Serving on the board of directors for a nonprofit organization offers opportunities to support the community through focused, mission-driven work. It also brings the opportunity to help guide the organization in how it does that both now and in the future.
While the staff is charged with delivering on the plans and goals previously set, the board of directors is responsible for looking to the future. That responsibility includes the question of whether the organization’s mission will be delivered in the future to be of the most benefit to the community and, if so, what form that will take operationally.
The prevailing wisdom in the nonprofit sector is that there are way more nonprofit organizations than there are resources to go around to support their missions. Many of us have had the experience of tripping over each other as our mission delivery strategies overlap. But who wants to be the one to suggest consolidation, merging, or simply closing a struggling organization? On the other side of the coin, who wants to raise the idea of a thriving organization taking on an aligned organization’s “baggage”? Merging and aligning are touchy subjects!
Why Make This Decision?
Fiduciaries (board members) of 501c3 organizations are legally obligated to put purpose and community first. Your organization is “tax-exempt” because you are providing a service to the community. The mission of the organization and its impact in the community is a board’s priority obligation.
The 2021 American Law Institute’s Restatement of the Law for Charitable Nonprofit Organizations states:
In the case of a charity, fiduciary duties are owed to the charity’s purpose – rather than to the corporate entity.
A fiduciary’s good faith belief in what is the best interest of the charity must be objectively reasonable in light of the charity’s purpose.
Thus, the best interests of a charity may not be in its perpetuation; rather, in some instances, a charity’s purposes may be better carried out by its dissolution and the transfer of its assets to another charity to be used for similar charitable purposes.
Restatement, §2.02 (AM. L. INST. 2021)
Another way to look at it is to move thinking about HOW the organization will survive to the background while you first consider WHY the organization’s mission must survive.
Traditional Framing of the Board Role: The board is primarily responsible for sustaining and supporting the organization and its ability to exist in service to its mission. This is a “How do we stay in business?” kind of approach.
Purpose-Driven Board Leadership: The board operates in service to the organization’s purpose. As a result, the board is primarily responsible for maximizing positive community impact in service to that core purpose. Anne Wallestad calls this is a “Why does this organization exist?” kind of approach.
When you start to question whether your nonprofit is the ONLY organization that can and should deliver that service to the community, it is time to dig into answering the question of whether the community is best served by a continuation of your organization as is or whether the community would be better served by two or more organizations combining to serve the same mission.
When Should a Board Consider Making This Decision?
- When there is a Transition of Leadership – Before you hire a new Executive Director, stop to make sure that is still the best strategy for delivering your mission. Remember, it’s not an indictment of the staff or board to ask the question!
- When there is Brand Confusion in the Community – If you find that donors and community members tend to confuse your organization with others in the community, it may just be that you need to improve on your brand development. However, it may also be that your organizations are doing similar things and the nuanced difference between you is only discernable to the staff and board. If it’s the latter, you might want to entertain what an alliance or merger might look like.
- When Survival is Threatened Financially – If you are continually having trouble raising the funds necessary to fulfill your mission delivery (and you know you have the right fundraising strategies and professionals in place), then it may be time to look around and see if there are other organizations with aligned missions who are doing that better. Instead of competing with them, consider joining them!
- When Considering Expansion of Services – Before you create a whole new department and service infrastructure, look around to see if someone else is already doing that. They may already have the people and processes in place! If that is the case, you can decide whether to approach them about joining forces rather than duplicating efforts and the drain on philanthropic donations from the community.
What Would a Merger or Alliance Look Like?
The result of all this thinking and talking about joining forces doesn’t have to be an all or nothing proposition. For example, in their presentation on making sense of nonprofit collaborations Alex Neuhoff and his colleagues propose some possible “middle of the road” options for collaborating with other organizations, such as:
As you can see, alliances can come in the form of associations, joint programs, or coalitions. These types of collaboration solutions might serve your organization and the community well without necessarily needing the formal integration of merging with another organization or ceding the space entirely.
How Should a Board Go About Making this Decision?
- Normalize the Conversation – Talk about it BEFORE it’s essential. This is part of being on top of your nonprofit board member game! Talking and thinking about it, whether you are coming from a position of prosperity or scarcity, just shows that you are being proactive and serious about the mission and its importance in the community!
- List the Reasons you Might Consider using an Alliance or Merger to Expand – With a list like this in place, you will know what metrics to look for. It also helps keep everyone focused on your mission and your effectiveness in delivering it. It is great to grow, but not if you are growing into a space that is already occupied!
- List the Reasons you might Merge with a Like-Minded Organization – Look around and take stock of who else is working in your space or in your shadow.
- Put the Mission First – Be prepared to care more about the mission and the community you serve than personal pride and ego.
If you need help determining what the future looks like for your organization, please reach out to us! We offer nonprofit board advisory services to organizations that need to know what the best strategic move is to best serve their communities. Our team of experienced nonprofit leaders can help you determine what you should do next and come alongside you with the resources to make that transition successful. Find out more about how our nonprofit consultants can help today!
