Boards of not-for-profit entities have a responsibility to steward and safeguard the programs, services, and resources of their organizations. Sometimes this work is straightforward; other times it is difficult and challenging. In changing or turbulent times, it is the latter. Challenging times can be the result of many factors including changes in policy direction, funding stresses, increased competition, or shifting public expectations.
If you’re unsure about the right time for a Board to consider integration or merger options, these are some of the signals to look for:
- Declining revenues and/or increasing expenses are making it impossible for the organization to be sustainable (Does your organization have financial reserves? Do you have a long-term budget projection? Do you have enough cash to meet all liabilities?)
- Funding levels that threaten the ability to provide expected volume and quality of service
- High administrative to service cost ratio
- Public and funding expectations for smoother, more integrated delivery of services across geographic boundaries, or across different service sectors (Is your organization aligned with current political priorities? Do you have a good sense of the landscape and whether/how it is changing?)
- Challenges of competing with larger, lower-cost organizations (Do you have a differentiated service offering? Do you know how your cost structure compares with others?)
- Failure to meet funders’ targets and expectations for service delivery (Have you analyzed your cost of service provision? If you are not meeting targets do you know why? Do you have a strategy to address service challenges)
- Challenges in recruiting and retaining the best frontline staff
- Inability to hire staff with the necessary functional expertise (e.g., human resource specialists, IT specialists, program specialists)
- Inability to offer programs and services that are innovative, leading edge, or best practice (Do you know what current leading practices are? Have you analyzed barriers to innovation?)
- Inability to attract and retain highly qualified Board members (Do you have a skills-based board? Are your governance practices and policy consistent with best practice in NFP governance?)
There are a variety of strategies to address these challenges, ranging from improving current practices to sharing services with other organizations (e.g., back office) to complete organizational mergers. An effective Board will address organizational challenges through informed discussion, identification of options, and objective analysis. This should not be threatening to boards; on the contrary, board members should understand that they have a duty to act in the best interest of the organization and its clients and that in changing times this may require bold new strategies.
By Melodie Zarzeczny
NFP Governance & Project Management
Visit Osborne-group.com for other Principals’ ideas and opinions on a range of topics. The Osborne Group provides interim executive management, consulting and project support across all sectors and over a broad scope of service areas.