2020 Lane Reports

Doing more good by joining forces: A formula for nonprofits

Monday, May 4, 2020 10:00 am
by Marc J. Lane

crains chicago

 

StreetWise is now “powered by YWCA Metropolitan Chicago.” When COVID-19 is behind us, should Chicago’s other nonprofits consider merging with one another?
Streetwise

Mark Grapengater/Flickr

StreetWise, the nonprofit publisher of the weekly magazine that homeless people buy for 90 cents and hawk on Chicago’s street corners for $2, has merged into YWCA Metropolitan Chicago, a venerable nonprofit that boasts hundreds of programs to empower women and combat racism. Although StreetWise’s annual operating budget is only $800,000 and the YWCA’s is $24 million, their merger, consummated before COVID-19 changed our lives, was carefully pursued for the best of all possible reasons — to increase their reach and impact, to leverage their collective resources, to provide greater opportunity for their vendors and job seekers, and to build new social enterprises that overcome barriers to employment.

The merger wasn’t driven, as too many are, by need. Both organizations are financially sustainable and neither suffers from board or staffing issues. They’re motivated solely by their collaborative vision.

Only such mergers, designed to amplify the agility and impact of both merger partners, are likely to succeed – to improve and expand their services, to increase the quality and efficiency of their operations, to improve their financial stability, and to gain greater public support. By contrast, nonprofits should shun mergers intended to rescue an organization in financial distress, whose leadership has failed, or whose good intentions have run amok.

COVID-19 creates unprecedented challenges for Chicago’s nonprofits that serve the most vulnerable of our populations and communities. That’s why policymakers and businesses are providing support to the social sector. And major foundations have pledged to step up their direct giving and policy advocacy, and to contribute to community-based response funds that promote the health and economic well-being of the disabled, the unemployed, the incarcerated, veterans, those who are experiencing homelessness or live in public housing, and others at greatest risk.

Over time, the most resilient nonprofits will regain their footing and thrive. Some of them may become candidates for merger.

But the help that’s on the way may come too late or be too little for many struggling nonprofits. For them a merger isn’t likely to counter the economic fallout of the virus. Other nonprofits will rightly conclude that a merger won’t positively impact the cause or people they serve, or that a mission-driven merger is beyond their reach.

Those organizations may instead see merit in combining their fates by sharing their strengths with others, short of a merger, by achieving efficiencies and economies of scale. They may create subsidiaries or joint ventures to consolidate administrative services that might include finance, human resources and information technology. Or they may unite programs and cut costs while remaining independent of one another as strategic alliance partners.

May StreetWise and YWCA Metropolitan Chicago’s thought leadership inspire nonprofits’ boards to act in COVID-19’s aftermath — whether to consider supercharging their respective missions through vision-driven mergers, or to conclude that mergers simply aren’t for them and explore other innovative ways to collaborate with their peers for the common good.


Marc J. Lane is a Chicago attorney and financial adviser and vice chair of the Cook County Commission on Social Innovation.

Reprinted from Marc Lane's March 5, 2020 editorial which appeared in Crain's Chicago Business. Crain Communication Inc.'s permission is gratefully acknowledged. Copyright © 2020 by Crain’s Communications Inc.


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