POwer in Numbers

By Community Wealth Ventures
In Consultation with Stan Birnbaum,
President, MACC CommonWealth, Inc.
 

Development of the MACC CommonWealth

The simplest ideas are often the most brilliant.  The story of MACC CommonWealth, Inc. started ten years ago with a simple idea of six nonprofit CEOs who all believed that there had to be a better way of serving the community and their clients.  First, they developed a membership organization committed to shared innovation among community groups.  Later, the organization evolved into a joint venture of shared services with the goal of increasing their administrative capacity while reducing their costs.  Now this model has evolved even further to include additional agencies in the Twin Cities.  Taken together, this shared services venture has significantly reduced the cost of the delivery of human services – which is what makes this simple idea brilliant.

Officially launched on January 1, 2007 as a joint venture among five of the Twin Cities’ leading human service providers – Family & Children’s Service, MACC Alliance of Connected Communities, Phyllis Wheatley Community Center, Pillsbury United Communities and Plymouth Christian Youth Center – MACC CommonWealth, Inc. (MCW) is a new concept in nonprofit administration and management. Membership has grown from five members to ten members today. MCW is owned and operated by its members and managed in an environment of high transparency, long-term commitment and interdependency, much like a cooperative. Working in collaboration, the nonprofit groups strive to build efficiencies and reduce costs and risk, while improving the quality of staffing. The MACC CommonWealth, Inc. owns all the resources used to provide services to member agencies. Agencies are then charged for services according to the proportion of resources they use.  MCW staff members are accountable to the Board of Governors, and each member organization has two seats on the board.

Benefits Achieved Through MACC CommonWealth

The goal in sharing back-office services, such as IT and finance, was to allow the member nonprofits to focus on their missions as well as help them reduce expenses and improve efficiencies. The benefits have surpassed those early goals and have provided members with a “cushion” of support.  

Specifically, the ten member nonprofit organizations involved in the joint venture have reported the following improvements: 

• Cost: Because as a group, the members were able to negotiate reduced fees, they saved money on employee benefits, technology, and communications. The initial analysis suggests that savings to members is in the range of 5% to 10% of total administrative costs.
   
• Talent management: MCW’s approach to staffing provides all members with professionals at various skill levels, while supporting best practices in staff retention, professional career development and opportunities, and succession management.
   
• Quality:  Through the members' combined knowledge, MCW is able to provide all members with consistent professionalism across each of its product and service areas. 
   
• Risk management:  MCW’s size and focus have significantly reduced operating risk for all of its member organizations. For example, a member that previously had one-person in finance now has access to a 15-person finance team, which assists with segregation of duties and thus reduces the organization’s risk of fraud. It also optimizes work among specialists rather than requiring one person to function outside his or her core competency.
   
• Scale:  The shared services allow member organizations to have the flexibility to change in response to their client and funding environments without worrying about the impact on the larger organization.  As member organizations get bigger or smaller – and unfortunately, “smaller” is a common theme in 2008-2009 – they can easily scale their resource pool and adjust pricing accordingly.  Imagine that a small nonprofit with one accountant or one human resource person grows by 30%.  How do administrative services keep up?  It is hard to find an employee to work only 20% or 30% of the time.  On the flip side, when an organization shrinks, the staff person will be under-utilized. As an MCW member, organizations get and pay for only the percentage of resources they require.

In addition to these foreseeable benefits, they have also experienced an unexpected gain.  The CEOs of member organizations have developed a new level of cooperation that has facilitated joint fundraising as a network of providers.  They recently responded to a county request for proposal as a service-providing network. This benefit has moved MCW from a model just for managing expenses to a model that is attracting increased revenue.  While the effort to form the venture was significant, member organizations continue to believe that the long-term potential of functioning as a true service network is extremely promising.

Lessons Learned

A few truths have been crucial to the group's success:

• Trust is the most valuable asset. Before MCW was formed, CEOs of the first member organizations had extensive conversations to build relationships with one another and talk about commitment levels and sharing risks.
• Members felt it was important to standardize its systems. For example, while it was difficult for everyone to convert, MCW has one financial system with a master chart of accounts and shared report designs.  The members understood early on that designing different reports for each user would drive up costs.  
• Members spent significant time on governance issues.  The board comprises member CEOs and one additional director from each organization. The by-laws protect the ethos of the group, including the “one member/one vote” principle.  In addition, all relationships between the members and MCW are governed by clearly structured contracts, which detail mundane items like fees and standardized approaches as well as less obvious issues like delegation of authority and boundaries between what MCW does and doesn’t do. 

Then, of course, there were some surprises:

• Funder interest—both private and government—was much greater than MCW had anticipated. Funders liked the innovation and opportunity to invest once to strengthen multiple organizations, and they saw their investments as a way to significantly benefit the community.
• The cost to build out scalable solutions—the platform for services—was significantly more expensive than MCW had anticipated. The costs associated with developing the network were revealed through a “discovery” process as development went along.
• The effort to “backfill” gaps in members' existing management support was greater than anticipated. For example, imagine two members before MCW membership, one of which had a great finance department, the other of which was more mainstream. MCW’s product had to meet the highest standard across the field; otherwise there would be an unacceptable decline in quality for the member that had a great finance department.  

MACC CommonWealth, Inc. has weathered the risks that all start-up ventures face to become a viable community resource in its own right.  The growth in membership and range of services has given MCW some financial resilience during increasingly tight times. Additionally, by sharing administrative, human resource, and technology services, the members have been able to better manage their spending, even in this down economy, while improving operations, managing risk and getting the support they need for growth.

For more information on MACC CommonWealth, Inc. please visit their website.

» BACK TO FRONT PAGE

» Message From the Managing Directors

» Leading in a Climate of Fear

» Weathering the Storm: Lessons from 2001

» Fundraising in Tough Times

» Top Ten: Bootstrapping Strategies

» New and Noteworthy

» FRONT PAGE