Partnership and Merger Resource Kit 21 Stage 3: Decide whether to proceed Having identified and explored the internal or external catalyst, assess the level of interest among organisations you consider potential partners, or participants in merger discussions. Are they responding to a comparable catalyst? Are they likely to be compatible, complementary or like-minded? If the decision is to proceed, be sure your organisation is driven by a clear understanding of the desired outcome. Are you clear about the nature and extent of resources your organisation is prepared to contribute to early discussions? If the decision is not to proceed, identify the main reason or barrier, then deal with that reason or barrier. This can be quite a challenge, but it may also be critical to your organisation’s strategic direction. This may not be the right time to enter early discussions. It is far better to defer or even cancel plans to do so, than to proceed with a working relationship that has little chance of being collaborative and successful. Reasons to delay could include: • key people are sceptical • your organisation cannot commit adequate or appropriate resources to early discussions • the catalyst for partnership or merger is not seen as sufficiently important • you are not confident that identified organisations will be motivated to become involved in early discussions. 22 Partnership and Merger Resource Kit Stage 4: Internal analysis Before considering whether partnership or merger activity is appropriate for your organisation, it is wise to undertake an internal assessment. This includes checking current legal, organisational and financial performance, and understanding your organisation’s core business. ‘Core business’ is what your organisation has undertaken, or is required and expected to do, and will be evident in the following documents: • the statement of purpose (or stated objects) as listed in your Constitution • the strategic direction endorsed in your organisation’s current strategic and business plan • specifications and requirements in funding or service agreements • obligations in existing agreements with external parties. Scenario: Organisation X may currently be providing client/tenancy support services, property management services, and tenancy management services. After an internal assessment using the Internal Assessment Checklist, it may be decided to specialise in only one of these services in the future. The challenge at this early stage is to confirm your organisation’s core business. Is it tenant/client support? If so, which reform initiative partnership and related activities is most important and relevant to our core tenant/client base? The opportunity then arises to strengthen your core business through one or more effective partnership relationships. If considering a partnership agreement with an existing provider of tenancy or property management, look over your assessment to see if any action is necessary to bring your organisational performance up to a level that would be acceptable to one or more potential partners. If considering a merger, look over your assessment to see if any action is necessary to bring your organisational performance up to a level that would make you an acceptable candidate for a merger. Partnership and Merger Resource Kit 23 Tool 3: Internal assessment checklist This checklist can be used by a Board and CEO to assess their organisation’s current legal, organisational and financial performance – and identify any areas for improvement or early action. Remember this is an internal assessment – not yet ready for an external discussion. Performance Suggested means of assessment Legal Review your Constitution to check whether your organisation is operating in accordance with the statement of purpose or stated objects, and the rules. Become familiar with the legislation and regulations under which your organisation is currently operating: • incorporation legislation as a cooperative, as an association or as a company limited by guarantee or shares • laws relating to industrial relations, occupational health and safety, equal employment opportunity, the environment, taxation, superannuation, WorkCover, anti-discrimination etc. • laws relating to the specific nature of services currently being offered or provided. Become familiar with the legislation and regulations that underpin a major initiative under the sector reform: • registration and regulation under Part VIII of the Housing Act 1983 • Gazetted Performance Standards • relevant documents available from the Housing Registrar. Organisational Compare your organisation’s performance at governance, management, operational and service levels against relevant Standards: • QICSA • HASS, and/or • Housing Act Part VIII Gazetted Performance Standards. Partnership agreement: If considering a partnership, look over your assessment to see if any action is necessary to bring your organisational performance up to a level that would be acceptable to one or more possible or potential partners. If considering a merger, look over your assessment to see if any action is necessary to bring your organisational performance up to a level that would make you an acceptable candidate for a merger. 24 Partnership and Merger Resource Kit Tool 3: cont’d Performance Suggested means of assessment Financial Negotiations for partnership or merger will require a sound knowledge of your financial position at the time of negotiation: 1. Take the past three years of your organisation’s performance as recorded in the annual reports and audited financial statements. 2. Identify the internal and external influences across these three years in annual financial management items such as: •major categories of income and expenditure •assets •liabilities •investment (if applicable) •debt reduction (if applicable) •client/tenant revenue or expenses •cashflow management •unplanned financial adjustments. 3.Trends and projections can now be illustrated by graphs, bar charts etc, to show upward/positive or downward/negative financial movements over the 4 year period. 4.Project the trajectory or ‘line’ into the next year or two. This projection may reveal that, if no new or remedial/ corrective action is taken, the organisation is travelling steadily to a viable – or non-viable – financial situation. 5.If the trends or projections are positive, your forward planning needs to strengthen the factors that have directly contributed to this positive position. 6.If negative, your forward planning needs to remedy or remove the factors that have directly contributed to or influenced this negative position. 7. Where your organisation has minimal control over the contributing factors, it then becomes a matter of risk management (to manage the influence of such factors), or risk avoidance (to remove your organisation from the influence of these factors). It should now be possible to identify gaps between your organisation’s current performance, and the performance that will be either possible or required through partnership or merger activity. Information gathered through the use of Tools 3 and 4 should ensure confidence in commencing early discussions. Partnership and Merger Resource Kit 25 Tool 4: Gap analysis checklist Gap analysis is a key tool to identify the uniqueness or your organisation, which in turn assists with identifying your core business and strategic direction. Be aware that the climate and culture of each of the participating organisation will be affected during the period leading up to a partnership or merger. The agreed outcome of partnership or merger must be to achieve your organisation’s core business and preferred future. There will be basic changes in the way the potential partnership arrangement or merged organisation will need to operate. Plan and ensure a smooth transition and integration, with minimal interruption to the ongoing provision of high quality services during the early stages of operation. Invest time to identify the uniqueness of each organisation, in terms of benefits for the partnership or combined membership and tenants or clients. Discuss ways to ensure that these qualities will be introduced into and assured within the partnership or merged organisation. It must be emphasised that, where a process toward partnership or merger is commenced and then discontinued before completion, there may be severe impacts on the morale, reputation and even finances of the organisations involved. Scenario A: In this example, the focus of your internal gap analysis will be the nature of your organisation’s involvement in sector reform, which means confidently working with the DHS Regional and Central Offices toward early discussions with potential partners or candidates for merger. Your gap analysis begins by identifying sections of the key documents that can identify specific activities required to achieve partnership or merger: • details of timelines and requirements for participation in sector reform in documents released by the Department of Human Services • in-depth analysis of sector reform from the perspective of relevant peak bodies in their published documents • your own organisation’s internal documents, created in preparation for sector reform participation • other external documents gathered for advice, information or clarification on sector reform, and the costs, benefits and process of partnership or merger. Your internal gap analysis will involve the people within your organisation in considerable discussion, perhaps debate, and certainly a lot of decision making. As a result, there should be agreement on any immediate or early action/s required to bring your organisation’s knowledge or performance to a level that will enable confident participation in early discussions with DHS Regional or Central Office, and with other organisations. It will also enable you to compare your findings with those of likely or potential partners: • What is each organisation’s current situation regarding sector reform? • What is each organisation’s preferred situation regarding sector reform? • Is partnership or merger worth considering at this time? 26 Partnership and Merger Resource Kit Internal Gap Analysis Tool – Sector Reform Application Source of information All documents released by the Department of Human Services, and the Housing Registrar, setting out the timelines and requirements of participation in sector reform All documents by relevant peak bodies, offering their in-depth analysis of sector reform All internal documents created by your own organisation relating to sector reform External documents gathered for advice, information or clarification on sector reform, and the costs, benefits and process of partnership or merger What is our current situation regarding sector reform: What is our preferred situation regarding sector reform: Any questions, or points that need to be clarified? Any questions, or points that need to be clarified? Is partnership or merger worth considering at this time: Any questions, or points that need to be clarified? Partnership and Merger Resource Kit 27 Following this analysis, your organisation may choose from the following growth strategies: • an organisation may choose acquisition (Definition 2). • an organisation may choose partnership agreements, in order to specialise in either property management, tenancy management or support services (Definition 1). • an organisation may choose a merger – either as a horizontal service network (all offering the same specialisation), or a vertical service network (together offering all specialisations). Either option should strengthen their core businesses in the security of a larger organisation (Definition 4). Scenario B: Apply this where the context for considering partnership or merger activity is other than sector reform. Internal Gap Analysis Tool – General Application Source of information All documents released by your organisation’s funding source/s explaining the context, timelines and requirements that will impact on a potential partnership or merger opportunity All documents distributed by relevant peak bodies, offering in-depth analysis of the context, timelines and requirements All internal documents created by your own organisation in anticipation of this potential partnership or merger opportunity What is our current situation? What is our preferred situation? Any questions, or points that need to be clarified? Any questions, or points that need to be clarified? Is partnership or merger worth considering at this time: Any questions, or points that need to be clarified? 28 Partnership and Merger Resource Kit Internal Gap Analysis Tool – General Application (cont.) Source of information What is our current situation? What is our preferred situation? Any questions, or points that need to be clarified? Any questions, or points that need to be clarified? Is partnership or merger worth considering at this time: Any questions, or points that need to be clarified? External documents gathered for advice, information or clarification on the context, timelines and requirements - and the costs, benefits and process of partnership or merger Having sufficiently explored the column headed ‘What is our current situation?’, this critical question deserves immediate attention: Is partnership or merger worth considering at this time? Informally exploring this critical question from all angles is sound preparation for applying Tool 5 Strategic Planning Framework. Consider: • clients or tenants • staff competencies • current workload • identified core business • available or accessible financial resources. Partnership and Merger Resource Kit 29 Tool 5: Strategic planning framework Your organisation should now be well placed to finalise medium to long-term goals – particularly those to be achieved through either a partnership agreement, or a merger. Your own internal assessment (Tool 3) and gap analysis (Tool 4) will have clarified the: • current situation - regarding sector reform or other catalyst • preferred situation - regarding sector reform or other catalyst • whether and why partnership or merger is worth considering at this time. With any catalyst: • A short-term goal should be achievable within six months. • A medium-term goal should be achievable within six to 18 months. • A long-term goal should be achievable within 18 months to three years. Where the catalyst is sector reform, it can be useful to separately consider these aspects of sector reform involvement: • Look at your organisation from the standpoint of the people involved with or affected by your organisation’s current activities and commitments. Consider any partnership or merger discussions from their perspective - particularly tenants or clients, staff, board members, existing partners and existing funding sources other than Department of Human Services. • Evaluate your organisation’s current and ongoing commitments – these must continue to be attended to through the period of exploratory or firm discussions leading to partnership or merger activity, and taken into account in finalising your organisation’s preferred strategic direction. • Identify short-term, medium-term and long-term goals that are appropriate to the sector reform deadlines and timeframe. Short-term may be to achieve registration or accreditation: medium-term and long-term will then be goals for the partnership arrangement or merged organisation – not just your own organisation. Where the catalyst is other than sector reform: • A short-term goal may be to achieve agreement with one or more suitable organisations with whom to enter into serious negotiations on either a partnership agreement or a merger. • A medium-term goal may be to have a legal partnership agreement in place, or to have the preliminary arrangements in place to achieve a satisfactory merger. • A long-term goal may be to establish the partnership or merger relationship, and meet agreed targets. Your organisation may already have a strategic planning framework in place. However, if the decision to initiate or respond to partnership or merger approaches is a recent one, it will be necessary to review your plans – and the processes followed in their preparation. 30 Partnership and Merger Resource Kit This collaborative process, led by the Board and CEO, includes: 1. identifying the vision and mission and values of your organisation 2. deciding on short-term, medium-term and longer-term goals to achieve your preferred future and strategic direction 3.choosing objectives and tasks to achieve each of the agreed goals (including the manner in which your organisation handles change, assesses and managed risk, and adopts an innovative approach to both challenges and opportunities) 4. asking ‘What opportunities exist for our organisation through the next three years?’ and ‘What could possibly happen to cause us to miss or mishandle these opportunities?’ 5. identifying the nature, extent and sources of resources necessary to carry out the agreed objectives and tasks 6.considering how the necessary resources will be obtained, allocated, utilised and evaluated 7. deciding how and when to evaluate your organisation’s progress in achieving stated short-term, medium-term and longer-term goals. Scenario A: Registered Housing Providers with plans to move to a Housing Association in the future. Partnership and possibly merger activity will feature in forward planning, and such organisations would be wise to be proactive in initiating or responding to partnership or merger arrangements. Scenario B: Organisations involved in one or more of the current reform initiative partnerships: (These include organisations involved with Creating Connections, Integrated Approach to Family Violence and Opening Doors). Intensive and internal discussion on these two questions is recommended: • What is it that we do exceedingly well, and should continue to do alone? • What is it that we do exceedingly well, and could do even better through a carefully constructed and sensitively arranged partnership or merger? Scenario C: Organisations with reservations about partnership or merger activity, following their internal assessment When an organisation is comfortable with and confident about its core business, internal assessment and internal gap analysis, the process of strategic planning will be relaxed and focused. Where uncertainty prevails, the process of strategic planning will be difficult and perhaps even contentious. Partnership and Merger Resource Kit 31 Developing a strategic plan Strategic planning includes considering various possibilities and problems which may occur following the chosen course of action. The Board and CEO require some knowledge of external factors over which they have minimal or no control, as these may affect the satisfactory achievement and resourcing of particular planned activities: • political factors, including changes in government or government priorities relating to provision of services or resource distribution • social factors, including changes in the kinds and amount of support and expectations of member, service-user, industry or community • demographic factors, including sudden increases, decreases or changes in demand for the organisation’s services • economic factors, including drastic depletion of available funds or, alternatively, an unexpected bequest which removes particular financial constraints • industry or sector factors, including changed strategic alliances, networks or competitors. Similarly, the Board and CEO need to fully understand internal factors affecting the satisfactory achievement and resourcing of specific planned activities over which it has considerable or total control: • employment factors, including staff selection criteria • technological factors, including centralised computer facilities and staff skill levels • program design factors, including changes in the needs, abilities and interests of members and service users • physical factors, including changes to the premises and facilities available to the organisation. Developing a strategic plan involves working through four questions: Q1.What does our organisation want or need to be and be doing in 3 or 5 years’ time? –What opportunities exist for our organisation? –What could possibly cause our organisation to miss these opportunities? Q2.What external and internal factors might be in place at that time? Q3.How is our present organisation different to this long-term picture? Q4.What do we need to do, change or start now, and each year, to achieve these 3 or 5 year goals? Useful segments in a strategic planning document: 1. Vision Statement — focusing on the organisation’s clients, tenants or service-users in 3-5 years’ time. 2. Mission Statement — focusing on what your organisation needs to do to achieve or contribute to this Vision. 3. Statement of Values – core principles to guide all decision making. 4. Strategic goals (or key result areas): •choose four to six priority areas for action during the strategic planning period •each strategic goal will have a number of objectives, targets and measures allocated yearly, throughout the strategic planning period. 32 Partnership and Merger Resource Kit 5. Current core competencies to be retained, together with additional core competencies to be acquired in order to achieve the Mission Statement objectives. 6. SWOT analysis of the organisation in relation to the Mission Statement: •strengths — qualities and features that must be retained and expanded •weaknesses — features and factors that require immediate attention •opportunities — potential initiatives •threats — factors which, if not addressed, will threaten achievement of the mission. 7. Definition, scope of activity and risk assessment for each year in the strategic planning period, including: •strategic e.g., core business and collaborative relationships (including partnership or merger activity), innovation •financial e.g., cost/benefit analysis, ratios, trends and projections •management e.g., best use of available and accessible resources •operational e.g., preparation and delivery of services to clients, tenants or other service users, administrative functions •technological e.g., systems, communication, data-gathering and analysis, and •stakeholders e.g., internal and external, succession planning. 8. Organisational structures – legal and formal. 9. Management team and procedures. 10. Major outcomes within each strategic goal through the immediate financial year (must-do statements, with clear core and non-core business boundaries). 11. Major events, activities and tasks within each strategic goal that must occur during the immediate financial year, in order to achieve or move toward the agreed Mission and uphold the Statement of Values. The Strategic Plan is just the starting point in introducing sound business practices: • the three-year Strategic Plan informs your Year 1 Business Plan • the Year 1 Business Plan informs the budget estimates and cashflow projections through Year 1 of your strategic period • financial performance is monitored through Board-endorsed financial controls, key performance indicators (measures and targets), risk management procedures and quality assurance procedures • all are managed through an appropriate organisational structure, policy framework and administration/ information systems. Where a merger is planned, it is necessary to develop strategic and business plans for the merged organisation – preferably before the actual merger takes place. The merged organisation’s business plan should be very specific about the organisational, financial and operational activities during the first year of its existence. Partnership and Merger Resource Kit 33 Developing an internal business plan A business plan is a detailed statement of objectives, proposed operations, resource requirements and financial forecasts, whether for a completely new business or an established business which is being developed further. This enables the people within your organisation – the Board, CEO and staff – to understand clearly what is required to make a success of the organisation, and for external parties with an interest or stake in your organisation’s success to evaluate the viability of what is being attempted. Useful segments in an internal Business Plan for the first financial year within the strategic planning period: 1. a brief profile of the organisation: • quantify the nature and extent of resources available to the organisation at commencement of the financial year. 2. a brief profile of programs, services, publications, etc: •describe how the organisation intends to use its available or accessible resources through the financial year. 3. a brief service profile: •describe the service model and service user profile. 4. organisational structure and management chart: •show how authority is delegated by and from the Board, with lines of accountability and reporting throughout the organisation. •show how resources are distributed throughout the organisation – in regard to functions or service support and direct service design, delivery and consistency. 5. a brief overview of operations: •location/s of service delivery •how functions/service supports interlink with direct services •risk management procedures •quality assurance and continuous quality procedures. 6. a detailed financial management plan: •financial delegations and reporting procedures •estimated income and expenditure, month by month through the year •financial methods and systems •financial controls and monitoring (‘checks and balances’). 7. detailed cashflow projections: •estimates of cashflow into and out of the organisation, month by month through the year, and how the need for any ‘corrective action’ will be identified, authorised and implemented. 34 Partnership and Merger Resource Kit Tool 6: Consultative process for making complex decisions Decision making is a core activity in goal-setting, and in the preparation of strategic and business plans. It is also a function for which Boards are accountable to their membership base. Not every decision will need to be worked through to the degree of detail discussed in this Tool, as many decisions are made on the basis of precedents, existing policies and procedures or the requirements of organisations wishing to be involved with sector reform. A decision making procedure is a series of sequential steps which ensure a consistent approach to decision making, including: 1. identification and diagnosis of a situation, difficulty or opportunity 2. reflective development of a plan to relieve or remove the difficulty, or to capitalise on the opportunity 3. implementation of the plan’s success or otherwise. Decision making is one of the most important and consistent functions of a Board. As can be seen from these sequential steps, the procedure for making a decision clearly falls into three distinct activities, which can be broken down further into seven steps. Step 1: Analyse the situation, difficulty or opportunity As your organisation works through this Kit, you’ll recognise that many decisions need to be made – some simple, some complex. A situation, difficulty or opportunity may be far more complex after examination and analysis than it appeared at the outset, and this will only be clarified through this early analysis. Step 2: Define and agree upon the situation, difficulty or opportunity After a thorough analysis, a definition should be written down and agreed to by the group involved in making the decision. Everyone is then starting the decision making process with an agreed definition. Step 3: Examine alternatives for action If the situation, difficulty or opportunity is a complex one, it is important to consider a number of alternative actions. At this stage, it is not necessary for suggested alternative actions to be practical or even feasible. This is the brain-storming step where all kinds of ideas can be floated and teased out, without being constrained by practical details. Step 4: Explore implications of each alternative With a number of alternative actions identified, each is now taken separately and considered seriously. Examine each one against a set of criteria which could include: • how the action will affect people involved with or affected by sector reform • amount of money, time and energy required • availability of necessary skills and knowledge • financially viability and contribution to your preferred future and strategic direction Partnership and Merger Resource Kit 35 • whether the action fits with your organisation’s existing commitments and obligations • whether any other organisation had experience with this action – talk with them first? A sheet of paper divided into two sections to list the positives and negatives of each alternative is a great help in examining facts. Note that the focus is on fact at this step, not opinion. Step 5: Select the alternative to be acted upon Selecting one alternative should be relatively easy, after examining the implications of each alternative in Step 4. Step 6: Implement the selected action This is planned in detail by asking these questions: • Exactly what is to be done? • What is the purpose and benefit of this action? • How is it to be done? • Who is to be involved and where? • What is the time-schedule for the total action, starting from this day right through to completion of the action? • How will we know that each step of the action is completed? Implementation is now ready to proceed and the planning is about to become reality. Step 7: Review and evaluate the process and the decision Ask this question - how will we know when the total action is completed and that the desired outcome has been achieved? Reviewing (asking ‘did we do it?) and evaluating (asking ‘how well did we do it?) are vital components in the decision making process. In this review and evaluation step, it is necessary to: • revise all the notes taken during the previous 6 steps • observe and ask questions of people involved • compare the real benefits and outcomes of the chosen action with the anticipated and unanticipated benefits and outcomes. Remember to review and evaluate the process and procedure of making the decision, as well as the decision itself. Involvement in decision making It is important to invite others to join in the process of decision making at the appropriate steps. Some suggestions: a) people with expertise, knowledge, experience, and information concerning the situation, difficulty or opportunity b) people with the right to be involved 36 Partnership and Merger Resource Kit c) people who will be directly affected by the process, the decision or its implementation d) people who can lend some ‘muscle’ to the result by being involved in the process e) people who will gain skills, expertise and experience, or will benefit from involvement in any way f) people who have available time and energy. Different steps apply to each group of people involved: • those who will be closely affected and involved as a result of the decision should be involved in selecting the alternative for action (Steps 4 and 5) • those with available time and energy should certainly be involved in the time-consuming steps such as analysis (Step 1) and detailing and costing the implications of each alternative (Step 4). When designing the implementation plan, start your questions with these practical words: • what? • why? • how? • who? • when? • where? • for whom? • at what cost? Decision making styles As well as taking care with the decision making process and the quality of decisions, it is important to understand the two main approaches used in community-based organisations: • collaborative decision making, where the decision makers consult with as many groups as possible who are going to be affected by major decisions • participative decision making, where the decision makers give such groups or their representatives an active role in actually making decisions. Whichever style or combination of styles is adopted, it is worth setting rules of engagement or protocols. Essentially, these are ground rules around if, when and how stakeholders are to be consulted – particularly if there are strong affinities and sensitivities. These two styles come together as collaborative and participative decision making, where people are not only consulted, but also play an active role in the process. This is the preferred style for community-based organisations to adopt in all matters where people other than themselves will be affected by or involved with either the process or implementation. The emphasis is on consulting widely before making the decision and to include people other than the decision makers in the actual making of the decision. Partnership and Merger Resource Kit 37 Benefits of this preferred style include: • a wider contribution to the analysis of the situation, difficulty or opportunity • a wider contribution to exploring alternatives • greater knowledge and understanding of each other’s opinions – therefore increasing tolerance, trust and respect • greater commitment to the decision once it is made, as people understand the reasoning behind a decision • greater chance of the decision being carried through to action • closer bonds between the different groups of people who together make up the organisation. A final assessment of your organisation’s decision to partner or merge could include whether this decision will: • improve the quality and delivery of services (continuous improvement) • enhance the nature and extent of tenant or client outcomes (organisational effectiveness) • reduce the overall cost to the community (cost efficiency). Scenario A: Where an organisation is unsure about the nature of their involvement with sector reform. Rather than putting decision making and forward planning on hold, such organisations could be: a) identifying matters over which the organisation does have control, and attending to these, or b) identifying matters over which it has little or no control, and monitoring the impact of the waiting period and process on its current legal, organisational and financial duties and obligations. Whether or not they are actively participants, such organisations will certainly be closely working with those that are – and such involvement may not only property related: • All organisations funded by Department of Human Services to provide a targeted family violence response are involved in the Integrated Approach to Family Violence through consortiums, which in turn have provided the basis for broader regional integrated committees/alliances. Scenario B: Where an organisation is considering partnership or merger activity for a reason other than sector reform. The decision to initiate partnership or merger activities is a major one for any organisation. If an organisation is considering partnership or merger activity as a growth strategy, the process of making such an important decision should indeed be a collaborative and participative process. People working in a paid or unpaid capacity throughout the organisation will need to understand and be committed to this decision, in order to support the processes necessary to ensure an effective and compatible partnership or merger.
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