This blog post was originally written in February 19, 2020 by Patricia Q. Connolly and has been modified and updated.
Why Strategic Alliances Matter
The nonprofit sector is facing tremendous challenges, as demands for services grow while funding declines. This could lead to devastating consequences potentially impacting hundreds of thousands of people. As nonprofits consider strategies to adapt to this challenging environment and look for innovative solutions, strategic alliances may be an option.
What is a Strategic Alliance?
The term “strategic alliance” has a broad definition encompassing varying levels of collaborations, including, but not limited to, re-aligning resources, collaborating to increase efficiencies, or even a merger.
In its truest form, a strategic alliance is a mutually beneficial relationship among nonprofits, most often intended to strengthen mission and impact by coming together for a common purpose.
Learn more about the positive impact strategic alliances can have on an organization through The Power of Possibility.
Key Benefits and Examples of Strategic Alliances
Strategic alliances offer potential benefits yet also come with pitfalls and challenges. In fact, the success and salience of alliance efforts and their long-term effectiveness for improved allocation of resources is often debated. Boards that conduct thorough due diligence to mitigate risks and show commitment to supporting management throughout the process see long-term success.
Will a strategic alliance further our mission?
Nonprofit boards can begin evaluating the opportunity by analyzing factors like the ones for-profit boards consider in M&A oversight. This includes synergies, cost savings, efficiencies, and work force issues, culture and values, among others. Directors also need to carefully review various information related to the other entity, including articles of incorporation, bylaws, board policies, audited financial statements, audit reports, contractual arrangements, litigation, insurance coverages, and other material documents.
These will allow you to identify potential challenges and determine if the entity is the right fit for the organization.
Why and when should my nonprofit consider a strategic alliance?
It is a nonprofit director’s obligation to mitigate risk and oversee opportunity. As such, directors should regularly review the nonprofit landscape for areas of opportunity and strategic growth through alliances. However, timing and execution are critical. Strategic alliances are often triggered during times of financial crisis and vulnerability, stagnation, management turnover, or with funder encouragement. Strategic alliances should not be rushed into as a result of external factors or pressures. Instead, ample time should be taken to conduct careful analysis and engage leaders, staff, funders, and other stakeholders to generate the buy-in critical to the alliance’s success.
There are countless examples of successful nonprofit strategic alliances and just as many that have failed. Boards can play an important role by asking the right questions. Here are two sample questions from our resource, Centering Purpose in Times of Change: A Guide for Purpose-Driven Boards:
- Should we consider merging, dissolving, and/or partnering at this critical time? How does each of these options help us further our collective purpose and our ecosystem?
- If we could successfully merge or create a strategic alliance with another organization, which one would we choose and why? How would this option help us further our collective purpose and our ecosystem?
The more time we, as nonprofit leaders, spend asking the right questions, talking about strategic alliances and the role that boards should play in contributing to the success of alliances, the better we will collectively contribute to building financially healthy nonprofits that foster community vitality.
Additional BoardSource Resources:
- Purpose-Driven Board Leadership
- A Risk and Resilience Checklist for Purpose-Driven Boards
- Choosing to Merge (members-only)
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