Strategies For Survival

When the SUMMECH Community Development Corporation of Atlanta lost its development director in early 2003, the organization was left with several projects in the predevelopment stage and little capacity to move forward. In an environment with diminishing resources, adding staff overhead was not the best alternative. Instead, SUMMECH decided to partner with another CDC to serve as the project manager for its current housing projects.

“Partnering with another CDC which is already doing the same thing in their neighborhood and has the staff capacity made sense to us,” says Janis Ware, executive director of SUMMECH. “It allowed us to continue serving the needs of our Mechanicsville community without having to spend time and resources on hiring and training new staff. In the long run this model may allow us to save on staff overhead as well.”

Their nonprofit partner is Reynoldstown Revitalization Corporation (RRC), a mature CDC in nearby Reynoldstown. Over the past decade, RRC has successfully built over 50 homes and served as a catalyst for Reynoldstown’s revitalization, in the process building up its own organization. RRC currently has a real estate division with four staff members, including an architect. The opportunity to form a partnership with SUMMECH also has benefits for RRC, which is looking for ways to increase revenues while leveraging its existing staff capacity.

More CDCs are exploring this kind of strategic restructuring, especially those organizations whose very existence is threatened by cutbacks in philanthropic and government funding. However, strategic restructuring could benefit even the strongest nonprofit. In the private sector, for example, corporations are willing to consider alliances and mergers in order to achieve economies of scale.

In the 1990s there was a widespread conviction that every neighborhood could benefit from its own community development organization. However, the “one neighborhood, one CDC” attitude is rapidly losing support in the development and philanthropic communities, largely because it is difficult for small community-based nonprofits to maintain stand-alone operations that can operate effective programs. Strategic partnerships can result in cost savings, but may also require giving up a measure of autonomy and sharing decision-making power.

In a 2000 study, Amelia Kohm and her colleagues at the University of Chicago described strategic restructuring as two or more organizations forming a relationship to increase their administrative efficiency or further their programs through shared resources and information. Strategic restructuring is an umbrella term that includes many approaches to creating partnerships. There are four different examples that may be relevant to community-based organizations (CBOs): the planning-broker approach, joint ventures, peer consulting and shared program staff.

The planning-broker approach is recommended for organizations without adequate staff capacity to develop new programs. In this approach, the CBO is responsible for planning the activities necessary for its community and then finding the best entity to undertake the program and broker the deal. “This is an approach that should be encouraged across communities as it builds on the strengths of both organizations,” says Bill Duncan, senior program director for the Enterprise Foundation. “I have found that the planning is best done by the community-based group, while the program implementation should be done by the entity that does it best.” He has been advocating such partnerships while working with communities in Miami, FL, and Columbus, OH.

A CBO that has the ability to provide assets, support or access to certain critical resources can best take advantage of this approach. For example, a CBO whose support is critical in obtaining approval from a municipal planning agency may have the political leverage to broker a deal with a development organization. The value of such political capital should not be underestimated. Leaders of such CBOs should set a realistic value on their services to encourage other organizations to work with them.

An organization that has a good understanding of a certain population or a market is also in a good position to broker services and programs that benefit its membership. In Atlanta, the Community Opportunity Centers Inc. (COC) works with public housing and Section 8 residents in Fulton County and provides social service support. “COC finds the agency that provides the best service and develops a very specific non-financial Memorandum of Agreement with them to provide the service,” says Tyronda Minter, COC’s executive director. “This allows us to offer more programs to the community without the burden of staff overhead.” COC has written agreements for service with over 20 organizations.

The planning-broker approach is effective when the CBO understands the benefit it is providing the other organization. “The challenge is to realize the value of planning and earning some revenue for the brokering activity,” says Duncan. “Most experienced developers in low-income communities will vouch for the value that community-based organizations bring to the success of receiving community support for their projects.”

Joint ventures are gaining popularity in the community development field. Smaller CDCs are finding more experienced partners to undertake joint projects that require more capacity and greater experience to execute. Such partnerships may be with other nonprofits or for-profit partners. In most cases both organizations stand to benefit.

In Atlanta, the Community Alliance of Metropolitan Parkway (CAMP) wanted to purchase and rehabilitate a rundown large multifamily complex. CAMP had no experience in multifamily housing and chose to partner with the Cooperative Resource Center, a more experienced development partner that was able to successfully assemble financing. CAMP is responsible for generating community support and ensuring the availability of support services in the complex. To maintain control, CAMP has an ownership interest in the project.

Joint ventures are particularly common in the development of larger real estate projects because financial institutions prefer experienced organizations with considerable assets to provide a level of risk mitigation. This approach is particularly effective when the inexperienced partner is able to bring some resources to the deal. CBOs with control of land or some financing for predevelopment activities make effective partners, even if their experience and capacity are limited. In the process, these smaller organizations gain experience. For experienced developers, this approach allows them to reach new markets or to work in communities where they may not have the necessary political capital.

Peer consulting is a way for more experienced CDCs to leverage their staff capacity while allowing smaller CDCs to receive valuable technical assistance and experience in housing production. The partnership between SUMMECH and RRC is a good example but there are others. CAMP has a similar consulting contract with the more experienced Historic District Development Corporation to develop single-family homes. “It is a way for us to build capacity without increasing our fixed overheads or retaining expensive consultants by the hour,” says Bonnie Johnson, executive director of CAMP. “It allows us to develop capacity and increase production at the same time.”

The model of peer consulting is not new but has become more popular in recent years. The Enterprise Foundation and the Federal Home Loan Bank of Atlanta used a similar peer-mentoring model for historically black colleges and universities; both Enterprise and the bank paid for the peer consultants. More recently, Georgia’s Department of Community Affairs has funded peer consulting between affordable housing groups, provided the smaller CDC has a viable project in progress.

An experienced organization that wishes to provide consulting services must treat the smaller CDC as a valuable customer. “For nonprofits to succeed, they must be able to provide a high level of professional service to their customers,” says Kate Little, director of Enterprise’s Atlanta office. “Without good service, no amount of expertise will make the partnership a success.”

In addition, there must be trust and understanding between the organizations. The CBO seeking the assistance should be confident about the work of its peers; the nonprofit providing the service must feel that consulting is compatible with its mission.

Staff sharing is an attractive alternative at a time when administrative dollars are hard to come by. In the late 1990s, North End Area Revitalization (NEAR) in St. Paul, MN, did not have enough housing activity going on to justify the hiring of a full-time construction specialist, so it partnered with Hamline-Midway Area Rehabilitation Corporation to share one. The construction specialist worked on projects that were located in both organizations’ service areas and production grew substantially. In addition to saving on overhead costs, the organizations were able to get more competitive rates and better service because of the increased workload. “Staff sharing produced many indirect benefits not anticipated initially, including better prices from our contractors and the ability to get discounts on larger volume purchases,” says Dawn Stockmo, former executive director of NEAR and now the Midwest regional director for the Fannie Mae Foundation. “It also paved the way to building closer relationships and trust between the two organizations that finally culminated in a merger in 2003.” The construction specialist’s salary and related expenses were shared equally by the two organizations.

Staff sharing requires both organizations to have a good understanding of what they expect and the corresponding time it takes to deliver that service. Organizations interested in this approach should negotiate upfront about sharing of time and overhead costs and supervision. In Atlanta, several groups are actively exploring staff sharing for housing development and community outreach.

While staff sharing for a particular program may be appealing, it was not enough for Jim King in Cincinnati, OH. King, who was trying to create greater efficiencies for the Walnut Hills Redevelopment Foundation and the Avondale Redevelopment Corporation, knew that the communities were not ready for outright mergers. Instead, he created a third entity called the Community Redevelopment Group. King is the executive director of both CDCs, while his staff administers housing development and programs across both communities.

Since initiating this new structure several years ago, King has implemented several new initiatives and expanded programs and resources for both Walnut Hills and Avondale. The unique management structure demands ongoing education of funders and agencies, says King, but he believes that it is worth it. There is seldom any competition for the same resources, but when there is the occasional grant that both organizations are competing for, the quality of applications is equal because staff is committed to the success of both organizations.

The concept of strategic restructuring is appealing but not easy, and there are two basic steps that must be addressed to ensure a sound approach. First, it is important to analyze programs and organizations in a geographic area in order to evaluate existing resources and to identify overlapping programs and organizations that are already performing effectively. In 2002 the Kenneth Cole Fellows of Emory University did an analysis of the service areas of six CBOs and found more than 200 programs in those neighborhoods and several areas that had the potential for collaboration. “It was a real eye opener for us,” says Young Hughley, executive director of RRC.

The second step is to build trust and relationships with potential organizations and programs that will benefit from some form of strategic restructuring. This requires open and candid discussion of all relevant issues. Involving different stakeholders – including staff, board, community residents and funders – is time consuming but necessary to ensure that the advantages and disadvantages to both organizations are discussed. Only through open dialogue will potential opportunities for both organizations emerge.

Several Atlanta CDCs are discussing the creation of a more efficient housing production model, and other discussions have focused on sharing community organizing and safety program staff. In many cases, partnerships may not be the end result. But the conversation can build relationships and lead to other benefits, including more open communication and informal sharing between organizations. This is a valuable by-product and intermediaries and trade associations in all cities should facilitate better communications.

Strategic restructuring is not a panacea for the current environment of reduced funding and resources. Nor is this time-intensive, complex approach appropriate for every organization. However, executed correctly, strategic restructuring compels community-based organizations to take a fresh look at the way they do business on behalf of their neighborhoods. And if all goes as planned, the result can be a partnership that creates greater synergies, efficiency and program effectiveness.

 

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