Mergers helping social service agencies survive
by Jim Walsh - Sept. 27, 2010 02:42 PM
The Arizona Republic
Two of Mesa's largest social-service agencies have become examples of how other non-profits can survive during the recession by using new strategies to increase revenues or cut costs.
Through a combination of mergers, partnerships and even spinoff business, A New Leaf and Marc Center have grown into social-service mega-agencies.
A New Leaf gradually matured from a drug and alcohol treatment agency into a wide-ranging human-services provider, merging with struggling smaller agencies that provided similar services.
Marc Center is delving into new business ventures to raise funds for their programs aiding the developmentally and emotionally disabled, an approach called "social entrepreneurship."
"We are seeing movement toward mergers," said Patricia Lewis, senior professional in residence at Arizona State University's Lodestar Center for Philanthropy and Non-Profit Innovation. "We're seeing a whole variety of ways non-profits are dealing with the real financial issues they are struggling with right now."
Patrick McWhortor, president and CEO of the Alliance of Arizona Non-Profits, said about 25 percent of Arizona non-profits responded in a survey that they are interested in forming partnerships or mergers with other agencies."There is strong interest in it, but whether it turns into consolidation in the sector remains to be seen," he said.
"Arizona has more than 23,000 non-profits ranging from small neighborhood programs to large national agencies like Goodwill Industries. The goal is always the same: finding a way for a valuable social service to continue in the face of government budget cuts and declines in private philanthropy, McWhortor said." He said he would like to see larger non-profits follow the example of A New Leaf and Marc Center by considering mergers or partnerships with smaller, struggling agencies. "We'd like to see more larger organizations do this. We've been encouraging people to go this way," McWhortor said. A New Leaf and Marc Center have pursued different strategies, but the goal of preserving or expanding services has been similar. A New Leaf started with drug and alcohol treatment programs but now runs homeless shelters for men and families in Mesa, a domestic-violence shelter in Glendale, foster-parenting programs and transitional housing. It took on agencies in trouble if they provided a similar service.
Marc Center, meanwhile, followed a strategic plan, looking for ways to make money in some areas to compensate for losses in payments for its core missions of helping the developmentally or emotionally disabled.
Marc now operates a property-management company to handle the more than 50 properties it owns, a janitorial service to give disabled clients jobs while cutting costs, a food service in partnership with another agency and a partnership with a mental-health agency."The big are going to get bigger and the small aren't going to be able to compete," said Randy Gray, Marc's CEO.
With payments from the state and federal governments either capped or declining, "if we don't generate excess revenue from other places, we're out of business," he said. Marc's diversification allowed it to serve about 8,800 clients this year,compared to 3,200 a year earlier, despite declining government subsidies, Gray said.
Torrie Taj, A New Leaf's executive vice president for marketing and resource development and a former board member for a transitional housing program that merged with A New Leaf, said mergers help agencies to avoid duplication in programs and spread out administrative costs.
She said the July merger between the housing agency, A and A Cottages, and A New Leaf not only preserved the transitional housing program but allowed it to expand and improve, rather than stumbling along on a limited budget. The program gives young women who either were foster children or group-home residents a place to go after they turn 18."There's too many small non-profits all competing for the same dollars," Taj said. "We wanted to make sure the girls were still helped. It was a trust issue."
When the state decided it would no longer fund group homes, the agency started to seek out potential partners, said Bill Scott, a former A and A board member. That also left A and A with limited resources to support the transitional housing program. Scott said the agency was trying to avoid selling off its properties to a for-profit company that would have converted them into halfway houses for ex-prisoners.
A and A chose A New Leaf because it provided many of the same services. More than 50 children in the group homes were placed in foster homes and A New Leaf invested $25,000 in renovations at one house alone. "When we saw the handwriting on the wall, we thought, we don't want it all to go for naught," Scott said. "It seemed like our vision aligned with their vision. It could not have been a better fit."
Fred Phail, a former La Mesita family shelter board member and A New Leaf's board president, said A New Leaf's size makes it easier to absorb some losses and to obtain grants from foundations.
La Mesita operates a child-care center at the shelter so that mothers can obtain job skills to make them employable. But the child-care center is not subsidized by any government program, forcing the merger with A New Leaf in 1998.
by Jim Walsh - Sept. 27, 2010 02:42 PM
The Arizona Republic
Two of Mesa's largest social-service agencies have become examples of how other non-profits can survive during the recession by using new strategies to increase revenues or cut costs.
Through a combination of mergers, partnerships and even spinoff business, A New Leaf and Marc Center have grown into social-service mega-agencies.
A New Leaf gradually matured from a drug and alcohol treatment agency into a wide-ranging human-services provider, merging with struggling smaller agencies that provided similar services.
Marc Center is delving into new business ventures to raise funds for their programs aiding the developmentally and emotionally disabled, an approach called "social entrepreneurship."
Patrick McWhortor, president and CEO of the Alliance of Arizona Non-Profits, said about 25 percent of Arizona non-profits responded in a survey that they are interested in forming partnerships or mergers with other agencies."There is strong interest in it, but whether it turns into consolidation in the sector remains to be seen," he said.
"Arizona has more than 23,000 non-profits ranging from small neighborhood programs to large national agencies like Goodwill Industries. The goal is always the same: finding a way for a valuable social service to continue in the face of government budget cuts and declines in private philanthropy, McWhortor said." He said he would like to see larger non-profits follow the example of A New Leaf and Marc Center by considering mergers or partnerships with smaller, struggling agencies. "We'd like to see more larger organizations do this. We've been encouraging people to go this way," McWhortor said.
Marc now operates a property-management company to handle the more than 50 properties it owns, a janitorial service to give disabled clients jobs while cutting costs, a food service in partnership with another agency and a partnership with a mental-health agency."The big are going to get bigger and the small aren't going to be able to compete," said Randy Gray, Marc's CEO.
With payments from the state and federal governments either capped or declining, "if we don't generate excess revenue from other places, we're out of business," he said. Marc's diversification allowed it to serve about 8,800 clients this year,compared to 3,200 a year earlier, despite declining government subsidies, Gray said.
When the state decided it would no longer fund group homes, the agency started to seek out potential partners, said Bill Scott, a former A and A board member. That also left A and A with limited resources to support the transitional housing program. Scott said the agency was trying to avoid selling off its properties to a for-profit company that would have converted them into halfway houses for ex-prisoners.
A and A chose A New Leaf because it provided many of the same services. More than 50 children in the group homes were placed in foster homes and A New Leaf invested $25,000 in renovations at one house alone. "When we saw the handwriting on the wall, we thought, we don't want it all to go for naught," Scott said. "It seemed like our vision aligned with their vision. It could not have been a better fit."
Fred Phail, a former La Mesita family shelter board member and A New Leaf's board president, said A New Leaf's size makes it easier to absorb some losses and to obtain grants from foundations.
La Mesita operates a child-care center at the shelter so that mothers can obtain job skills to make them employable. But the child-care center is not subsidized by any government program, forcing the merger with A New Leaf in 1998.
