Financial challenges facing nonprofits are driving organizational mergers and closings. Because the role of the nonprofit board is to ensure that the organization’s assets are used for designated purposes, the board must be thoughtful in deciding if and when a nonprofit is no longer viable, and then exploring options for the future. There are valuable leadership lessons to be learned from boards that have undertaken the serious responsibility of merging or closing a nonprofit.
Consider that nonprofits provide vital services in education, housing, healthcare, employment, international development, and the environment, among others. The continuity of particular services might be essential to the welfare of certain people in a community; the legacy of a mission might be valuable to the future of the world.
David H. Roe, a Rhodes Scholar, Brig. General USAF (Ret.), and successful business executive, chaired the board of the U.S. Center for Citizen Diplomacy (USCCD), when they decided that the organization was no longer financially viable. USCCD had been dependent on private philanthropy and one donor in particular. After two years of deliberations, the USCCD board and CEO decided to merge with CDC Development Solutions (“CDS”) in the summer of 2012. (Note: CDS is a client.)
According to Roe, it was most important to the USCCD board to “preserve and the brand, a convening brand that catalyzes citizen involvement in work with people from other countries here or abroad.” For Deirdre White, president & CEO of CDS, the merger of the two organizations would strengthen CDS. “The core values of citizen diplomacy, the spirit of volunteerism, and of international engagement have been at the heart of our work since we were founded in 1990 to deliver business skills, pro bono, to markets and entities in need of that expertise,” said White. For both organizations, this was a win-win.
By integrating citizen diplomacy with CDS’s work in international corporate volunteering, local content development, and MBAs Without Borders, both the USCCD and CDS boards saw the opportunity to leverage their respective strengths to achieve their newly crafted mission: “To reinvent how public, private, and social interests converge to address global challenges,” and vision: “A culture of sustained collaboration that improves lives and communities worldwide.”
The merger also addressed USCCD’s financial dilemma; CDS’s revenue model is driven primarily by fees for services, particularly through corporate programs.
Dione Alexander is vice president, Midwest region, of the Nonprofit Finance Fund (NFF), one of the nation’s leading community development financial institutions. Alexander chaired the board of Detroit’s Simon House, a residential shelter program for women with HIV, when the board closed the organization this year. The government funding on which the nonprofit depended was shifting away from smaller organizations making Simon House unsustainable. The ultimate closing represented the culmination of two years of board work-– deciding which programs to transfer into which nonprofits, how to transition buildings to nonprofits that could make good use of them, and most importantly, how to assist each and every client and resident so that services and housing would be seamless.