What does the restructuring process include?

La Piana Consulting has developed a process over many years of facilitating strategic restructuring projects with nonprofit organizations. This comprehensive process has been developed to ensure that:

• All parties to a restructuring process should feel heard, understood, and included.
• The process should not drag out indefinitely, and the negotiations should be organized and fruitful.
• The road to implementation should be clear to everyone involved, and the new or restructured organization(s) should move forward with confidence and optimism.

The Strategic Restructuring process encompasses the following stages. Though the details will vary according to the unique issues of the organizations involved and the type of partnership structure desired, the framework remains the similar for all strategic restructuring projects.

Stage 1: Assessment

In this first stage, the organization needs to be assessed for its readiness and suitability as a partner. This involves asking a series of questions about the organization and its people, and looking at the organization's strengths, weaknesses, and "unique ways of doing things." This is an extremely important step, as experience has shown that the readiness factors explored in this stage correlate with success in the actual merger effort. By understanding its strong and weak points relative to a potential strategic restructuring effort, an organization will be in a better position to anticipate difficulties before they occur.

Some of the questions and topics we cover at this stage of the process include:

• What is motivating your desire to partner?
• What are the outcomes your organization desires from the partnership effort? How will you measure accomplishment of these outcomes?
• How flexible is the organization in pursuing its mission? Is everyone in agreement on what the mission is?
• What are the critical issues facing your nonprofit? Are you currently in "crisis mode," or coming from a position of strength?
• Do you have the ability to speak with one voice? Was the decision to attempt a partnership discussed openly and honestly among all constituencies? Is everyone comfortable with supporting the group's decision?
• How solid are board-management relationships?
• Do you have a history of successful risk-taking? A growth orientation?

Stage 2: Negotiation

Once each organization has assessed its own position as a potential strategic restructuring participant, it is time to look at the pre-existing relationship, if any, between specific potential partners. Do the organizations know each other? Do they have a history of working successfully together? Do they trust each other?

The strengths, weaknesses, and cultural factors identified in Stage 1 will very likely impact both the course of the negotiations and the implementation of an eventual partnership, and this stage helps all parties to understand how. It also helps make each party more aware of its knowledge of and feelings toward its potential partner, and to understand where those thoughts and feelings come from.

Once all parties have explored their own and their potential partners' suitability for partnership, we delve more deeply into the specifics of what is possible. We review the types of partnership, and discuss specific questions relevant to each type. When appropriate we bring in legal counsel to explore specific legal issues that may be relevant to a potential partnership, such as the impact of union contracts or employment agreements.

While each negotiation process is unique, most organizations through each of the following negotiation stages:

• Board authorization and the development of a "good-faith" negotiations resolution
• Formation of a Negotiations Committee (to include the CEO’s and approximately three to five Board members from each organization.)
• Initial negotiation meeting and agenda formation
• Continued negotiation
• The due diligence process (examination of the financial and legal ramifications of a merger)
• Communications and rumor control
• Decision-making and Negotiations Committee recommendations
• Board discussion and agreement

Nonprofits entering into strategic restructuring negotiations will face a myriad of challenges. Some of these are "fact-oriented." Financial and legal liabilities that are uncovered, for example, can be explained and understood, their risk assessed, and a decision made about whether to move on or to halt the process.

Other challenges or concerns are more "human-oriented," and stem from such sources as fear, lack of trust, or envy. Fears can be raised by concerns for autonomy, self-interest, and the need to integrate cultures. In each case we discuss the issue or concern thoroughly, attempting to clarify misunderstandings, create compromises, and help everyone to articulate the advantages to be gained from continuing with the partnership discussions.

Implementation/ Integration

Implementation of a merger or other strategic restructuring is in some ways straightforward: you file the appropriate papers, wait the necessary time, and you are "restructured." It is recommended that the parties to a merger jointly hire one attorney to create and file the Agreement and Plan of Merger along with the other documents required to put a merger into effect within the state the organizations exist.

On the other hand, the integration of people and processes that makes real all the previous discussions can be trying and conflict-laden. The new organization should approach this integration phase with special focus on the following issues:

• Timeframe
• Use of legal counsel
• Creation of an integration plan. steering committee and potential integration sub-committees (HR, Program, IT, Facilities, etc.)
• Board integration
• Management integration
• Staff integration
• Managing culture conflict
• Program integration
• Systems integration

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