AbilityFirst is a Southern California nonprofit serving people with developmental disabilities.   They came to La Piana Consulting at the height of the Great Recession in 2009 in order to think about strategies for responding to economic change.  Our Real-Time Strategic Planning (RTSP) process was a perfect fit for their needs because they wanted to know how to make good decisions in the face of change, and RTSP focuses on creating a Strategy Screen—or list of criteria—to guide decision making.

The challenge: the state of California provided approximately 50% of AbilityFirst’s funding either directly or indirectly—and the state was in the throes of a major budget crisis.  The last state budget process had resulted in significant cuts to state funded services, and the prospect for additional major cuts in coming years was certain.  AbilityFirst knew they had to be prepared to survive these cuts.

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In considering a strategic restructuring of a nonprofit organization it is critical to understand, and have agreement on, the nature of ownership of a nonprofit.

Ownership is very different in the nonprofit sector than it is in the for-profit sector. The reality in the nonprofit sector is that no one individual or group such as a management team or board can own a nonprofit organization.  There are no stock shares to be owned or traded. Any assets owned by the nonprofit must remain with the nonprofit.  If a merger of a nonprofit takes place, the assets of the nonprofit must remain within the surviving corporation.   (Similarly, if a nonprofit dissolves independent of a strategic restructuring process any assets remaining after resolving all liabilities must be transferred to another nonprofit serving a similar mission.)

Nonprofits hold special tax status in order to accomplish their mission with the resources developed under that tax status. Therefore, in a sense, through this special tax status, the nonprofit is owned by the public – this is why nonprofit corporations are sometimes referred to as “public benefit corporations.”

Board members, staff, clients, and the public have a profound interest in the organization’s future success and its ability to provide needed programs/services.  The board and staff have the responsibility to manage and make decisions for the organization that are in the best interest of the community and the mission served.

When an organization considers a potential strategic restructuring partnership, the leadership must consider this decision from the perspective of what is in the best interest of the mission and the people or issue it serves – first and foremost.  Clearly, the roles of employees and board representation are important factors in the process of considering the most appropriate organizational design.  But ultimately, the nonprofit’s mission and ownership by the public must be the priority in decision making.