The Strategic Restructuring Process The Strategic Restructuring Process Assessment Negotiation Implementation 34 35 Self-Assessment Are you aware of...? Motivators Desired outcomes Critical issues Organizational factors or red flags Financial assessment The market, your current place in it, and how you got here Other organizations in the market their strengths and weaknesses (with an eye toward potential partners) The forces social, economic, technological, political that have created your current position in the market 36 37 Identifying Potential Partners Joining Forces for Greater Impact Organizations with the similarities and differences in Which organizations can help you fill your major gaps Mission and vision Constituents served Types of programs Funding sources Strengths and Weaknesses Provide skills and expertise to increase your operating capacity Provide complementary services needed by your clients Make you more efficient Allow you to seize on major opportunities Give you access to additional resources 38 39
Partner Assessment The Strategic Restructuring Process Negotiation Level of trust Past experiences Usable skills and assets Mission and program compatibilities and complementarities Financial condition 40 41 The Negotiations Process See Handout C Issues to be Negotiated Board of Directors Boar d of Directors Identify Issues Negotiations Committee Process Due Diligence Board of Directors Decision Boar d of Directors Joint Legal Counsel Integration Management and/or governance Financial Human resources Capital Programmatic Communications Negotiate financial and legal issues Determine potential risks Rec or d agr eements Com municate progress to const ituents Disc lose infor mation Analyz e 42 See Handout D 43 Elements of a Board Resolution Time frame Type of partnership sought Commitment to keep other party informed Delegation to the negotiations committee Charge to the negotiations committee Elements of a Confidentiality Agreement Return of sensitive documents Disclosure of information to third parties Use of information for competitive purposes Public communications See Handout E See Handout F 44 45
Due Diligence Documents to review: Organizational Tax Insurance Personnel Financial / funding Capital / real estate Others? See Handout G Financial Impact and Analysis Financial Comparison Human Resource Comparison Budget Development Projection for combined budget Cost /savings analysis Donor Comparison 46 47 The Strategic Restructuring Process Implementation Example: Shared Services Organization Does activity D together Affiliate 2 Offers Service A Affiliate 3 Affiliate 4 Offers Service B Affiliate 1 Affiliate 5 Offers Service C Shared Services Organization 48 49 For example Integration Joint homeowner trainings Affiliate 1 Affiliate 2 Recycling / baling Affiliate 3 Shared Services Organization Affiliate 4 AmeriCorps program management Employer/PEO (payroll, benefits, hiring assistance), IT services, shared safetyofficer, centralized purchasing of construction materials andsolicitationof building material donations, centralized warehousing, fundraising for regional initiatives, coordinationof regional signature event Affiliate 5 Mortgage servicing Areas to be integrated: Culture Board Management Staff and volunteer Program Communications and Marketing Systems Finance, Fundraising, Human Resources, Technology, Facilities 50 51
Challenges in Integration Lack of a champion Scarce resources (time and money) Culture clash Board and staff development Creating reasonable expectations Why Partnerships Can Fail Partnerships do not fail because organizational leaders can t integrate financial systems or IT. Partnerships fail because people tend to hold on to their individual cultures and identity and fail to create a new culture. 52 53 Cultural Integration Intentional process Specific events, opportunities, times to reflect and create Respect the time needed to move through this process Maintain open two-way communications Celebrate small and large successes Resolve disagreements/problems immediately Determine communication/decision-making style Monitor internally and externally Questions? 54 55 Thank You! Discussion What types of strategic restructuring could help your nonprofit better serve your community? What might a larger number of organizations in your community do together? Contact Heather at gowdy@lapiana.org For more information, visit www.lapiana.org 56 57
Management Services Organization Relationship Before Management Services Organization Relationship After Corporation C Corporation D Corporation C Corporation D Management Services Management Organization Services(MSO) Organization (MSO) 58 59 Joint Venture Joint Venture Before After Corporation C Corporation D Corporation C Corporation D Programmatic Activity Management Services Organization (MSO) 60 61 Parent-Subsidiary Relationship Interlocking Boards Before After Pre-Merger Interim Step contr ols Interlocking Board Post-Merger Merged Corporation 62 63
Merger: Implementation Options Implementation Option 1 1 2 Assets and Liabilities Assets Dissolving Merger by dissolution into Merging corporation B into A, bringing assets and liabilities to corporation A and then dissolving corporation B 3 Assets and Liabilities Corporation C 64 65 Implementation Option 2 Implementation Option 3 Merger by dissolution Merging by dissolution, with assets left to the surviving corporation after liabilities are disposed of Merger by dissolution Merging by dissolution, with both parties dissolving into a new corporation Assets Dissolving Corporation C 66 67 Asset Transfer Transfers asset Offers cash 68