Candid Learning - Collaboration Hub The Merger of Network for Good and Groundspring: Two Nonprofits Combine Their Complementary Strengths to Increase Charitable Giving and Efficiency Participating Organizations ● Network for Good Board of Directors, Bethesda, MD ● Tides, San Francisco, CA Please note that all data below was derived from the collaboration's nomination for the Collaboration Prize. None of the submitted data were independently verified for accuracy. Formation Type of Collaboration: ● Joint Programming to launch and manage one or more programs ● Administrative Consolidation to share, exchange, or provide back office services such as accounting, IT, human resources ● Merger by which governance, programs and administrative functions have been combined but which may or may not have included the integration into a single corporate entity. Geographic Scope: National Collaboration Focus Area: Philanthropy Population Served: Other Year Collaboration was Established: 2006 Goals Sought Through Collaboration: ● Expand reach and/or range of services / programs ● Maximize financial resources ● Leverage complementary strengths and/or assets Reasons Prompting Collaboration: ● Competition for funding, donors and/or clientele ● Advancement of a shared goal ● Response to a community need Who Initiated Collaboration: ● Board member(s) ● Executive Director(s) / CEO(s) / President(s) Number of Participating Organizations: 2 Nature of Funder Involvement: Funded implementation Were Partners Added or Dropped?: Yes Consultant Role: To draft the governing agreement or provide other legal advice The merger of Network for Good (NFG) and Groundspring is special for two reasons: it succeeded (most mergers don’t), and it succeeded on a scale far beyond the most optimistic projections. Two organizations that separately raised $37 million a year for a few thousand nonprofits as one generate well over $100 million a year for 150,000 charities. In the dot-com boom of the late 90’s, small nonprofits were left on the wrong side of the digital divide with no affordable way to reach supporters online. Two nonprofit entities were founded independently to address this problem: Groundspring was founded by the Tides Foundation to help socially progressive organizations by giving them low-cost online fundraising tools, and NFG was founded by AOL, Yahoo!, and Cisco to provide nonprofits and consumers with online giving tools. By 2004, both organizations had proven successful – Groundspring with a high-touch, training-intensive, subscription-fee model for online fundraising and outreach tools, and NFG with a low-touch, transaction-fee based model. Both were seeing a shrinking of funders and consolidation among the for-profit providers, yet increasing demand for their highly effective and low-cost alternatives to traditional fundraising practices. NFG and Groundspring saw an opportunity to have a greater impact on the nonprofit sector by combining their complementary strengths to increase charitable giving and efficiency. Management Management Structure: One Executive Director / CEO / President The Chairmen and Executive Directors of each organization outlined and negotiated the critical tenets of the merger. NFG had two small departments: one serving nonprofits and one serving donors. Groundspring served only nonprofits, had sales, training, and customer service staff and outsourced its back office shared services. The Executive Director of Groundspring became the leader of the nonprofit services department and reported directly to the CEO of Network for Good. Donor and Shared Services were provided by NFG and the contract with Groundspring’s shared services provider was significantly downsized. Network for Good and Groundspring merged in a two-phased approach. The first phase assimilated cultures and operations. Because the organization grew quickly to accommodate sector needs, a second phase was implemented soon after. All aspects of back office product development and marketing were merged into a cohesive sales, training, and customer service structure that seamlessly supports nonprofits, donors and partners from their first point of contact with NFG through their long term use of its services. These transformations fully integrated the two organizations under one COO who now oversees all operations. Impacts of the management structure: • Collapsing shared services has had major efficiency gains and cost savings. It led to a streamlined and unified experience for nonprofits as well as a drastic increase from 5,000 to 150,000 nonprofits served, resulting in a greater impact on the nonprofit sector. • Expanded and efficiently scaled training increased the average dollars raised per nonprofit from $6 for every $1 spent on our services to $25:1 today. • NFG launched its free training on www.fundraising123.org via webinars and in weekly tips. • Future collaborations allowed NFG to power giving across the internet: GuideStar, Charity Navigator, Change.org, Capital One’s Giving Site, Causes on Facebook, Kevin Bacon’s sixdegrees.org and a dozen other partners. Challenges Challenges to Making the Collaboration Work: ● Defining and measuring success ● Creating a shared culture ● Addressing lack of staff or allocation of staff resources Network for Good leveraged Arthur Andersen’s Merger Integration Methodology to guide the Groundspring Merger Plan. Its CEO and Director of HR both developed the methodology while at Andersen. Also, NFG used performance incentives and stay pay packages to reward key personnel. Openness and transparency were themes throughout the merger. The two organizations strove for consensus when arriving at solutions even if that required more effort. It had been predetermined that if consensus was unachievable during the merger process, the two CEOs would engage the Board Chairmen to discuss more complex issues. Ultimately, though, NFG had the final say. Impact Internal Efficiencies and Effectiveness: ● Financial savings - Combined / coordinated marketing ● Financial savings - Coordination / consolidation of programming ● Fund development - Access to new / more sources of funding ● Reduction in overall cost per unit of service - Reduction in overall cost per unit of service Community Impact: ● Increase in number of clients / individuals / organizations served ● Improved programmatic outcomes The primary learning of the merger was that by combining cost-effective, fee-based technology with widely-broadcast free training, Network for Good could not only significantly grow its audience and its own sustainability through earned income, but it could also lower costs and increase donations for the nonprofits it serves. Key outcomes of the merger on the organizations: • Reduced combined annual budgets of $5.1M to $3.6M in 2006 • Increased the number of nonprofits served from 2006 to 2010 by nearly tenfold Key outcomes of the merger on the community: • In 2005, the two organizations drove a sum of $37M to the sector, and now drive well over $100M to the sector each year. • Increased the number of nonprofits served: just over 4,000 in 2005 to 40,000 in 2009. Model The merger of Network for Good and Groundspring was proven successful because a careful analysis of the two national organizations was made prior to collaboration, and each partner sought a partner that would help it achieve its core mission faster and more efficiently. Two national organizations with similar missions can benefit from mergers provided their executive directors and boards seek out partners who have: • similar missions, • comparable audiences, • complementary strengths, • consensus on how to go about the merger, • win-win alignment on goals, • and similar views of how success is measured. When considering Groundspring as a potential partner, Network for Good thoroughly evaluated both organizations’ core competencies to produce greater collective resources. NFG had developed a strong brand and had only one rudimentary solution for its growing audience of nonprofits. Groundspring had a more robust tool set, training, and a recurring earned revenue stream, but lacked the brand awareness and capital for growth. Each organization saw that the other’s mission aligned with their own and that a merger would bring an advanced collection of resources to the nonprofit sector. A consolidation of back office functions also created a streamlined strategy that efficiently drove all aspects of the organization toward one goal. Network for Good is already offering merger guidance from key merger experts on when and how to merge in the nonprofit sector through its online learning center. Nonprofit mergers are generally avoided because it is difficult to objectively point to increased value. However, when a merger takes into account the organizations’ similar missions, complementary strengths, consensus on how to go about the merger, as well as goals for the merger, it is possible for nonprofits to escalate their social impact while increasing revenues simultaneously. The merger of Network for Good and Groundspring is an example of how two organizations can truly network for good. Efficiencies Achieved The quantitative benefits or goals for communities across the country were 1) more resources for nonprofits that 2) were raised more efficiently. These goals and the changes that resulted from the merger were measured not only in 2006 (the first year of the merger), but over three years that followed the merger: 2006 – 2008. In addition to revenue and expenses which were obviously tracked to