What is Strategic Restructuring?
Five Stages of Strategic Restructuring

Through many years of facilitating strategic restructuring projects with nonprofit organizations, David La Piana has developed and refined a process that is both comprehensive and effective.

• When done well, 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 Solutions restructuring process encompasses five general stages. Below we have outlined the sorts of issues and questions that must be addressed in each stage. 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 same for all strategic restructuring projects.

Five Stages of Strategic Restructuring

1. Internal Self-Assessment
2. Inter-Organizational Assessment
3. Discussion of Forms of Partnership
4. Negotiation and Communication
5. Implementation

Stage 1: Internal Self-Assessment

In this first stage, we undertake an assessment of the organization's 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. We believe that 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: Inter-Organizational Assessment

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.

Stage 3: Discussion of Forms of Partnership

There are many forms of strategic restructuring: mergers, joint ventures, administrative consolidations, parent-subsidiary structures, etc. Each of these mechanisms offers different advantages and benefits as well as posing unique challenges.

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.

Stage 4: Negotiation and Communication

While each negotiation process is unique, Strategic Solutions has developed a set of procedures that reduces as much as possible the stress associated with negotiation, while at the same time ensuring that it is productive, comprehensive, and gets you as quickly as possible to a well-considered decision. We take the organizations through each of the following stages:

• Board authorization and the development of a "good-faith" negotiations resolution
• Formation of a Negotiations Committee
• Initial negotiation meeting and agenda formation
• Continued negotiation
• The due diligence process
• 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 barriers. 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 barriers 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.

Stage 5: Implementation

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." On the other hand, the integration of people and processes that makes real all the previous discussions can be trying and conflict-laden. We can help the new organization through this integration, giving advice and assistance with regard to the following issues:

• Timeframe
• Use of legal counsel
• Creation of an implementation plan and steering committee
• Board integration
• Management integration
• Staff integration
• Managing culture conflict
• Program integration
• Systems integration