The David and Lucile Packard Foundation

Organizational Effectiveness and Philanthropy Program

Strategic Restructuring for

Organizational Effectiveness

Strategic restructuring—including organizational mergers, back-office consolidations,

and joint ventures—is an increasingly popular option for nonprofit organizations.
While many nonprofits consider strategic restructuring only when faced with an
economic crisis, successful partnerships are frequently motivated by the opportunities
created when two organizations join forces. These opportunities, to name a few,
include expansion of service area, better integration of services, cost savings, and
enhanced market position. Certainly strategic restructuring is a serious organizational
decision that requires both a strategic moment and a strategic partner. When success-
fully applied, however, it has the potential to transform organizations, making it an
important tool for nonprofit leaders to be aware of.

The enclosed Partnership Matrix is meant to provide some basic information on the
various options for strategic restructuring. The brief case study below may inspire some
creative thinking on how strategic restructuring might be used by your organization.

Current or recent grantees of the Packard Foundation who are considering strategic
restructuring are invited to apply for support for the project from the Foundation’s
Organizational Effectiveness and Philanthropy Program. Instructions for submitting
a proposal can be found on our Web site at www.packfound.org.
 The David and Lucile Packard Foundation
Organizational Effectiveness and Philanthropy Program

How to Get Beyond Stuck in Strategic Restructuring

Negotiations: A Case Study
Used with permission from Strategic Solutions.
Please see www.lapiana.org for more information.

Recently we [Strategic Solutions] had the experience of facilitating negotia-

tions among four national organizations considering some form of alliance
(at the outset they were not yet sure what). From the beginning of negotia-
tions the parties saw great areas of common interest—but also had deep
concerns around losing their uniqueness and individual identities. They
were also at different stages of consideration of the partnership. Two of
the parties were ready to merge, another was unsure whether merger or
confederation was the right move, and the fourth was uncertain whether
its unique needs could be met by any form of close alliance, but wanted to
be at the table.

The discussion, as it inevitably evolved, characterized the central issue as

one of identity. Thus any alliance—merger, confederation, whatever—
would be judged in large part by how much it threatened each organiza-
tion's autonomy. This, clearly, was not a framework for getting anywhere,
since any form of alliance would require giving up some level of autonomy.

In order to shift the discussion to more productive ground, we used the

following method, which we call the Strategic Goals Matrix.

First, we asked each group to caucus separately and list, in writing:

• its most important strategic goals as an entity.
• its desired ends from the partnership.
While the caucus period was underway, we drew a chart with four
columns on it, each headed with the name of one of the organizations.

When the negotiators returned from their caucuses, we listed out each
group's strategic goals, side-by-side, and found, amazingly, that they were
very much the same. The graphic representation of these goals, repeated
almost word-for-word beside one another, was a transformative moment
in the process.

Strategic
Restructuring for
Organizational
Effectiveness

 The David and Lucile Packard Foundation
Organizational Effectiveness and Philanthropy Program

Next we listed each group’s desired ends from the partnership, again
side-by-side, and found that they were also quite similar. They broke
out into three categories:

. Activities that ease administration, such as combined back offices.

. Activities that enhance member services.
. Activities that can have a major strategic impact on the field.

When the negotiators reviewed the lists, they found a great deal could be
accomplished through a back-office consolidation. Essentially all of numbers
 and  could be achieved through the creation of a jointly owned manage-
ment services organization. This, in itself, was a major breakthrough, again
aided by seeing very similar goals laid out next to one another.

However, the negotiations committee felt strongly that the reasons they
were considering coming together were not only, or even primarily, to
achieve administrative ease. They returned to the list of their goals and
quickly agreed that advancing their strategic agenda was the real reason
they were assembled around the table. They also agreed that the only
way to advance those goals was to create a single voice in the field. Thus
they agreed to pursue creation of a confederation, as an interim step
toward merger.

In this situation, reframing the discussion away from identity issues to

instead focus on each organization's strategic goals motivated the negotia-
tors to come up with an agreement that they think will better serve their
constituencies. Also helpful was the use of a simple chart that made it
obvious to all negotiators how similar their goals and desires were. Finally,
the act of specifying their desires concretized the discussions, moving away
from abstract concerns over autonomy and toward very specific goals they
strongly desired to accomplish. This motivation was sufficient to overcome
the negotiators’ natural fears of loss of autonomy, allowing the process to
move on.

This critical discussion occurred at a meeting several months ago. Since

then, there have been many ups and downs in the talks, but the process has
moved forward. When autonomy concerns have once again arisen, as they
do regularly at our negotiations sessions, they now do so within a context
of shared agreement on the great things the groups hope to accomplish
together. This perspective helps us to overcome any roadblocks and get
back on track. We anticipate the first phase of the project—creation of
a confederated entity—will occur by year’s end.
Strategic
Restructuring for
Organizational
Effectiveness

 The Partnership Matrix

Administrative Consolidation
Contracting for services
Exchanging services
Management
Sharing services

Administration
Services Org.
Examples include: information
sharing, mutual support and
development of executives,
some joint purchasing, program Joint Programming Parent/Subsidiary
coordination, and joint planning Single focus or program
Multi-focus or -program
Joint Venture

Primary Focus
Integrated system Merger
Corporation

Collaboration
The David and Lucile Packard Foundation

Program
Organizational Effectiveness and Philanthropy Program

Greater Autonomy Greater Integration

• No permanent organizational commitment • Involves a commitment to continue for the • Involves changes to corporate control and/or
• Decision-making power remains with the foreseeable future structure including creation and/or dissolution of
individual organizations • Decision-making power is shared or transferred one or more organizations
• Is agreement driven

Collaboration Strategic Alliance Corporate Integration


Strategic Restructuring

Strategic
© 1999 La Piana Associates, Inc. - Strategic Solutions for Nonprofit Organizations

Effectiveness
Organizational
Restructuring for
The David and Lucile Packard Foundation
Organizational Effectiveness and Philanthropy Program

A Partial Bibliography of the Literature

from Strategic Solutions www.lapiana.org

Dewey, Kate R., and Sarah Wertheimer. Nonprofit Partnerships: Meeting the Needs of
the Marketplace. Pittsburgh, Pennsylvania: Dewey and Kaye, Inc., .

La Piana, David. The Nonprofit Mergers Handbook: Leader’ Guide to Considering,

Negotiating, and Executing a Merger. Saint Paul, Minnesota: Amherst Wilder
Foundation, .

La Piana, David. Beyond Collaboration: Strategic Restructuring of Nonprofit Organizations.

San Francisco, California: The James Irvine Foundation, .

Lewis, Fritz C., and Charles R. Chandler. “The Urge to Merge: A Common Sense
Approach to Association Consolidation.” Association Management. Washington D.C.:
American Society of Association Executives, March, .

Mattessich, Paul W., and Barbara Monsey. Collaboration: What Makes It Work: A Review
of Research Literature on Factors Influencing Successful Collaboration. St. Paul, Minnesota:
Amherst H. Wilder Foundation, .

McCormick, Dan H. Nonprofit Mergers: The Power of Successful Partnerships. New York,
New York: Aspen Publishers, Inc., .

McLaughlin, Thomas A. Seven Steps to a Successful Nonprofit Merger. Washington, D.C.:

National Center for Nonprofit Boards, .

Winer, Michael, and Karen Ray. Collaboration Handbook: Creating, Sustaining and
Enjoying the Journey. Saint Paul, Minnesota: Amherst H. Wilder Foundation, .

Yankey, John A., Barbara Wester Jacobus, and Kelly McNally Koney. Merging Nonprofit
Organizations: The Art and Science of the Deal. Cleveland, Ohio: Mandel Center for
Nonprofit Organizations, .

Strategic
Restructuring for
Organizational
Effectiveness
