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As published in The Memphis Daily News | Jonathan Devin

In mid-2008, Sallie Johnson became executive director of Memphis Literacy Council, a 30-year-old nonprofit literacy organization with a strong reputation for programming that was facing funding issues caused by a rapidly disintegrating economy.

That situation was almost universal among small- to medium-sized nonprofits in Memphis, which had mushroomed like start-up real estate agencies in the early 2000s and dot-com businesses in the late 1990s.

Corporations that had been generous in the past were being more conservative or restructuring altogether; individual donors were losing their jobs and holding on to every penny; and grant foundations were looking harder at bottom lines and statistical results.

It was a bleak year for anyone whose work depended on sharing. So Johnson broke the glass wall and called a friend.

“I started talking with Kay Shelton and we began doing some projects together,” said Johnson, referring to the former executive director of another literacy organization, Mid-South Reads. “I began going to some of Mid-South Reads’ monthly meetings. We also began to keep each other informed about what was going on in terms of services we provide. The more we worked together, the more it seemed to us that it was profitable for both organizations (to merge).”

The merger was completed in January and the resulting organization, called Literacy Mid-South, brought new hope for its own fundraising, a subject few nonprofits were willing to share information about when times were better. Now even those organizations that do not take the dramatic step of merging with another are seeing the benefit of boldly using the “Big C Word.”

“For at least 10 or 15 years, what some of us call the ‘Big C Word’ – collaboration – has been the buzz,” said David Jordan, executive director of Agape Child and Family Services.

“So this is not necessarily new, but it continues to take heightened levels. The bottom line is that funders more and more are expecting and requiring collaboration. (In the past) collaboration is done when you’re trying to get the money, but it breaks down at the program level. You can’t do that anymore.”

Jordan’s organization established a coalition of nonprofits and churches – all with similar missions to improve health and safety for children and families – called the Power Lines Community Network. Now that coalition is finding strength in numbers. Through the partnership, Agape helped serve 18,000 children and adults this year and has a vision to up the total to 50,000, something Jordan said the organization could not do on its own.

“We have nearly 30 letters of agreement with other nonprofits to serve through Power Lines Community Network,” Jordan said. “There’s no way we will be able to serve alone at the level we will anticipate, now or especially in the future.”

Nancy McGee, CEO of the Alliance for Nonprofit Excellence, which helps local nonprofits improve their management, said the current nonprofit fundraising climate could have happened even without a recession.

She cited a report in the 1990s from the Brookings Institution that estimated about 3,000 nonprofits were being created every month across the country. Many were founded by well-meaning individuals with a strong sense of purpose but little know-how.Some assumed that being in charge of an organization was more about fulfilling their mission than about raising money.

“Memphis did see the creation of a number of new nonprofits during that time, as well,” McGee said. “It was good times, but the money did not go up in proportion to the number created.”

Foundations are generally only required to give out 5 percent of their assets per year, so most nonprofits depend on individual gifts for about 85 percent of their operating budgets. So now, she said, nonprofits are sharing more than volunteer training tips.

“That’s typically been the attitude to operate as an island alone and not share information, not let the organization next to you find out who your funders are because they’re afraid that they’ll tap into your funding,” said McGee. “But I think that they’re beginning to realize that in order to survive in this environment, they’ve got to do business together, they’ve got to share information.”

Johnson found that Mid-South Reads had a strong network of funding supporters including The Assisi Foundation of Memphis Inc., but was in need of new programming.

“Mid-South Reads brought the entire collaborative piece and Kay Shelton had developed a strong relationship with other funders in the community,” said Johnson. “She was out in the community much more than the Literacy Council was. But the Literacy Council had the strong service piece.”

Mid-South Reads received its last support check from the Assisi Foundation in January. Literacy Mid-South’s current top funder is the United Way of the Mid-South, but Johnson said the organization will approach Assisi again.

“I think it’s probably something that needed to happen regardless of the economy,” said Johnson. “There’s not enough money to go around anyway, so if there are organizations whose missions are similar, then it makes sense that we just have to get past that and do what’s best for the people we’re trying to serve.”

But collaboration can be tricky – in terms of how money is raised and spent.

“Collaborations are not easy,” said Jordan. “It’s nothing short of being married to somebody. You always have to work on the relationship to be able to serve.”

For one thing, if a coalition of agencies receives funds for a common project, that money must typically be sent to one lead agency that is entrusted with distributing it fairly.

“The bottom line is trust,” said Jordan. “Do I believe you have my agency’s best interest at heart or are you here to get what you want? Do we have a common mission and goal? Are you able to eliminate the competition factor? Can we work out how we do what we do best and not step on each other’s toes? The collaboration is not the client, so are we listening to the voice of the people that we’re planning to serve?”

That’s where nonprofit boards come in, said David Lindstrom, board chair for the Alliance. Lindstrom facilitates the group’s new Board Chair Council, a forum for nonprofit board chairs and vice-chairs to collaborate and learn from each other.

“I think most boards weren’t ready for a bad economy,” he said. “Just in the last few years it’s become clearer and clearer that board members need to become primary in raising funds, and many times this is a difficult thing to get board members to do. In many cases boards have been comprised primarily of business people. And when business people are in trouble financially, they tend not to pay attention to their boards. Or if they do, one of the great difficulties is that they expect nonprofits to act as for-profits, and nonprofits can’t. They’re there to provide service.”

Navigating the triangular relationship between funders, agencies and clients is something, he said, that perhaps takes some effort.

The Power Lines Community Network, for example, sets up site-based programs focusing on health, education and well-being of children within apartment complexes in blighted Memphis neighborhoods. To spend the kind of time and energy needed to participate in Power Lines, Jordan said the entire organization had to figure out what its mission really is.

“We said let’s really sharpen the pencil,” Jordan said.

Agape’s Adoption Support Center, a specialized service center for children who cannot remain in their own homes and need adoption or foster care, resulted. Though reshaping the entire organization was not the initial plan, it was necessary to secure the group financially.

But collaborating may not be as scary as some might think. Johnson said that the merger discussions between Memphis Literacy Council and Mid-South Reads quickly turned into a shotgun wedding, overseen by a facilitator paid for by the Assisi Foundation.

“From my perspective, I think the merger is almost a poster child for a successful merger,” Johnson said. “In November, the vote was taken by both boards to merge with an effective date of Jan. 1, 2010. It was an amazing amount accomplished in a relatively short amount of time.”

The nonprofits that choose to go it alone, though, face the prospect of closing.

“We still get calls all the time from people saying we want to set up a nonprofit,” McGee said. “We try to be realistic with them. Our first word of advice is to see who else is doing something similar and go talk to them first.

“I think now we’re going to see a nonprofit sector with organizations that are a lot more focused on what the needs are and how to address them, and less saying, ‘Let’s be all things to all people.’ At least that’s what my hope is.”