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Together, they’ve committed to seeking the common good and sustainable solutions by forming a nonprofit shared services organization. The new organization, MACC CommonWealth Services was launched in 2006 under the umbrella of a larger Twin Cities nonprofit membership organization, the MACC Alliance of Connected Communities.
More than two dozen community-based nonprofit organizations belong to MACC, including Alliance members Family & Children’s Service and Pillsbury United Communities.
Like many nonprofit organizations, Family & Children’s Service and Pillsbury United Communities were struggling to maintain adequate staffing and supervision of administrative services. This was especially true in areas requiring a high degree of technical expertise and accountability, such as finance, human resources, and information technology.
“It was apparent that, unless you are a very large organization, it would be increasingly difficult to amass the kind of talent and capacity required in this complicated age,” says Tony Wagner, president of Pillsbury United Communities. “We realized we had to do things differently.”
Based on the recommendations of a 2005 feasibility study, Pillsbury United Communities worked with Family & Children’s Service and three other MACC members to found the CommonWealth as a joint venture agreement. Their motivation wasn’t just to save money—although cost-savings is a welcome consequence—it was to access first-rate, cost-efficient administrative services.
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“Our founding members pooled their resources to achieve new capacity (collective scale), new efficiencies (economies of scale), and new levels of expertise,” says Stan Birnbaum, CommonWealth president and CFO at Family & Children’s Service.
Among the collaborative’s first tasks was to develop a new cross-organizational financial platform, reorganize the human resources team, and rebuild the information technology and telecommunications platform. The CommonWealth’s scale allowed it to implement innovative solutions well beyond the individual capacity of any of its members, which have annual budgets ranging from $1 million to $13.8 million.
Access to high quality administrative services also substantially reduces each agency’s operating risk, Birnbaum notes. But the greatest benefit of the collaboration, he emphasizes, is that it enables senior leadership to focus on their agency’s core mission services.
A Partnership Grounded in Trust
Trust, familiarity, and open communication proved essential ingredients when the CommonWealth’s founding members approached the table to discuss making their vision for high-performing administrative services a reality, says Molly Greenman, president and CEO of Family & Children’s Service.
Each agency had been a member of MACC for years. They knew and respected each other. Still, as the collaborative was developing, the CEOs met at least twice monthly to discuss vision, values, and culture. Other management and staff members from each agency met frequently to solve operational issues in their areas of focus.
“As a group, the agency executives talked through whatever concern any of us had. And the staff members worked hard to design what this would look like and make it work,” says Greenman. “By the time we signed on the dotted line, my trust level was just about unlimited.”
The group operated for about a year as a joint venture agreement before rewriting the charter and bylaws to form a nonprofit limited liabil-ity corporation, which began operations Jan. 1, 2007. In order to receive 501(c)3 status, which was received in August 2008, the Common-Wealth later changed its incorporation to a non-shareholding organization.
“It was necessary to put a toe in the water first,” explains Wagner. “The executive directors were enthusiastic, but their boards of directors were somewhat wary.”
As a member-controlled organization, the CommonWealth guarantees a significant voice to all members. Each member organization has two seats on the board. The CEOs of each member agency form the CommonWealth executive committee, which shapes and holds accountable the CommonWealth staff.
Currently the Commonwealth employs 20 professionals with more than two centuries of combined expertise in the areas of finance, human resources, and information technology. The group uses a common outside auditor and hired one contractor to manage all the information technology functions.
Resources used to provide services to member agencies are owned by the CommonWealth. Its members are charged for services according to the value of the assets they contributed to the CommonWealth and the proportion of resources they use.
“We’re not customers of the CommonWealth,” Greenman emphasizes. “We are partners.”
Partners with full membership status—all five of the founding organizations are full members—have representation and a vote on the board. Several associate members are represented but do not have a vote.
In November 2008, the CommonWealth also approved affiliate memberships for organizations to purchase select services from the CommonWealth. Affiliate members do not share responsibility for governance or resources.
Committing to Shared Solutions Broadens Opportunities
“To make this successful and achieve economies of scale, every member needs to support several principles,” explains Birnbaum. “It requires a rigorous process of committing to shared solutions and driving out complexity and individual member variance. Our agreements are long-term, based on our understanding that our success depends on deep, sustained collaboration among the members.”
These collaborations have already moved beyond administrative functions. Members are working actively on shared programmatic initiatives, joint proposals, and other ways to leverage their unique capabilities for the benefit of the clients and communities they serve. For example, several CommonWealth member organizations responded to a request for proposal as a network and received funding.
CommonWealth members are also discussing ways to collaborate and drive efficiencies in other areas, such as development, program evaluation, communications, and volunteer programs. The group recently launched two new products: facilities management and a client database. Both have the potential to generate revenue for the CommonWealth. The client database in particular is attracting interest from potential affiliate members.
Meanwhile, foundations and donors are taking notice of the CommonWealth as an innovative collaboration. When MACC held a capital campaign several years ago, which included start-up funds for the CommonWealth, many foundations were moved to give more than they were asked for.
“Donors are excited about this initiative. There is a real ‘wow factor’ in what we’re doing,” says Greenman.
Strength of Togetherness Outweighs Individual Risk
Although the agency executives who founded the CommonWealth knew each other well and worked hard to establish a trusting and communicative process, planning and implementation wasn’t without challenges.
To start, the founding members came to the table with unique agency cultures. Their needs and hopes for the CommonWealth differed. Overcoming the obstacles this created required each agency executive director to invest time into building relationships with their colleagues and understanding their peers’ organizations.
“We worked toward transparency, cooperation, and collaboration,” says Wagner. “We got to know each other’s values and judgment. We talked through every single issue that came up, and we learned how to trust each other.”
Each member had to make some concessions, too. It is essential to have a certain critical mass for a joint venture like this to work, Wagner notes. “Unless you all have the same financial software, information technology platform, and other systems, somebody is going to have to give up something,” he says. “That was the risk for all of us: Am I going to lose staff? Systems I’ve become dependent on?”
He cites an effort by several very large nonprofit organizations in the Twin Cities to create a similar organization. It never got off the ground. Each organization felt it had invested too much in its individual infrastructure to give up any part of it.
Greenman says losing some control over administrative processes is a fair trade-off. “Often individual organizations do things a certain way just because we’ve always done it that way,” she acknowledges. “So I had to give up some control, but to be honest, where I want control is in the quality and value of my agency’s programming.”
The complicating factor in any such venture, Wagner says, is the balancing act between spending on administration and spending on mission. “In my organization, there is always a tension between line staff and administration. Most of us believe that resources ought to go as directly as possible to the people we serve. We want the organization to be as lean in administration and executive leadership as possible. But we can’t compromise quality.”
Although Pillsbury United Communities has the largest budget of the member organizations, before the CommonWealth it struggled to build a strong in-house information technology capability. “With the CommonWealth, I now have state-of-the-art information technology, in addition to human resources and finance,” says Wagner.
Like Wagner, Greenman believes that human service agencies can no longer survive and thrive without the strongest possible infrastructure. With an annual budget of $6 million, Greenman says her agency could not afford to build the agency’s administrative bench strength. “We now have the range of depth and talent we need. The CommonWealth has enabled me to solve some real challenges.”
Based on the principle that when one member of the group does better, they all do better, the CommonWealth has “tied our futures together,” Greenman says. “Whatever happens to one of us could impact the other organizations. But the strength of being together far outweighs the individual risks.”
For more information about the members featured, visit their websites: Family & Children’s Service and Pillsbury United Communities. Also visit the sites for MACC Alliance of Connected Communities or MACC CommonWealth Services.
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