Sharing Administrative Services, Part IV: Joining Forces in the Back Office - Lodestar Foundation Resources
The Lodestar Foundation’s mission is to maximize the growth and impact of philanthropy by encouraging philanthropy, public service and volunteerism; and by supporting long-term collaborations among nonprofits working in the same area in order to increase efficiency and eliminate duplication of efforts. It has been involved in nonprofit collaborations across the sector, a recent initiative being the Collaboration Prize.
Collaboration Prize. Instituted about four years ago, Lois Savage states the Collaboration Prize was designed with the hope it would find models of nonprofit collaborations so as to begin building the type of collaboration research that is often seen in the for-profit world. Although named the “Collaboration Prize,” the prize is not limited to simply administrative collaborations as defined by La Piana Associates. It instead covers collaborations generally (including mergers) but with “a spotlight on collaborations among two or more nonprofit organizations that each would otherwise provide the same or similar programs or services and compete for clients, financial resources, or staff.” It received an unexpected overwhelming response with 644 nominations from all 50 states and the District of Columbia.
Savage briefly discussed three findings. First, Savage states there is a vibrant collaboration environment in the nonprofit world, full of many creative and diverse collaboration activities across all segments of the nonprofit sector. Among the nominees, 50% were in the area of joint-programming, 20% mergers, 20% administrative consolidations, and the rest were hybrids. Second, most collaborations were initiated by staff and/or board members. Third, the motivation for collaboration was driven by five different desires: to improve the quality of services provided, to maximize financial resources, to expand the range of service, to serve more clients, and to improve program outcomes.
Lessons from an Unsuccessful Collaboration Project. Among the Lodestar Foundation’s activities, Nicole Wallace highlighted a collaboration project in which the Lodestar Foundation also underwrote the shared common space for a group of small youth serving organizations that co-located in a space in order to realize economies by negotiating as one unit (e.g., gain better amenities like conference rooms, board rooms, more sophisticated equipment, etc.). Although the project was ultimately unsuccessful, Savage provides three reasons for the project’s failure that can be learned from:
- First, the high staff turnover at all but one of the small agencies caused a lack of institutional memory as to why the organizations had come there initially and what they had hoped to achieve. Ultimately, CEO buy-in was not possible without this educational process and the constant education of new executive directors eventually became too burdensome to carry out.
- Second, the organizations faced the problem of an under-resourced project. Savage explains that with more common area comes additional costs and this problem was only compounded when trying to explain the benefits to a “revolving door of executive directors.”
- Third, Savage states there was a lack of a mutual party to oversee the actual arrangement. While the collaboration was supposed to be a group of peers working together, ultimately, the one stable organization was burdened with trying to educate everyone and keep everything going. Savage explains “when one person has to assume [an] ownership role, it just kind of destroys the equity among the group and other people [become] resentful.”
Even after hearing the Hunter Museum, MACC, and Lodestar Foundation experiences, organizations may still be unsure as to what constitutes the right conditions for sharing administrative services. While there is no “perfect answer,” Stan Birbaum and Robert A. Kret leave some last words of advice. Regarding budget size, for a partnership like MACC, Birbaum suggests both large and small organizations are not always ideal. For example, a large organization may be easier to manage on its own and the costs paid to administer the collaboration may not reap sufficient rewards; and a small organization have may have such resource constraints that it is not enough to work with (Birbaum estimates less than $0.5 million in revenue) and the cost savings would be minimal because expenditures on services are so minimal to begin with. Kret adds that for partnerships like CMC, it is less about the numbers and more about having an organization with the capacity to do it, a willingness to work together, and a priority of the community ahead of the individual organizations.
More information on the Collaboration Prize is available here. (The results of the findings will be available soon.).
- Emily Chan