November 20, 2017
 
Determine Your Goal Before Seeking Partners for an Alliance

By Thomas A. McLaughlin

Tom McLaughlin
Alliances are an increasingly popular management tool for accomplishing specific objectives, such as increasing efficiencies. Being clear about what you want the alliance to accomplish will help your organization determine which one to join or to initiate.

Many nonprofit leaders are tempted by the idea of an alliance, but soon realize that the term covers a wide range of approaches, including short-term efforts that do not rise to the level of defined legal identity. Moreover, it is not always clear what can be gained from joining.

Every collaboration—such as a merger or an alliance—starts with the goal that each participating organization wants to achieve. Once a nonprofit has become clear about its goals, joining an alliance—or creating one—becomes a matter of selecting the best fit.

Alliances can take an almost unlimited number of shapes, and for that reason the term alliances is used as a catchall applying to highly formalized structures as well as informal ones. A fully developed alliance may even look like a network of nonprofits, each with its own corporate structure but each participating collectively in one or more common tasks.

A quick explanation of potential goals helps determine the best structure.

Your Organization's Goals

  • Keep your corporate structure unchanged and your board of directors as the entity’s ultimate authority: If this is your goal, then any alliance will fit. Examples include a joint choral performance series mounted by two arts organizations and a partnership of funders, technical experts, and health-care providers who offer a conference for nursing home employees. By definition, the relationship between members of an alliance is contractual. By contrast, a merger may change the corporate structure and will definitely change the powers of the board of directors in some way.
  • Gain financial savings: Look for simple, economics-oriented alliances, such as purchasing cooperatives. These are relatively straightforward efforts that try to gain lower prices for members by building large-scale buying power that will be attractive to vendors and motivate them to offer lower per-unit.

    It is important to be realistic about the impact that such alliances can have. Online competitors of all kinds often can aggregate buying power as well if not better than traditional purchasing alliances. Also, keep in mind that purchased goods and services frequently represent a small percentage of a nonprofit’s total expenditures, so even a relatively substantial savings can be small in total dollars.
  • Improve the quality of your backroom services: If your goal it to improve backroom services, then look for administrative alliances. These will typically offer services like IT, accounting and financial management, and human resource management. Notice that the realistic goal here is to “improve the quality,” not "save money.” Since most nonprofits typically don’t overspend on administrative services, saving money—especially significant sums of money—by joining an administrative alliance is unlikely. It is more likely, however, that you’ll get more bang for the same buck.
  • Offer programs and services jointly: To meet this objective, then start your own alliance. Be aware, however, that programmatic alliances are among the more difficult alliances to create. It is widely understood that the nonprofit sector is a highly fragmented service delivery system, in which several organizations typically deliver the same kind of service, and a few entities dominate. As a result, organizations seeking to collaborate around programs and services are likely to have just one or two alliance partners rather than many.

    Unlike the three other type of alliances described above, in which more is usually better, program alliances are likely to be highly individualized. Scale is not nearly as important for program alliances, and in fact it could actually be a hindrance. Moreover, the services offered by programmatic alliances are likely to be complementary rather than duplicative.
Nonprofits interested in program collaborations will likely find themselves designing their own effort with one or two partners. An exception would be quality-related efforts such as accreditation or perhaps training and education, although in these areas you’ll also find many strong entities offering the same services as a stand-alone operation.

Thomas A. McLaughlin is vice president of consulting services at Nonprofit Finance Fund and the author of Nonprofit Mergers and Alliances, recently published by Wiley & Sons. He can be reached at tom.mclaughlin@nffusa.org.

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