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Philanthropy

Making Nonprofit Collaboration a Foundation Strategy: The Lodestar Foundation

The Lodestar Foundation supports nonprofit collaborations, mergers, and other cooperative activities as a major strategy.

In my recent Internet wanderings, I came across the work of a fascinating foundation which devotes much of its giving to support nonprofit mergers and partnerships. It’s called the Lodestar Foundation, and its president, Lois Savage, kindly agreed to be interviewed for this blog posting.

Jean Butzen: How did the Lodestar Foundation decide to support nonprofit collaborations, mergers, and other cooperative activities as a major strategy for your philanthropy?

Lois Savage: Since Lodestar’s inception 10 years ago, our mission has been to support and leverage the growth of philanthropy in two ways:

  1. Through capacity-building of organizations directly promoting philanthropy, volunteerism and public service (community foundations, venture philanthropy groups, volunteer centers, etc.)
  2. By maximizing the efficiency and effectiveness of grant funds. Because Lodestar’s chairman, Jerry Hirsch, and I had had personal experience with nonprofit inefficiencies and ineffectiveness stemming from overlapping missions and duplication of efforts, we adopted the strategy of supporting long-term collaborations as a way to maximize the impact of our grants in furtherance of our second objective.

Do you feel that this strategy has proven out over time? How many grants have you made and what is the range of your grants?

We have numerous examples of the synergistic value of collaboration (nonprofits being able to achieve more impact through collaboration), the efficiencies achieved through collaboration, and the leverage we have achieved by funding collaborations. As for some general conclusions, we have learned that the most durable collaborations are initiated from the ground-up, not top-down, and that while investment in this strategy is risk capital—not all collaborations will survive—there are good lessons to be learned from each project. We have funded approximately 30 collaborations and mergers. About 15 percent have either dissolved when funding stopped or not progressed to a full-fledged collaboration. The range of our grants has been from $5,000 (for a consultant to determine whether a nonprofit should merge or go out of business) to $3,000,000 (for a consolidation of homeless-serving agencies in a one-stop-shop campus). Most of the grants are in the $10,000 to $40,000 range.

I am very excited about your newest initiative, The Collaboration Prize, a $250,000 cash prize for the best nonprofit collaboration in the U.S. Can you tell us more about it?

In the spring of 2008, we launched “The Collaboration Prize” as a means to uncover successful collaboration models and blueprints that can be utilized to inform and educate the sector. We received a total of 644 nominations and uncovered a rich treasure trove of information that we are in the process of analyzing and categorizing, with the goal of making it easily available to the public. At this point in time, the 644 nominations have been pared down to 30 semi-finalists (listed at www.thecollaborationprize.org). A distinguished Final Selection Panel is in the process of selecting the eight finalists. The winner of the prize will be announced on March 5, 2009, during a collaboration conference in Phoenix, sponsored by the Association of Small Foundations. At that time, the 120 quarter-finalists will be named as well.

The response to The Collaboration Prize is great, but it still seems that despite the benefits of collaboration strategies, they receive little notice in the nonprofit sector. Why is that?

First, I think the response to the prize shows there is more of this going on than we realize. Second, collaboration is not easy—it takes time, utilizes already scarce resources, needs leadership, and requires resolving numerous challenges. Third, while the business world has voluminous scholarship on mergers and other restructuring models, there is no counterpart body of knowledge in the nonprofit sector, so models, blueprints, and guidance are extremely limited. Fourth, there is no secure network or marketplace (no “dating service”) where nonprofits can meet prospective partners or otherwise discuss collaboration issues with each other. Finally, almost no funding is available to assist nonprofits in facilitating the collaboration process. 

To your last point, donors sometimes worry that if they create a specific fund for collaborations, then nonprofits will be driven by the funding opportunity to try collaborations. Has that been your experience?

There is a big difference between program grants that require collaboration as a condition and capacity-building grants that facilitate collaboration. The former grants are funder-mandated and can drive the collaboration process; however, our grants are capacity-building grants, not program grants. We fund only collaborations that already are forming at the grassroots—our funding helps them complete the collaboration. The funder-driven collaborations generally are tied to a specific program area (“we will fund your project only if you do it in partnership with another nonprofit”). 

Because the collaboration process is difficult and because our funding is tied only to facilitating the collaboration, I never have encountered, nor would I anticipate encountering, parties collaborating just because the funding for the process of collaboration is there. As noted above, what drives nonprofits is funding for their programs and services—program grants that are conditioned on collaboration can be coercive. Our grants, which facilitate the process of collaboration, would not be a driver.

What advice would you give to a foundation that would like to start doing so?

I think there are several ways a philanthropic community can create an environment that encourages nonprofit collaboration:

  1. Provide funds for convening, on an ongoing basis, nonprofits working in the same area
  2. Provide technical assistance grants to nonprofits exploring a collaboration option
  3. Sponsor workshops that can provide nonprofits with tools to facilitate collaboration
  4. Support programs that bring funders, government, and nonprofits together to focus on cooperatively addressing difficult community issues.

When will your database on collaborations be ready for the public?

Currently, we are in the process of identifying a team to organize and categorize the prize data and design a Web site that will make the information easily accessible. We are hoping to have the site operational by March, 2009.

 

Find out more about the Lodestar Foundation or the Collaboration Prize.

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COMMENTS

  • Troy Green's avatar

    BY Troy Green

    ON December 19, 2008 12:52 PM

    I am interested in starting a non- profit one that would be targeted at professionals who are looking for work and have been laid off but are not having success with outplacement firms.  I want to incorporate a “transformation approach” that looks to prepare the professional candidate with the tools necessary to achieve in our current climate. Can you guide me in the right direction and perhaps forward me information that might be of assistance?

  • BY Jean Butzen

    ON December 19, 2008 03:23 PM

    Hi Troy,
    I really can’t help you with that question. Perhaps other readers could make suggestions?

  • My organization, Volunteer Memphis, approached the local Hands On affiliate and merged 1/1/07.  A few months later, our national partners Points of Light and Hands On announced merger talks.  We are now the “one stop shop” for volunteerism in the Memphis area and will change our name to Volunteer Mid-South in January of 2009.  The merger was not without difficulty, but was supported by the local foundations and corporate funders.  The funding came after we announced the merger and helped us with the things we needed to do to become one, more effective, organization - which included a move to new quarters.  I know now that I seriously underestimated the time that would take.  We’re finally in new space and poised to announce the new name, but still have some board members from the merged board who are still attached to projects that are not paying their way.  They can’t seem to understand that now the community has more choices when they support us financially so they may not choose projects they formerly supported.  We did see a drop in funding from people who formerly supported both organizations - they did not stay at the combined level but dropped to a lower level of funding - even though costs when up for the merged organization - despite the economies of combining forces.

  • BY Jean Butzen

    ON December 31, 2008 02:18 PM

    Definitely, this issue about how much time it takes to consolidate organizations is way under-estimated; that is very common in mergers and I think can be addressed by incorporating strategic planning directly into the merger planning process which is something that LaPiana and Associates advocates and which makes a lot of sense to me. Nonprofits are still learning how to do this merger process and there has been very little documentation of the mergers that happen which is something that I’m hoping will be somewhat rectified by the Lodestar Foundation database when it is up and running next spring. In terms of donors and board members, I would say that in the case of my own organization’s merger (see my blog http://www.MissionPlusStrategy.com for that story), it takes at least two years for the board members from the consolidating entity to fully get on board and for donors to get back to where they were prior to the merger so in your case it’s a problem of the merger process still being somewhat early for them which is why they are not fully on board. Have some patience and I predict that if they loved the former entities, they will come to view the new entity with respect, too.

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