Nonprofit Sustainability Initiative

Courtesy of: The Music Center, L.A.’s Performing Arts Center
Photo by: Alex Pitt

Nearly a decade after the economic downturn, nonprofits continue to face pressure to deliver more services with fewer resources. In an effort to help the sector adapt to what the UCLA Center for Civil Society coined as the “new normal” in 2012, the Parsons Foundation partnered with the California Community and Weingart foundations to establish the Nonprofit Sustainability Initiative (NSI), a pooled fund designed to help nonprofits think seriously about collaboration.

The NSI helps Los Angeles-area nonprofits explore and implement formal partnerships leading to greater organizational effectiveness and efficiency. Known as strategic restructuring (SR), these partnerships typically culminate in agreements to combine some (or all) aspects of business, ranging from jointly managed programs and back-office consolidations, to shared ventures or full-scale mergers. Drawing from a practice that is commonplace among for-profits, the NSI seeks to normalize SR in the nonprofit sector – establishing an environment where service providers, funders, consultants, and university faculty understand and regularly engage in the activity as a strategy for enhancing impact and sustainability.

Managed by the California Community Foundation (CCF), The Ralph M. Parsons Foundation, and the Weingart Foundation, the NSI operates with support from the Ahmanson, Annenberg, California Endowment, Carol & James Collins, Durfee, First 5 LA, Hilton, James Irvine, JP Morgan Chase, and UniHealth foundations. The NSI employs several strategies to support SR:

Negotiation grants pay for outside consulting services to assist two or more partnering organizations in exploring, negotiating, and reaching a restructuring agreement. Grants in this category typically range from $20,000 to $50,000.

Integration grants are available to those organizations that complete the negotiation process with a formal restructuring partnership. These grants typically range from $20,000 to $35,000 and help cover one-time costs associated with implementation. Sample activities include rebranding, breaking leases, or merging IT and accounting systems. Integration applications require Board-signed negotiation agreements, detailed integration plans, budgets, and demonstrated allocation of additional resources toward the project.

What we’re learning. Expertly led by Blue Garnet and Associates, the NSI evaluations reveal:

  • Healthy organizations fare better during SR processes than their weaker counterparts;
  • Third party/neutral consultants are critical, offering structure, expertise, safety, and objectivity;
  • Outside funding acts as a stimulus, giving nonprofits opportunities to engage in the work without compromising general operating funds;
  • The process is valuable and builds capacity, regardless of whether or not the negotiation ends in a formal agreement; and
  • SR takes time – approximately 3.7 months for mergers, and 6.4 months for other types of restructuring.

 

The NSI has raised $3.7 million from 13 funders to date, including $675,000 from the Parsons Foundation. The fund has granted nearly $2 million to support 128 organizations engaged in 48 restructuring explorations. For more information on how to apply, please visit the California Community Foundation website by clicking here.