March 31, 2014

Power in Numbers: Joining Forces to Create a Nonprofit Network

In 2010, three public charter schools in Cleveland came together to create Breakthrough Charter Schools. The merger wasn't motived by financial distress nor by academic underperformance. They came together voluntarily in the hopes of increasing their impact. Their story illustrates that the possibility of coming together can be explored with modest risk, provided that organizations have the time, resources, and foresight to follow a thoughtful process.

By: John MacIntosh

In 2010, three public charter schools in Cleveland—Citizens Academy, the Intergenerational School, and E Prepcame together to create Breakthrough Charter Schools, risking significant time and money to make the network a reality. The schools were motivated neither by financial distress (their finances were sound) nor by academic underperformance (they were the top charters in the city). Rather, they came together voluntarily in the hopes of increasing their impact. (See a case study on another such mission-driven union: “United Way of Battle Creek and Kalamazoo Region: Merging to Advance Common Good in Southern Michigan” by Lois Savage.)

If you find this perplexing, then you might suffer from the all-too-common belief that nonprofit mergers and collaborations are just a thinning of the herd whereby the weak are “taken over” by the strong. You would be wrong. Truly mission-driven organizations—even healthy ones with ambitions for growth—recognize that achieving impact is a team sport, and that there may be ways to be more efficient, effective, or stable by joining forces than by going it alone. The creation of Breakthrough illustrates that the possibility of coming together can be explored with modest risk, provided that organizations have the time, resources, and foresight to follow a thoughtful process.

Citizens Academy, the Intergenerational School, and E Prep were natural partners: they knew one another well, respected each other’s academic success, and shared common funders. While they understood that in theory there were opportunities to have more impact by combining some activities, they recognized that in practice, it would be tough to pull off. So in July 2009, after an initial discussion led by a neutral facilitator with deep charter school experience, the schools decided to push forward in three stages: create Breakthrough as a new “shell” entity; recruit a mutually acceptable CEO; and raise capacity-building funds to give the CEO six to 12 months to make Breakthrough a reality.

It went pretty much according to plan:

  1. In August 2009, Breakthrough was created as a new "shell" nonprofit.
  2. In September, Alan Rosskamm, a proven business executive with a passion for Cleveland, was recruited as CEO. Alan had the requisite skills as a manager, consensus builder, and external-facing leader. Although Alan was passionate about education, he was not a professional educator, allowing him to more easily remain neutral about the differing instructional models pursued by the schools.
  3. In November, the Cleveland and Gund Foundations put up the initial capacity-building funds to allow Alan to focus for six to 12 months on exploring best practices from across the country, designing a proposed structure for Breakthrough, and working with the schools to make it real.

By August 2010, after nine months of discussion, and with the continued support of an outside facilitator, Breakthrough became a real operating entity through three governing agreements: a Code of Regulations, an Academic and Business Services Agreement, and a Memorandum of Understanding Regarding Fundraising and Fund Allocation. The agreements centralized most business functions to the fullest extent possible (e.g. raising money, coordinating with the Cleveland Metropolitan school District, managing back office functions, recruiting teachers) while leaving each school with primary responsibility for academic matters. The agreements, which were informed by the experience of others across the country and in compliance with Ohio Charter Law, also created an independent board of directors at Breakthrough with representation from each school.

When the smoke cleared, the process of creating Breakthrough had taken a year and cost about $250,000 in one-time, out-of-pockets costs. But looking back after four years, I know that the investment has been a terrific one. Though nobody can prove what would have happened if the schools had remained separate, it seems clear that they are having more impact together than they would have apart: fundraising has grown from $2.3 million to slightly over $8.0 million in part because Breakthrough (as a network) is attractive to national charter school funders that will not support single schools; education quality is higher than ever (they are the highest ranking charter network out of roughly 20 that have schools in Ohio); the number of schools has grown from three to nine and the number of students served has grown from 1,100 to over 2,500; per-student operating costs are no higher than they were before; and the network structure is stable enough that one of the founders has finally been able to move on to other things in confidence that "his baby" is in good hands.

In retrospect, Rosskamm believes Breakthrough has been a great success. "Our ability to attract national funding and our ability to collaborate with Mayor [Frank G.] Jackson and the Cleveland Metropolitan School District arose because by coming together these three successful, but small, independent charter schools suddenly had the scale and the capacity to replicate and achieve meaningful city-wide impact," he told me. "And together we are more sustainable in an uncertain political climate for charters and better positioned to grow in order to serve more students."

Might it have failed? Absolutely, but the partners were motivated to take some risk to do better for children, and they designed a process to mitigate that risk while exploring opportunity.

Nothing ventured, nothing gained.

John MacIntosh leads SeaChange Capital Partners, a nonprofit merchant bank. In this role, he has responsibility for managing the SeaChange-Lodestar Fund for Nonprofit Collaboration and the New York Merger, Acquisition and Collaboration Fund. The SeaChange-Lodestar Fund supported the creation of Breakthrough by making a grant to support a portion of the associated costs.

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