Philly Nonprofits Are Getting Big Help to Merge and Consolidate. Here’s Who’s Behind It

Is the Philadelphia nonprofit sector too bloated for its own good?

A group of local philanthropic organizations seem to think so, and they’ve created something called the Nonprofit Repositioning Fund to encourage nonprofits to consolidate, merge, buy each other out, and even dissolve. With goals of improving the capacity, effectiveness, and financial health of local groups, the following funders have collectively committed $1,425,000 to be used for this purpose over the next three years:

  • North Penn Community Health Foundation
  • Samuel S. Fels Fund, the Scattergood Foundation
  • The Barra Foundation
  • The Philadelphia Foundation
  • United Way of Greater Philadelphia and Southern New Jersey
  • William Penn Foundation
  • Lodestar Foundation of Phoenix, Arizona

Recent statistics show that the Greater Philadelphia nonprofit sector generates over $11 billion in annual wages. Some alarming examples of service duplication, undefined leadership, and high back-office costs have come to light as well.

The Fund will be making early-stage Seed Awards, awarding Exploratory Grants up to $40,000, and Implementation Grants up to $100,000 toward technical assistance and one-time repositioning activity costs. Nonprofit Repositioning Fund Director Nadya K. Shmavonian describes this unique grantmaking program like this:

The fund provides a safe space and financial support to explore repositioning activities as a strategic option to strengthen performance and deliver upon mission in a rapidly changing external environment, The fund will make grants to nonprofits so they can obtain the technical assistance required to thoughtfully explore long-term collaborations, and to implement repositioning activities where organizations find they can effectively combine their forces for greater impact.

To dig a little deeper, I connected with Ms. Shmavonian to learn more about this funder collaborative, which might come as a surprise to some local nonprofit organizations. When asked about common characters that the fund is looking for in new grantees, she said:

More than anything, we’ll be looking to assess the alignment of purpose among the partners, and the level of commitment they bring to achieving a thoughtful exploration or execution of an implementation plan. The potential for sustainability, and the ability to deliver services effectively and efficiently over time will, of course, be important, too.

We also hope and expect to see some truly imaginative collaboration ideas and models that may well emerge from non-traditional partnerships. Strange bedfellows, if you will, where services or offerings may be enhanced and augmented by newand heretofore unlikelyalliances.  Our effort is part of a national movement of similar initiatives, and while we have benefited enormously from the experience of other cities, we also seek to contribute to this dialogue by amplifying fresh models and lessons learned in the Philadelphia region.

Shmavonian shared that the fund isn’t interested in any topics or interest areas more than others.

Our funders are concerned primarily with the strength and sustainability of the nonprofit sector in our region (but yes, nonprofits focusing on health, education, arts & culture and other issue areas will be eligible). The fund is focused primarily on growing the menu of strategic, long-term collaborative options available to nonprofits to help them deliver upon mission sustainably, and with high performance. We want to routinize the consideration and practice of formal collaboration as an important strategic option for nonprofit leaders, boards and funders.

To do this, the fund will consider collaborations of two or more nonprofits that want to combine some (or all) of their activities in a formal, long-term or permanent way. Possible forms include alliances, joint ventures (including programmatic partnerships), administrative consolidation (e.g., space/staff sharing), mergers, acquisitions, and other types of formal, long-term collaborations. In rare instances, the fund will also consider dissolution planning for individual nonprofits (i.e., a dissolution that does not transpire in conjunction with a merger or acquisition).

The participating foundations’ involvement in the fund will be an evolving process that we'll be interested to lern more about as it matures. There are quite a few moving parts, but that’s typical of unprecedented collaborations like this one. Shmavonian said:

The eight founding members have been deeply involved and entirely hands-on in the development of the fund over the last two years, but now with a director in place, we are beginning to establish our "new normal." The members are passionate about the importance of the fund for the region, and will no doubt remain very engaged in its oversight. They are also committed to retaining their respective individual relationships with respective grantees, and may provide additional support to our projects, as appropriate.

While potential applicants may choose to have all of their early-stage (pre-grant) deliberations managed in total confidence with the director, the founding members will vote on every Exploratory or Implementation Grant that is made. The director will recommend grants and participate in all grant discussions, but is a non-voting member of the governance committee.

Undoubtedly, the fund will face some obstacles as it kicks off with initial grantmaking. This is what Shmavonian feels is the fund’s biggest challenge right now:

First, normalizing this as a routine conversation for funders and nonprofit leadership to engage in will be importantbut may also be challenging in the early days. This is somewhat new ground for our region, and there may be initial anxiety about the fund from both sides of the aisle. As a pre-emptive strike, we are conducting a series of outreach events with nonprofit leaders, board members and funders in an effort to demystify the fund. We also have confidentiality provisions built into our process, which hopefully will further allay some of these potential concerns. 

Second, it is essential that we have a diverse bench of technical assistance providers in the region. Professionals who have facility and deep experience in areas of strategic facilitation, legal considerations, accounting and financial services are essential to our model’s success.  We will be providing a number of trainings and information sessions in the coming year to help build this vital community and to stimulate greater information sharing.

And finally, she offers a piece of advice that the Nonprofit Repositioning Fund offers to potential grantees who are interested in collaborating for the greater good of Philadelphia philanthropy:

Remember that sometimes your greatest perceived competitors may also be your most promising collaboration partners. Keep an open mind. The fund is here to provide a safe place and resources for you to explore your options creatively.