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Deciding to Restructure

Success Factors in Strategic Restructuring

Unfortunately, very little data is available about the success and failure rate of restructuring among nonprofit organizations.  However, through the work we have done, we have found that if several factors are in place before two (or more) organizations undertake some form of restructuring, the chance of success is much greater. These factors include:

Mission Focus

This is essential. If an organization can clearly and succinctly define its mission and the enhancement of its mission is the goal of the strategic restructuring, then the completion of the restructuring will be much easier.

Flexibility in pursuing mission

An organization must be willing to consider new ways of doing business or the restructuring process will be very difficult.

Strong Board-management partnership

Strategic restructuring needs the full support of the board and management of all the organizations involved. The stronger and healthier this relationship is, the easier the process will be.

Growth orientation

An organization that was developed to provide a singular service at a static size and does not see itself in a growth or expansion mode may have a very difficult time making the required commitment to the restructuring process.

A lack of divisiveness within the nonprofit

The restructuring process itself generates differences of opinion within an organization so it helps if the organization can be relatively cohesive at the beginning of the process. However, an agency that has endured poor funding for some time with low morale may also find the process rejuvenating as it signals a major initiative toward resolving some of the financial obstacles with which the organization has been dealing.

No immediate crisis

If an organization is not in an immediate crisis, it has the opportunity to selectively consider partners and what form of restructuring best suits its strategic plan, and thus any restructuring effort is bound to be more successful. If the organization is struggling with an acute cash shortage, coping with huge growth, recovering from a recent public relations fiasco, or engaged in a major internal power struggle, it may not have the energy to focus on a new and challenging opportunity such as that represented by a restructuring effort. It might be better to wait until the crisis is resolved before embarking on anything so time and energy consuming. An exception is the chronically-in-crisis agency that may just need to jump at a good opportunity, even if it knows it is currently not able to put its best foot forward.

Clarity regarding desired outcomes

If board leaders and senior managers are clear on what they expect from the restructuring process and these can be stated in a way that success can be measured, it will be much easier to recognize success and identify problems as the effort moves forward.

Positive relations with potential partners.

The restructuring process is difficult. If there is a good rapport and trust and between the organizations, this can only help.

Able to bridge differences, within & across

If an organization can demonstrate the ability to bridge differences within and across the organizations involved, this will again ease the restructuring process.

We recently participated in a study of organizations that have gone through a strategic restructuring process. The report on this study is called "Strategic Restructuring: Findings from a Study of Integrations and Alliances among Nonprofit Social Service and Cultural Organizations in the United States." Findings in this study support our prior work, showing that the most important success factors have been:

• A staff or board member who championed the process
• Board support and encouragement
• Positive board-executive relations
• Organizational risk taking and growth orientation
• Positive past relations with other organizations involved