Strategy

Ask the Board Chair: Tim Allen, Board Chair of CLASS, Inc.

Recently, Tim Allen, Board Chair of CLASS, Inc. sat down to answer 5 questions about mergers:

CS: Many organizations are considering some form of consolidation or merger these days. As the Chairman of the Board of Directors at CLASS, Inc, how did your organization come to the realization that considering a merger was an important strategic move?

TA: There were a number of considerations, the first being the financial pressures that agencies like ours have been experiencing. Our operating costs increase with each fiscal year but our state and federal reimbursement rates have not kept pace with these increases. We needed to take a step back and consider all options that would allow us to preserve the mission of our agency. We needed to find a way to survive and thrive, and consolidation was our best option.

CS: The merger process requires a great deal of time, capacity, and energy from the Board of Directors. What should Boards considering mergers be prepared for?

TA: The Directors should be prepared to address new issues and a level of complexity that they may not have experienced ever before, both of which require the assistance of subject matter experts to help along the way.

We were fortunate in that we had people on our Board that had previous experience with for- profit mergers and acquisitions. While that has helped us a great deal, we still lacked the expertise in the non-profit space.

Finding someone to guide the Board in understanding the process, what it takes, what needs to be done, as well as the disruption that it causes, is critical in ensuring success.

CS: The merger process does not come without challenges. What are a few of the obstacles or challenges you have faced as Chair? As a Board? And how did you overcome them?

TA: Getting the right Team together, keeping that Team together and understanding what it’s going to take to keep the process moving forward.

As Chair, it was a challenge to keep the merger Team that we established as a subset of the Board in one piece. Every Board experiences turnover for a variety of reasons and we are not exempt from that. It’s a big commitment seeing this process through and holding that Team together. This was something we struggled with. My challenge was to keep that Team together because we needed the knowledge, experience, and comfort that we were accustomed to, during a time of great disruption and uncertainty.

Another challenge stems from the reality that there are many internal and external groups invested in the process that have a seat at the table. We worked hard and found success by keeping open communication with everyone throughout the process. We made sure that everyone was part of the process from its inception and that the level of engagement remained consistent.

It is important for Boards to remember that any challenges, such as those I mentioned, shouldn’t outweigh the benefits of a merger.

CS: Successful mergers are about culture and people, such as Board Members, Staff, and Clients. What insights do you have concerning working with and unifying two Boards?

TA: The best thing we did was to establish a working committee from each organization.

Early on, we arranged a meeting between the two committees. We got to know each other, established a working relationship, and developed a respect for each other. This became our foundation and the mutual respect we had for each other had a trickle-down effect. We took our excitement and comfort with each other back to our respective Boards and that had a very positive impact.

CS: What advice would you give other Board Chairs or Board Members that are considering a merger?

TA: First and foremost, if you don’t have anyone on your Board who has ever been through a merger or acquisition, get help fast. It is always going to be more work than you thought and there is always going to be something that comes up that you didn’t anticipate. Those are the biggest takeaways.

I would also advise the Board to take a close look at other agencies that they can work with and how that relationship will play out. Consider agencies they could partner with to more effectively meet the needs of those served. Seek-out an agency or agencies that have resources that can be shared that may be too expensive to acquire alone.

Are Mergers on Your Mind?

Conversations concerning mergers are now occurring across the country more frequently than ever before. We are seeing collaborations and merger discussions across every sector, including healthcare, human services, and even higher education. We believe there is real value in considering mergers as a strategy, but many organizations may not be prepared for the journey. This leaves many to wonder: What needs to be done while considering a merger?

There is no quick answer to this question due to the numerous factors and variables involved. However, we’d like to offer you the following tips from our own merger facilitation experience to help get you started:

  • Engage your Board. The Board of Directors is the single most important stakeholder when considering this type of strategy, so setting a plan for Board engagement and communication is critical. Even more important is making sure that the Board is part of this process from its inception and that the engagement remains consistent. 

  • Your why. What needs are you trying to fulfill in your organization? What value and benefit would a collaboration add? Understanding what your organization needs and how it can be improved, provides the foundation to support assessment and decision making.

  • Build it or Buy it. For those organizations that have reached a size where organic growth is no longer a viable approach, considering mergers as a means of addressing growth strategy, cost savings, quality, or competitiveness is a viable solution.

  • Understand risks and capacity demands. It takes a significant amount of time to build strategy, find candidates, manage the deal, and then integrate once the merger deal is finalized. This could translate to an organization being unable to undertake any other initiatives during this time. Factoring this in to planning avoids the pitfalls of being overburdened or strained.

  • Answer difficult questions first! Once the process is underway, there are several critical questions concerning the surviving entity that need to be answered in order to avoid wasting time: Who will serve as the Executive Team and Board Officers? What will the surviving brand be? Who will serve on the Board of Directors? Answering these questions early on will make decision making much easier as the process moves ahead.

  • Make the tough decisions. Once the merger contract is signed, the implementation process begins. It is during this phase that decisions need to be made around restructuring. These decisions are often very difficult and stressful but, with the right approach, frustrations can be minimized. For our insights on restructuring during an Organization Design project, click here.

  • Mergers are about people. An organization’s culture is formed over time through shared values and mergers begin with the people who make up that culture. In part, a merger is the unification of two cultures, so you’ll need to allow ample time for due diligence. During this phase difficult questions will arise as an in-depth review of financials, governance, human resources, organization charts, and planning documents will occur. This is also a time to become more familiar with people and their abilities through engagement, communication, and feedback.

Considering a merger is a significant decision for any organization but preparedness is key. A successful merger will help an organization eliminate competition, acquire talent, save money, expand geographic impact, and improve quality of service, among other countless benefits. Most importantly, a merger can ensure survival in a highly competitive marketplace and allow organizations to continue the positive impact they have on society.

If you have an interest in learning about merger strategy and discussing whether it is a viable approach for you, please connect with us here.

Community Quarterbacking

For firms focused on achieving their internal goals, it is easy to let big-picture thinking get lost in the fray, and opportunities for collaboration can be missed. The “community quarterback” model typically refers to an actor aligning resources to address the various elements of community development behind a single project, amplifying the impact a project can make. This can be a lead agency in a community, a third-party acting to organize multiple competing service providers, or a public-sector leader seeking to amplify the impact of public investment in a space. Once a leader is identified and everyone on the field begins to trust their decision making, new opportunities to get points on the board are identified, and the entire community can score. 

Finding your quarterback

A good quarterback needs to fit a few criteria. They need to be trusted by all stakeholders within a community. They need to have a clearly articulated vision for the future; a strategic plan that aligns the goals of every community partner and translates these goals into value adds for each organization. And finally, and maybe most importantly, the quarterback needs to be invested in remaining engaged with all stakeholders throughout the execution of whatever strategy is decided upon. Finding a partner that meets all of these specifications may seem impossible, but in reality, identifying existing overlap among the missions of community organizations can be done with the help of the right supporting organization. Engaging with a strategic planning partner like Curtis Strategy to conduct the stakeholder identification can help to find the best candidates to quarterback in your community, or help you position your organization to take the lead.

Quarterbacking stakeholder alignment

Quarterbacks see and understand the entire field ahead of them; they are calling the plays for their offense, keeping an eye on the defense, and calling audibles when they think a quick adjustment needs to be made. In housing, it is impractical to expect any developer to be able to understand the full picture, especially when a firm measures success not by profit on a project, but outcomes related to human development and long-term success of tenants. Finding a quarterback for your process lets you focus on the hard-work of delivering outcomes to your constituents, and gives you a partner to keep their eyes downfield. In the hustle to address the already busy day-to-day workload at a nonprofit developer, it is easy to miss a signal from a potential partner, or not see a chance to change formation to make your organization more effective. 

Breaking down barriers

Its easy to get caught in the silo of our own work; housing developers are focused on building new units of housing, human service organizations measure their success with counts of the number of people reached, and other economic development stakeholders are caught up in the rush to measure success to ensure continued funding. This approach leaves value on the table, not only for constituents who navigate a complicated roadmap to have their needs met, but also for the community development organizations that are missing out on ways to connect their services to improve the outcomes that led to the isolation in the first place. When a quarterback is leading, outcomes can be better connected, and organizations can multiply their resources through collaboration.

With a community quarterback leading, a community of service providers can be connected, and new partnerships can be formed. When considering how to best serve your organization’s constituents, you aren’t focused solely on metrics that count people reached, homes built, or products delivered; you’re seeking to improve outcomes that are impacted by a complex range of factors. Better outcomes are driven by smarter planning; so when service providers working in the same community open themselves up to new partnerships and strategies, everybody can win.