Kids Blowing Bubbles

There is a movement toward national nonprofit consolidation, but what’s good for one organization may not be good for another. Here are some factors to consider.

Operations

Pros and Cons of Local-National Nonprofit Affiliation Agreements

  • Kelsey Vatsaas
  • Curtis Klotz
  • 1/16/2019

Affiliates, chapters, agencies, satellite locations, related entities, associated groups — no matter what you call them, the local iterations of national nonprofits help carry out large-scale missions at the community level.

There has been a trend in the nonprofit sector toward consolidation and centralized affiliation models. The hope is that such arrangements will have financial and program benefits for all parties. But entering into these business and operational associations requires compromise.

There are likely to be both advantages and drawbacks.

There are more than two sides of the affiliation coin

National affiliation agreements are structured in so many different ways that you can only safely say, “If you’ve met one, you’ve met one.” No two are exactly alike.

Some affiliate organizations are highly centralized, with most decision-making and operational oversight resting in a strong national office. Examples include the National MS Society and the American Red Cross (ARC). At one time, MS Society affiliates were very autonomous, raising money and providing services on the local level.

Now they operate as one entity, with fewer affiliates offering services to a greater region. While these organizations still fundraise locally and hold connections to the community, most of the work required to run the organization is done regionally or nationally.

Similarly, the American Red Cross first organized local chapters into subsections of the country called regions, and then consolidated further to reduce the number of regions. Red Cross chapters share a strong branding identity and benefit from a national reputation, but they remain flexible to meet local needs.

Other national organizations come together in name only as loose affiliations of local entities that operate with great independence. There are “opt-in” arrangements at the core of some affiliations, where member organizations maintain their own identity, mission, and areas of specialized services, while combining efforts in certain program areas or sharing common performance standards.

Other models look and act like franchises —they may be fairly independent but are required to use certain common branding or meet certain fundraising goals on behalf of the national office.

Craft an affiliation agreement that addresses these areas

Choosing an appropriate legal and organizational structure for an affiliate model should be a thoughtful, strategic decision for any group considering this move. But no matter which form is ultimately chosen, the organizing documents should be conscientiously negotiated in each of the following areas.

Governance and corporate structure — Will there be one central organization with a single board of directors? Does each chapter or affiliate have its own board? How formally are the local organizations tied to the national organization?

Enterprise risk and legal representation — The legal structure defined in the affiliation agreement may necessitate certain types of risk management and legal representation. The level of corporate control that rests in the national organization will often dictate which entity in an affiliation is liable for certain types of risks and legal action. Lines of responsibility and liability that are not clearly defined by the corporate structure should be negotiated and clearly articulated in the organizing documents.

Organizational planning and strategy — Who makes decisions regarding the overall mission, priorities, and strategies of the organization? Do local affiliates lead the process or offer only input without decision-making authority? If board members or staff are included, which ones?

Marketing and branding — Questions about branding run all the way from logos and letterhead to control over print, social media, and web content. How these decisions get made can also vary. Is there a central marketing staff or leader? Do satellite offices each have a representative on a committee that oversees these decisions?

Program development and delivery — When it comes to day-to-day program operations, how much decision-making and responsibility for delivery is local and how much is centralized nationally. Across the spectrum of possibilities, what communication channels will be set up to ensure consistent, high quality delivery of the organization’s promised mission?

Outcome tracking and evaluation — When it comes time to report about the mission success of the organization, is that reporting done by location, by chapter, or at the national level? To facilitate data gathering and consistency, is there a central database or CRM platform that all affiliates agreed to use?

Technology standards and security systems — Affiliations of all types may find efficiency and cost savings by collaborating around managed IT and cloud-based applications. As with all of the components of any affiliation arrangement, the question of local control and decision-making versus national needs to be agreed upon. The related intellectual property rights for the data should also be considered.

Fundraising efforts and strategies — As in all relationships, both personal and organizational, it is vitally important that you have a clearly defined arrangement concerning money. A key question is how fundraising responsibilities and strategies are shared between national offices and their chapters. Do funds flow in one or both directions? Is each affiliate required to raise a certain amount of funding? Are donors segmented by geography according to the location of affiliates? Does the national organization lay claim to certain “national” funders?

Accounting and financial reporting — The structure of affiliation chosen may affect the type of accounting and financial reporting systems needed. Decisions need to be made about where contributions and payments will be accepted and processed. Bill paying and vendor relationships could be handled locally or nationally, depending on what makes sense for both the chapters and the national office. Agreements should spell out the level of access to any cloud-based financial information that will be granted to local offices versus the national office.

A give and take relationship

Independence has its advantages, but so can a consolidation of people and resources under one national identity. There are pros and cons that should be considered by any entity exploring an affiliation agreement.

Pros and Cons of Nonprofit Affiliations
Pros
  • Cost savings and negotiating power (everything from office supplies to technology and office space)
  • Economies of scale around personnel and systems
  • Consistency of image and branding
  • Consistent program offerings
  • Standardized accounting and financial reporting
  • National and/or international fundraising support
  • Access to a readily available network of other professionals engaged in the same mission work
Cons
  • Management and operational control rest in a national office that may be geographically distant from local chapters
  • Local financial support and engagement may be dampened by the national identity
  • National affiliates risk the perception of being disconnected from local needs
  • Strategic and financial decisions are made remotely
  • The actions of one affiliate may affect the reputation of all affiliates, regardless of location

How we can help

No one size fits all, but all of the systems and processes that define your affiliation need to be considered. CLA’s work with social services organizations and other nonprofits gives us a broad perspective on the complex decisions necessary to develop a strong affiliate model. With skilled teams in outsourcing, financial department assessment, operational improvement, information security, and other nonprofit areas, we can guide you through a thoughtful process of considering each of the key areas that make up an affiliation arrangement.

  • Curtis Klotz
  • Director of Nonprofit Innovation
  • CLA Minneapolis