Strategic Restructuring Does Apply to You

In this time of increased opportunity for environmental progress and a weakened economy, organizations are looking for creative ways to continue to succeed in the long term. ICL’s newest publication, “Creating an Environment for Success: Mergers and Other Partnership Structures for Environmental Nonprofits” gives you detailed information about a range of restructuring options, four case studies, and lessons learned.

Restructuring should be on your mind, even if you know that your organization is stable, and maybe even thriving. Here’s why:

• Partnership can create new opportunities that would otherwise be missed
• You may be approached by another organization (maybe with whom you have no current relationship) interested in merging with your group
• Your financial situation could change tomorrow, next week, or in six months
• Restructuring could create a better economy of scale for your organization
• Donors and foundations may look favorably on new organizational structures
• Restructuring done well helps to refocus and sharpen your organization’s mission

Strategic Restructuring 101

So, what are the options for strategic restructuring? Like many business and financial concepts, the different options can be dizzying. The five most common options include:
 

1. Merger – combining two organizations into one. One of the organizations is often stronger and better positioned than the other. A merger works out best when there is a similar culture among the two entities and a single mission can be agreed upon. Some of the challenges for mergers include waning brand loyalty, retaining staff, and dealing with the way things “used to be” both internally and externally.
2. Joint Venture – a contractual agreement between two organizations who are reaching to attain the same goal. Both parties agree to share risks and gains of the venture. Joint ventures are an example of the old saying, “two heads are better than one.” Combining resources freely will allow for successes that would never be possible otherwise.
3. Parent-subsidiary Restructuring – consolidates varying levels of each organization’s administrative and programmatic activities, often allowing the subsidiary group to maintain their own identity. The ultimate goal of this type of structure is greater efficiency and quality. Organizations that move toward a parent company sometimes do so to find stability in an extremely competitive market for funds.
4. Management Services Organization – creates a new organization to oversee the administrative activities of multiple participating organizations. This allows each organization to focus on its primary goal and mission while leaving the administrative work up to someone else. As with parent-subsidiary structures, this may lead to more efficiency internally.
5. Fiscal Sponsorship – gives unincorporated groups access to an incorporated sponsor’s tax-exempt status. The fiscal sponsor provides administrative services such as accounting and human resources, and covers the cost of these activities through revenues or expenses paid through the sponsored program. The sponsored programs often bear both organization’s names and as a result, the sponsoring organization may see more charitable donations and expand their reach.

Examples for most of these five examples can be found in ICL’s “Creating an Environment for Success.”

Restructuring can help your organization be more effective in fulfilling its mission and be more financially stable. All of the options require good planning, creativity, and some risk. Are any of them right for you? Will you be prepared? Download ICL’s free “Creating an Environment for Success” to learn more and to gain valuable lessons from four case studies of environmental organizations.

To give us your feedback or suggest other examples of successful restructuring in the environmental community, contact us.

-- From ICL's The Network - February 2010.