Tips and Answers to Your Questions
The Negotiations Process

The Negotiations Committee

Negotiating the terms of a strategic restructuring -- merger, asset transfer, parent/subsidiary structure, the creation of an MSO or joint venture corporation, etc. - is a complex process, and can raise many anxieties. The ultimate responsibility for such decisions lies with the boards of the nonprofits involved, and thus the boards must take the lead role in negotiations. Getting entire boards to participate is not usually practical, however, and in fact does not necessarily lead to the most productive process. We have found that the best approach is to create a single negotiations committee to take the lead role in identifying and addressing all of the relevant issues, and in coming up with a final recommendation as to how to proceed with the partnership. This committee does not have the authority to commit the organizations to a specific course of action; its role is to identify and address the issues involved, communicate with the organizations' boards and constituents, and make recommendations with regard to a final decision.

Who should be on the negotiations committee? With the exception of the executive directors of each organization, who should be included whenever possible, staff should not be involved directly. Instead, board members from each organization should be selected. Again, strategic restructuring decisions are the board's responsibility, and the board must take the lead role in the process. Staff can be used to support the committee, and to provide input to the committee via conversations with committee members, meetings, surveys, etc., but in most cases they should not be involved in the ongoing negotiations.

Whenever possible, negotiations committee members should be equal in number and type from the two groups. It need not, however, include solely the respective boards' executive committee members. A range of skills is needed by the committee; these skills should be sought anywhere the board might have them. Board members with financial analysis skills, as well as those familiar with their particular organization's financial condition, will be helpful with the due diligence phase of the negotiations. Human resource specialists or experienced managers can assist in comparing practices between the two potential partners. Board members with skills and contacts in insurance, real estate, labor law and a host of other business specialties will also be useful to the process. It is essential to include board members who understand and are passionate about the mission of one or both of the organizations, those who can articulate a future vision; and those who are close to the community and can reflect its anxieties, if any, about the merger. Above all, committee members must be reasonable people who can negotiate in good faith. They should be able to use, as appropriate, tact, humor, and an obvious commitment to the cause to help move the discussions through the rough spots.

As with any important board task, choosing members who will represent the organization well, who are trustworthy, intelligent, and who can be relied upon to follow through from meeting to meeting is essential. Consistent attendance is crucial to moving the process forward, and should be a requirement of committee membership. If opinion on your board varies regarding the advisability of the merger or other partnership, it may be wise to add a couple of reluctant or skeptical board members to the committee, so long as they are able to keep an open mind throughout the negotiations.