Nonprofit Groups Turn to Survival Strategies

Mergers and acquisitions are daily events in the world of for- profit corporations.

Now they are becoming more prevalent among nonprofit organizations trying to cut overhead costs and attract scarcer contributions in a sagging economy while continuing to provide important services.

Consider:

The directors of Planned Parenthood of Rhode Island, a 77-year- old organization, have voted to turn over management of the local operation to Planned Parenthood of Connecticut, with the intent of merging the two nonprofit organizations.

“The decision by the board reflects a growing belief among nonprofits that by joining forces, they will be able to reach out and help a larger and more diverse group of people in the community,” wrote John R. Morton, chairman of the board of directors, in a letter to supporters.

A merger would allow Planned Parenthood to cut costs by sharing resources and expenses, such as purchasing, billing, payroll, management, information technology and training, plus use its combined staff and funding to serve clients better.

“Partnering between affiliates and sharing administrative costs is becoming essential in this economy; few Planned Parenthood affiliates of our size have survived without this kind of linkage,” Morton wrote. “We are extremely optimistic about the potential for this alliance and are confident that Planned Parenthood’s presence in Rhode Island will continue for many years to come.”

As part of the change, Judy Tabar, president and chief executive officer of Planned Parenthood of Connecticut, is serving as interim CEO of Planned Parenthood of Rhode Island. Tabar previously worked on the merger of three affiliates in New Hampshire, Vermont and Maine. She has worked in Connecticut for 10 years and in Providence replaces Miriam Inocencio, who resigned after 13 years.

“Judy is committed to moving forward and believes that by joining forces, great things can be accomplished in Rhode Island,” Morton wrote.

In an interview, Tabar said Connecticut has a much larger operation than Rhode Island. For example, the budget is $21 million in Connecticut and $3 million in Rhode Island; the annual number of patients is 62,000 in Connecticut and 8,000 in Rhode Island; and the staffing is 230 in Connecticut and 22 in Rhode Island.

Planned Parenthood relies on individual and corporate donations, some federal funding and third-party payers, she said. In Connecticut, there is a state contribution.

“Donations are critical to providing services,” she said, adding that the slumping economy and strained government budgets have caused concerns for Planned Parenthood organizations across the country. Other mergers are under consideration.

Taber said she expected the merger talks between Rhode Island and Connecticut to take six to nine months.

“We also see the process as an opportunity to make sure we are serving the underserved communities and perhaps expand services,” she said. “It’s a very challenging time for health-care providers in general because of health-care costs. Many are trying to find economies of scale.”

Planned Parenthood’s moves are part of a trend among nonprofits, whose numbers grew to more than 1,700 in Rhode Island during the economic expansion earlier this decade. Many provide duplicate services and tap the same donors.

With Rhode Island in a recession, the nonprofits are having trouble paying for services, especially with money tighter among contributors and less support from government in a state that is suffering its own deficits.

The result is consolidation, some encouraged by agencies such as United Way of Rhode Island, which previously created two mergers- and-acquisition funds to help pay for professional services for nonprofits looking to combine operations. United Way plans to make a third fund available in the spring.

The idea is to continue to provide the vital services Rhode Islanders require, but to do it in a more cost-effective way. One merger involved the consolidation of Greater Elmwood Neighborhood Services and the Elmwood Foundation. Another involved Family Services of Rhode Island consolidating the back-office functions of many of its agencies. Anthony Maione, president and CEO of United Way, said that in all, about 20 entities had combined all or part of their operations. Momentum is building to do more because the troubled economy has exposed weaknesses among the nonprofits, he said.

“We are trying to get good programs to stay up,” he said. “There will be continued streamlining.”

It’s the same story at the for-profit companies. Sluggish sales as consumers cut back on spending plus rising costs of materials, utilities and health care are squeezing margins for small and large businesses.

That has caused a tough cycle of layoffs and other cost controls that have made the workplace a difficult environment for many.

For-profit companies and nonprofit organizations may have different missions.

But they complement each other to form an economy that provides jobs, creates wealth, delivers services and defines our quality of life. In tough times, they can be more alike than different.

“We are all in the same boat,” said Tabar.

jkostrze@projo.com / (401) 277-7330

(c) 2008 Providence Journal. Provided by ProQuest LLC. All rights Reserved.