Through this partnership, VPP will provide LAYC with up to $250,000 and significant non-financial support, including management assistance and access to VPP’s network of contacts and resources, for strategic planning. LAYC intends to use the strategic planning process to clarify its mission and develop a plan for improving the impact of its core programs and services. LAYC hopes to map an approach for replicating a subset of its core programs elsewhere in the District of Columbia and nearby suburban neighborhoods with large Latino populations. The LAYC team will also determine the most effective way to influence public policy on issues that affect immigrant and first- and second-generation youth and families in the region. VPP’s funding will enable LAYC to engage a strategic planning firm, retain content expertise, and support agreed-upon research and best-practice analysis. Planning preparation has begun; strategic planning will begin by June 1, 2003, and will be completed on or before November 30, 2003.

We are excited to have this opportunity to work with LAYC Executive Director Lori Kaplan, who is highly regarded in the community for her commitment, her talent, and her proven ability to partner with others to get things done. Her list of impressive accomplishments includes bringing the organization from a budget of $1 million to $6.5 million (projected), raising more than $5 million for capital needs, and launching a charter school and a business enterprise.

Lori oversees a 29-year-old organization that has a strong history of providing innovative programs that truly captivate young people. Founded in the late 60s and incorporated as a not-for-profit organization in 1974 to serve at-risk, first-generation immigrant youth from Spanish-speaking Caribbean countries, the organization initially offered job training and programs in the visual and performing arts and crime prevention. LAYC added several social service programs in the early 80s as immigrants from war-torn Central American countries arrived in Washington, DC, and had few other places to turn. In the late 80s, LAYC responded to increasing gang violence and drug addiction in the community by creating programs to combat substance abuse and engage young people in alternative healthy and safe activities. During that time LAYC also developed residential housing and foster care services for youth in need. In the mid-90s, educational enrichment programs were created to provide enhancements and linkages to educational and career opportunities, and family mentoring programs were developed to support the challenging needs of families in the community.

Learn more about LAYC.

Back to top

In theory, mergers, joint ventures, and consolidation of operations make a great deal of sense. Bringing organizations together—whether for-profit, governmental, or nonprofit—can be a powerful way to build stronger organizations with increased impact and reach, offering the tactical benefits of eliminating duplication, achieving greater efficiencies, coordinating services, and reducing turf battles. But in practice, consolidations can be more difficult and costly than they appear. The corporate world is rife with failed mergers and acquisitions.

The nonprofit sector faces many of the same challenges as the for-profit world and then some. Nonprofit organizations are often less driven by earnings and revenue than by values and mission. For many nonprofit executives and board members, the risk of losing control of mission and of their organization in a merger or consolidation far outweighs their concern for financial and operational efficiencies.

David LaPiana, a San Francisco-based consultant specializing in nonprofit mergers and consolidations, points out in the report Beyond Collaboration: Strategic Restructuring of Nonprofit Organizations that nonprofit executives will do almost anything—deplete their reserves, defer facilities upkeep, and reduce services and salaries—before considering a merger or consolidation. When they do consider some kind of restructuring, it is usually because their financial situation is desperate and the organization is on the brink of collapse. But the time to think about a merger is well before the point of desperation is reached. Restructuring should be considered from a position of strength, when an organization is capable of expansion and has the potential to absorb such change.

However, nonprofit leaders’ fears regarding mergers and consolidations are justified. Although mergers and acquisitions are commonplace in business, they present formidable challenges, often having higher than expected costs, proposed synergies that are never realized, and ill-conceived, ineffective integration of products or services, to say nothing of the likelihood of layoffs and damaged employee trust at the newly merged company.

Funders can be helpful in providing information about partnerships, mergers, consolidations, and resource-sharing models. They can help nonprofits think through the pros and cons of such an action, the implications it has for the organization, and what would be involved in negotiating and implementing it. Throughout this process, the underlying question must be: Does this action advance our mission? Funders can also help by pointing the nonprofits to specialists in the field who understand the issues related to nonprofit consolidations and asset transfers.

Funders must be careful not to force such actions, however. The parties involved have to see value in coming together, and the impetus for the consolidation or partnership has to come from the organizations themselves. If there is a lesson to be learned from business, it is that forced mergers do not fare well.

Nonprofits would be wise to keep an open mind regarding mergers, consolidations, and other restructuring options and consider them as a path to create stronger organizations and accelerate mission achievement. Organizations should spend time assessing their strengths and weaknesses. They should carefully examine the assets of their organization and of potential partners—boards, management, products/services, channels to funders, real estate, and so on—to see what might complement their operations and vice versa. And nonprofits should focus on what new opportunities would be made possible by a larger, stronger organization.

In this time of shrinking resources and increasing need, it’s getting harder and harder to go it alone. Under the right conditions, mergers and consolidations can be effective strategic growth tools. And just as in business, the creation of a stronger organization could actually change the dynamics in a region or field.

Back to top

Impressed by the comprehensive program offered at the charter school, Jack and Raul are excited about the prospect of taking the program to other areas of the city and influencing programs across the nation. "From the first time I heard about See Forever and the Maya Angelou School, I was amazed by the success they had enjoyed in helping some of the area's most at-risk teens,” says Jack. “After visiting the school and seeing the program, I knew that what they are doing is very special.”

Back to top

The first task facing CAII in Iraq will be to determine what kinds of support and supplies are needed for 4.2 million children to start the new school year on October 1. A major challenge will be for CAII and its subcontractors to work with the Ministry of Education to develop policy and train teachers quickly. Charito points out that for a country in upheaval, having children in school is an important sign of a return to normalcy.

CAII employs about 80 people in Washington, DC, and another 200 across the globe—often in political “hot spots.” Charito told The Washington Post, “We work in areas where conflict is about to end and turmoil is about to begin, and we love it.”

Read the VPP News profile on Charito Kruvant.

Back to top

Bob, a Louisiana native, says he “got hooked” on public policy and nonprofit issues through a popular professor at Yale Law School. After law school and two years at Oxford, Bob was drawn to Washington, DC because “I was interested in helping to make the rules” that affected nonprofit organizations and their constituents. For most of his career, Bob has worked for the prestigious tax law firm, Caplin & Drysdale, which represents a wide swath of American nonprofits, from the Robert Wood Johnson, Kellogg, and Packard Foundations to the Natural Resources Defense Council and a host of universities and hospitals. One of Bob’s first assignments at the firm in 1980 was to help establish Independent Sector, an umbrella organization created to represent foundations and the national nonprofit operations they support. Bob also represents the Council on Foundations on tax matters.

When you talk to Bob, it’s clear from his enthusiasm that the national YMCA is one of his favorite clients. The “Y” came to Caplin & Drysdale for help in 1981 when the IRS challenged the tax-exemption of YMCA fitness programs. After five years as an outside counsel, Bob went to work for the YMCA from 1986 to 1992. He opened their Washington, DC public policy office, helping them clarify their mission and develop a national and state advocacy strategy. “Working for the “Y” got me out of my legal box. I went on the road to talk and teach at local Y’s,” says Bob, who is still active with the national organization.

Bob’s advocacy work with the YMCA convinced him that the myriad of issues and challenges facing children and youth—especially low income youth—begs for a very vocal and visible movement on their behalf. “My dream,” he says, is the creation of a broad-based advocacy coalition that includes service providers and funders and promotes the cost-effectiveness of meeting the developmental needs of children up front, rather than trying to put the pieces back together after kids are in crisis.” Such an effort must include careful research to build a compelling case for increased public funding for preventive services for children. A few organizations such as the Children’s Defense Fund have gained important ground, says Bob, but what’s needed is a broader effort with strong, dynamic leadership. He suggests that while “saving one child at a time” through direct services is important, the youth service field must also embrace the more “activist” strategies used by some in the environmental and anti-tobacco movements. “There’s tremendous leverage in convincing government to allocate greater resources to kids.”

A voice for children is especially important given the current conservative political climate and economic downturn, Bob says. “I’m glad that we are galvanized by the current budget crisis, but the fundamental problem is not cyclical, “ he adds. Even in better times, government funding for children and families—particularly non-academic programs like child care, after-school programs, and youth centers—was woefully inadequate. And the popular notion that philanthropy and nonprofits can fill the funding and service gaps is simply wrong. Bob explains that government’s capacity to provide resources is so much greater than the giving capacity of individuals and foundations, that if government steps back from supporting youth and family-serving organizations there’s just no way they can meet the growing need for services. To this point, Bob encourages VPP to ensure that the capacity building and management assistance it provides to its investment partners includes helping them build public awareness of the need for increased public funding.

Bob believes that individual donors, foundations, and enterprises like VPP that take the time to understand the work of nonprofit service organizations can be valuable public educators and advocates. When government and the private sector ignore blatant needs and dismiss opportunities to address them, society pays a heavy price in terms of lost generations of young people who are unable to contribute their talents and who instead drain resources. Says the activist tax attorney, “We need to help people—including those who are more advantaged—see that the need for creating a healthy social environment for children is just as important as creating a healthy natural environment.”

Back to top

VPP Forum Highlights Nonprofit Survival
A forum following VPP’s April board meeting provided investors and board members an opportunity to meet the executive directors of all seven VPP investment partners and learn firsthand about the issues and challenges they face. The session gave the audience food for thought on how they might support the important work of these organizations.

Key points in the discussion included:

• Deep budget cuts from public and private sources have produced a funding climate that some of the executive directors describe as the worst they have seen in decades. At the same time, the need for many of their services has increased.
  
• Investment partners are becoming more involved in advocacy efforts to increase public awareness and support for services to children and families.
  
• VPP assistance can help investment partners weather the storm. It is important to focus on improving management, building strong boards, and thinking more critically about funding sources.
  
• Association with VPP provides validation for investment partners. It has helped open doors and influence other funders.

Back to top

Contributions to VPP Still Strong
Despite the dismal economy, VPP received $775,000 this quarter as VPP’s founding investors continue to honor their original pledge commitments. VPP has now collected $29.2 million of the initial $34.5 million pledged. Although there have been delays projected in remaining payment schedules, our founding investors continue to honor their commitments—a remarkable feat in these economic times.

Back to top

The Great American Bake Sale
Last month Share Our Strength (SOS), founded by VPP board member Bill Shore, was featured in Parade magazine to draw attention to childhood hunger in America. Parade and SOS have teamed up to sponsor the Great American Bake Sale, a national fundraising effort to generate funds for summer school and after-school food programs. Learn more.

Back to top

High-Engagement Philanthropy
In their recent article "High-Engagement Philanthropy: What Grantees Say About Power, Performance, and Money," authors Christine Letts and William Ryan share the results of their study of six high-engagement funders and their grantees, in which the grantees found the high-engagement approach effective and satisfying, but not without pitfalls. This article appears in the inaugural issue of the Stanford Social Innovation Review (SSIR), a quarterly publication covering nonprofit management, philanthropy, and corporate social responsibility. To subscribe, please visit the SSIR website, email info@ssireview.com, or call 650/725-5399. Read an excerpt of the article from the SSIR. Letts and Ryan (along with Allen Grossman) also wrote the seminal 1997 Harvard Business Review article, "Virtuous Capital: What Foundations Can Learn from Venture Capitalists," which fueled considerable interest in venture philanthropy in recent years.

Back to top