Lawyers Project (VLP). We proposed that they accept our federal funding while we applied for their non-federal funding. It was an uneven funding swap, so we looked at what programs to transfer. We did screening and intake, which was non-restricted, through a separate organization, so we transferred our screening and intake staff to the payroll of VLP. This complicated four-way transaction—with CASLS going out of business, all the federal money going to VLP, and us taking over the nonfederal funding—took place within about a five or six-month period.

“Our board members didn’t think we could pull off something so complicated that fast, but we did it in a relatively short time in part because we already had a number of close working relationships with each organization. Also, in a very altruistic move, Jack Boesen, the director of CASLS, decided to resign to make the merger possible. We were originally concerned that our board of directors, our supporters, our bank, and the bar association might say that it’s more important to have the money and keep the staff and live with the restrictions. But at every level the reaction was one of astounding community support. People were proud to be associated with an organization that had turned down money on principle. The bar association became extremely involved and helped us with funding, our bank was extremely supportive, our board members felt proud. The organization’s morale was never higher than when we turned down the money.”

Carolyn O’Brien, executive director, Environmental Federation of New England, Kal Stein, president, Earth Share
Sarah Sameh, former executive director, Environmental Federation of Oregon and vice chair, Earth Share

In the late 1980s and early 1990s, workplace giving federations were established to represent local, state and regional environmental nonprofits, and Earth Share was established to represent large national nonprofits, such as the World Wildlife Fund. Earth Share and the state federations were de facto competing with each other. It wasn’t friendly for us or for donors when we were going after the same giving opportunities. Plus it made it appear that we didn’t have our ducks in a row.
We had good reasons to get together: to be more competitive in the marketplace, reduce duplication of effort, be more effective, and build relationships. But it’s hard to get former competitors to become collaborators. Negotiations took about two years. It was really necessary to break down the us-versus-them dynamic. In general there’s a real tension between national and local charities. They tend to see things differently—locals tend to have a great understanding of their markets and tend to see the national organization as indifferent to their unique concerns. Nationals tend to see locals as parochial, not seeing the big picture. But we’re all peers and colleagues—the more we function that way the better and healthier we’ll be.At earlier negotiations, not every state was at the table. The national group was setting up contracts with strategic states—California, Texas, New York—and everyone was only looking at their own bottom line. This time we got a facilitator who insisted that every state be at the table. We thought he was insane but it was the only way it could have worked. So this time we were going for the common good. We’re willing to make certain compromises, because we know it would help all of us if we learned to work together.

The solution we came to should be able to help everybody. The locals will do what they do best—on the ground field work with a hands-on approach—going in and making presentations, for example, encouraging workplaces to get involved. What the locals lacked was a strong voice in the marketing arena. Right now we have an affiliation structure. Each local federation is an independent 501(c)3—they remain independent but take on the name, for example Earth Share of Texas, and gain the benefit of the brand name, Ad Council support, efficiency, and economies of scale. They’ll be able to offer donors the opportunity to give to groups serving everything you can imagine—local watersheds, global warming, African wildlife… And Earth Share donors will have the advantage of being able to support local backyard organizations. National staff will also facilitate collaboration among the federations—in most instances the local environmental federation will manage
campaigns assisted by national economies of scale. Earth Share will assist in communication, best practice, and solving issues. Each federation will be responsible for distributing materials, but Earth Share will establish uniform standards and forms, accounting procedures, and so forth. The states have ownership and remain autonomous, but at the end of the day, the public feels there’s the same quality level everywhere in behavior, accounting, and so forth.

That Earth Share was willing to restructure its board of directors was a major factor. One-third—eleven members—come from national organizations, one-third from local affiliates, and those two elect the last third—eleven at-large members. It’s certainly changed the dynamic in a dramatic and positive way. We couldn’t anticipate everything ahead of time, but now the partnership’s evolution will be influenced by locals. It’s not going to be perfect—it’s going to require tweaking—but we’re tweaking it together.

Staff Support Yields Service Improvement, Barbara Hutsell, executive director, Arras, Inc., Portland, Oregon

“In Oregon there’s a wide diversity of child, adolescent and family resources. In 1995, four of the larger agencies in Portland began a discussion, saying, ‘If we’re going to thrive—not just survive—we should begin to work together.’ Our first goal was to impact the quality of overall care by being a stronger voice for children at a local and statewide level. The organizations signed a strategic agreement to work together when developing new programs, talking to contracting bodies, and representing ourselves to the community. The organizations now look at their individual strengths and meld those to create the strongest presentation for each issue. We also wanted to improve overall service by creating a continuum and a collaboration of care within our partnership, not only providing services for a range of needs from those of drug affected infants to the homeless kids on the street, but also coordinating the movement of children from one program to another in a better way than the state system has been able to do.

“A second goal of the collaboration is to improve the professional development stream for staff by incorporating a strong training component and developing the opportunity for staff to work in a variety of settings without losing the seniority and other benefits that they had from working in any one of our organizations. This led to a need for a common personnel policy manual and common benefits and leave policies. That led to the third major goal, which is to support economies of scale by bringing administrative services together.

“We started with the administrative piece—we needed to do that in order to support the staff development goal. The agencies had identities they didn’t want to lose so we did not pursue a traditional merger or holding company model. We created a separate organization, now called Arras, with an Internal Revenue Code classification of 501(c)3, 509(a)3. It is an organization that exists to support the charitable purposes of Morrison Center Child and Family Services and Janus Youth Programs. Through this mechanism group benefits are combined. No matter where you work within the Federation organizations you get the same benefits—and we’ve been able to enhance those benefits. We now have one corporation providing all the fiscal, human resource, information technology, maintenance, safety and health operations. We have also reduced our administrative overhead from a high of 18 percent to just over 10 percent across all the organizations.

“Staff skill development is increasing because they can move between different programs; they have more possibilities. In their day-to-day operations, staff receive support without worrying about the administrative structure. What staff experience is more freedom to take care of kids, and that was a major goal. Now the coordination of care is beginning to blossom. For example, we have a number of programs serving juvenile justice adolescent males that are now joined together. The quality of care for the families and youth we serve has increased.

“We’re a unique model, three separate organizations, each doing what it does best. Since 1995 we have grown from $14 million in combined programs to $28 million. We are thriving.

“In traditional mergers, people often experience a loss of identity and a loss of sense of control. When we first brought the directors and managers of the organizations together for a meeting in 1995, everyone sat in their little quadrants; people had their turf. Over time, we’ve continued those meetings, and now the best of all the cultures have come together—people from all the organizations gather together and talk with each other about what’s going on in their programs. Our structure helped us support positive growth instead of loss. We have binding agreements between the organizations, which helps in buying benefits packages and other legal status issues. But we didn’t have to say, ‘You have to merge’.”

Susan Kamprath, project support director, and John Knox, executive director, Earth Island Institute, San Francisco, CA
We couldn’t tell this story without telling about our late founder, David Brower, a huge influence in environmental work for 60 years. He was wary of bureaucratic organizations, and simply wanted to facilitate people doing the work they needed to do for the planet. He was a pioneer on the issues but also in empowering people to be leaders. Dave would have lunch with somebody and suddenly there’d be a new project. His vision was that if you did good work the money would come.

Among its focuses, Earth Island provides fiscal sponsorship—we help run more than 30 projects, everything from promoting sustainable economics to defending whales. We adopt a number of programs just starting out, programs migrating from other organizations, and even existing 501(c)3s that want to focus on the work and reduce their administrative headaches. We’ve learned over the years how to have minimal structures that would still provide support for leaders. The package that all programs receive, for seven percent of their revenue, is 501(c)3 status and basic administration: accounting, audits, and so forth. As a second-tier service, projects can rent space in our offices at cost and share copying and other services. Our third tier is custom services—we sit down with each project and look at their goals for the coming year and see what strategic services might help boost them to the next stage.

Our fiscal sponsorship program offers training and technical assistance as well as networking opportunities. Since all of our projects do environmental work, they have the opportunity to learn from each other and create an internal community. That kind of synergy is harder to quantify but definitely a part of what brings people here.

Some of our energy goes into actively working with people who want to bring projects to Earth Island. Frequently new projects grow from existing projects or contacts in the wider environmental community. In part, we see ourselves as an incubator for independent 501(c)3s. Rainforest Action Network was one of our original projects and was Earth Island’s earliest spinoff. But if projects want to stay with us forever, that works out too.

We have relationships with dozens of foundations. Many of them see us as a great tool for learning about effective projects, a kind of one-stop shop. In turn, we need to listen carefully to their requests. Our projects need to abide by our internal procedures, such as checking in before sending proposals, so that we can compare notes about a given foundation. Our project leaders are among the most passionate about what needs to change in the world, and they may also be impatient about organizational procedure. But that’s our bias—to provide an organizational home for people with great ideas and drive who are going to change the world.


Jane Barker, senior vice president for programs, Safe Horizon (formerly Victim Services), sponsor of the Brooklyn Child Advocacy Center, Brooklyn, N.Y.

“In 1991 Victim Services, a large nonprofit victim assistance organization in New York City, issued a report that found that child sexual abuse investigations subjected victims to significant additional trauma and emotional chaos beyond the original abuse. On average, each child victim had to tell her or his story to eight different people—one child was interviewed by 27 different people.

“This system frustrated law enforcement officials, child protection workers and prosecutors, too. So we started bringing agencies together in New York to create a more seamless response to children who reported being abused. After developing a protocol, we conducted a pilot for about a year and a half, with agencies coordinating together and responding from their home bases. The results were vastly improved cross-discipline communication and children accessing counseling more quickly, but we were not successful in our overall goal to decrease repetition of interviews.

“We still had full engagement of the agencies in the planning group. They were willing to continue looking at ways to achieve the original goals. I was aware of and found out more about the Children’s Advocacy Center model (CAC). It was started in Huntsville, Alabama as a way to coordinate a more child-friendly response to child abuse. Different agencies come to one common site when there’s an interview to be done. When I brought the idea back I got a typical New York response: ‘Sure, that’ll work in Huntsville, but never in New York City.’ But I was encouraged to respond by bringing data on how these centers work and allowing the New York skeptics to hear from folks of similar disciplines (police, prosecutors, social workers) on how the model works in other jurisdictions and how flexible it can be. They fielded questions and got folks excited about the model and its potential for New York.

“Our approach in developing this center was very important—we had all the agency partners involved in planning. It wasn’t, ‘We will build it and they will come.’ People on the planning committee became internal advocates within their agencies to get buy-in. Having their involvement pushed us to have a variant on the typical CAC model. Based on our experience with the pilot, the representatives of these agencies pushed to have agency staff co-located—making it logistically much easier to coordinate a response. We also combined the child-friendly space with discrete spaces and separate entrances that police could use to interview suspects.

“We opened in October of 1996. Our success in New York has led to attention from existing centers interested in moving to co-housing. We’ve been visited by people across the country and been asked to replicate the model in Staten Island and Queens. And we have established a New York State center for helping establish these centers across the state. Of course, we don’t always recommend the exact same model—we believe strongly in having each center be locally appropriate.”
For more information, see: Laura Colin Klein. 1999. “Lessons from Brooklyn: Strategies for Developing a Co-located Child Advocacy Center.” New York, NY: The Conservation Company.

Three organizations, Central Boston Elder Services, Southwest Boston Elder Services (now Ethos) and Boston Senior Home Care were concerned that both elderly clients seeking service and elder service providers seeking referrals were bouncing from agency to agency searching for an appropriate contact. Toward the beginning of their collaboration they developed a shared telephone and referral system, Boston ElderINFO, to improve the initial client contact and improve communication with other providers.

Dale Mitchell, executive director, Ethos

“We collaborate to eliminate duplication of effort and to make operations more efficient, financially and programmatically. Our very first collaboration was negotiating a non-competition agreement on fundraising, to do all fundraising collaboratively. Our second agreement was to collapse all information and referral activities, which overlapped a lot and were very duplicative, into one. That became Boston ElderINFO.

“One advantage in creating a separate entity is subjective: it neutralized a lot of turf concerns that each organization had. And it’s more convenient—when we were doing collaborative fundraising, it seemed that we should do that in the name of an entity that represented all three of us—it’s unwieldy to mention the names of all three organizations every time we made a pitch! It didn’t cost much—just some lawyers’ fees—and left the door open for experimentation.”

Marta Frank, executive director, Boston Senior Home Care

“The structure was an evolving one for us.

“We have come to believe that structurally there are essentially two lines of services or products: charitable ventures and entrepreneurial ventures. The former operate with state funding; the entrepreneurial side is supported by our own dollars, corporate dollars, or special grants. Those programs have the potential to be a revenue stream to support our charitable or internal programs. There’s a 501(c)3 that contains all of this, the Elder Care Charitable Foundation.

“We each exist as individual organizations, with our own contracts and programs and neighborhoods to serve. Together we have consolidated some existing programs and built others from scratch.

“We see ourselves bonded together as far as innovation and expansion are concerned. The structure we have created has accommodated to our needs and makes the process relatively easy. There’s some economy of scale, and we avoid duplication. On our own, we’d each have to invest a lot to make it any good, and compete against each other, and confuse people. We’d like to make some money, and we’re not interested in competing with each other. Now we have to justify why we don’t do something together.

“We have a very important collegial relationship—we’ve learned to disagree and compromise with one another. We certainly see ourselves as functioning as a single entity. There’s a lot of similarity in our knowledge of the city and our willingness to grow beyond our traditional program portfolio and service areas. We’re each very different but we’ve managed to use these differences to our advantage. It’s worth all the hard work.”
Catherine Hardaway, executive director, Central Boston Elder Services

“I had the opportunity to work with these organizations prior to being executive director. I think that in coming together as a collaboration they were ahead of their time. Many organizations were out there competing and talking about coming together, but these three were smart enough and committed enough to put their egos aside and do it.

“That commitment lends strength to the collaborative. We have been through some tough times, but we banded together and have come out stronger. The collaboration weathered a change in one of the partners when I came in to replace Marilyn Anderson Chase, who had helped begin the process. That could have upset the whole thing, but we put in the time to talk through our big and little conflicts, build trust, and maintain the relationship. A large part of maintaining the collaborative work goes far beyond the executive directors. All areas of our organizations—program development, human resource, financial, for example—regularly meet on their own to collectively discuss programs, training and budgeting. The governance of the foundation is equally shared with representatives from all three agencies. In the end, for me, that means that the collaborative is integrated at all levels and very supportive.”

John Rakis, associate director for program  services, Osborne Association, New York City, NY

“When there’s a conflict, collaborations can fall apart. So the culture or our respective agencies was a concern. You can have similar missions but entirely different cultures. I thought it would probably make sense for my organization, the South 40 Corporation, to merge with the Osborne Association. We help disadvantaged people in prison prepare to find work and keep it after their release. (The name refers to the acres farmers let lie fallow—and which then gave high yields.) The Osborne Association had a treatment center in the South Bronx for ex-offenders. They also had an HIV program for prisoners upstate, an HIV information hotline for the state prisons, a program to unite prisoners with family members, and after-school programs. What they didn’t have was a strong employment component. One didn’t have to be an expert to see that these pieces fit together very nicely—they needed us and we needed them.

“And it turned out that our concern about different cultures was moot. The organizations in fact functioned very similarly—both were very inclusive, not rejecting anyone who came to the door. And, by coincidence, we even picked the same places for our staff picnics and for our Christmas parties. This was indeed a very close match.
“We hired consultants and hosted a number of meetings to help us figure out what to get done and what responsibilities we had. We engaged two law firms that worked pro bono and helped us with the formal papers, the due diligence and merger agreement. We engaged in exercises during the merger process to take the opportunity to restructure to work more effectively. We involved staff and board to redraft mission statements that reflected the broader scope of the agency. Our very active boards traded representatives.

“As a larger agency you also have much more influence on the public and an easier time educating legislators. The government is changing, and now they’re interested in the one-stop approach, in larger contracts with lead agencies instead of lots of contracts with community-based organizations. As a result of the merger, we’ve attracted more money—our combined budgets have gone from $6-7 million to $16 million.

“The fit was right—it made sense. With a merger, we could expand our ability to serve the mission.”

by Carol Lukas

The pros and cons of different structural options depend entirely on the goals you’re trying to achieve. But even with clear goals, I’ve found that there is a need for very concrete research into structural options before deciding. Often legal advice is needed because of the implications for member organizations (for example, a school district cannot be a member of a nonprofit association; a nonprofit cannot be a part of a joint powers agreement—at least in Minnesota).

One of the most helpful things I have done to inform myself of various structural options was when I was working with a forming collaboration of settlement houses—14 of them. We knew that there were alliances, coalitions, associations, and even nonprofit intermediaries that had formed in other metro areas to serve as the collaborative base for settlement houses. So I did a scan of about 12 of these from other states. I called and asked for their by-laws, operating agreements, membership policies and commitment forms, dues structures, anything that would help me understand their structure. Then I interviewed people at each to learn why they had chosen the structure they did, and how it was working. Out of that I ended up with three models that seemed to be viable choices for my client collaborative. We then weighed the three options in light of their goals, and settled on a hybrid model. This process worked very well, and moved us beyond guesswork into learning from others’ experience.

What I learned is that the number of structural options is limitless. There are structures I’ve never heard of, and the research I did just convinced me that I only touched the surface on the subject. So, as you think about what structure to choose, be sure to ask around—you will get excellent information from other coalitions and their experiences and choices.

Carol Lukas is the director of national services at the Amherst H. Wilder Foundation.

Noémi Giszpenc of Third Sector New England, associate editor of the Nonprofit Quarterly, conducted the interviews for this article.