A Practical Guide to Collaborative Working

How this guidance note can help

The guidance has been developed by CollaborationNI to assist voluntary, community and social economy (VCSE) organisations to define what constitutes collaborative working, highlight the various forms of collaboration and examine some of the main drivers behind it. It is supported by research and statistics on collaborative working within the VCSE sector in Northern Ireland. It also assesses the benefits and risks associated with collaboration.

The document looks at the importance of organisations becoming innovative and creative through collaborative working and it examines the role of collaboration and mergers in the current economic environment. In addition, it directs organisations to sources of support.

It is hoped that this guide will provide both practical and timely advice to a broad range of organisations. To ensure that local best practice is made available to organisations considering collaboration, the document also contains links to collaboration and merger case studies from Northern Ireland that further illustrate the topics discussed. These are:

• Abbeyfield UK (NI) Ltd
• Alpha Housing
• The Bytes Project
• Cara-Friend
• Culturlann
• PIPS Newry and Mourne
• Will to Give
• Walled City Community Partnership
• Autism NI and Mencap

As well as illustrating the main drivers behind these collaborations and mergers, the case studies highlight the progression of each organisation through the collaborative process. The challenges and opportunities arising from the processes are presented, along with advice from some of the key people involved.

Review of the literature and case studies highlights the fact that there is no single generic model to follow to ensure a successful outcome from collaboration. Local conditions, geographic and economic, as well as the personalities involved, tend to be major factors contributing to success. The case studies help to illustrate the impact of these specific conditions in each of the models examined.

 What is collaboration?

Definitions

There is no single agreed definition of 'collaboration'. This reflects the fact that collaboration ranges from the very informal, right through to collaborations and mergers that are much more codified, structured and formalised. Organisations can work together in a range of ways. They may engage with other organisations as informal contract partners, work collaboratively to deliver a service within the framework of a formal agreement, or move towards a full merger.

The broad nature of collaboration is well encapsulated by the following definitions:

"Collaborative working occurs when two or more organisations work jointly to enable a greater overall output than if they pursued the activity alone."
BASSAC, ‘Sharing Without Merging’, 2005

"Collaborative working describes joint working by two or more organisations in order to better fulfil their purposes, while remaining as separate organisations."
The Charity Commission for England and Wales (CCEW), Choosing to Collaborate: How to succeed, 2009

Collaboration can be seen as any form of working relationship between two or more organisations, no matter how formal the arrangement may be. Through collaborative and cooperative arrangements and networks organisations may work with one or two others or may belong to a wider consortium. This can last for an unspecified length of time, for a specific period, or may develop into a permanent relationship. Organisations can work collaboratively in order to meet a wide range of aims and for a variety of purposes, but what all these options have in common are that they involve an exchange that is of mutual advantage to the organisations involved and their beneficiaries.

At the most formal end of the collaborative spectrum sits 'merger'. The National Council for Voluntary Organisations (NCVO) defines a merger as the process whereby two or more organisations formally combine to form one organisation, though as they make clear:

" the term merger has no precise legal definition and is used to cover a number of different processes. Some mergers may also be referred to as takeovers''
NCVO, Should You Collaborate, 2010

Merger is used to describe the transfer or combination of assets (and liabilities) of two or more separately registered charities, resulting in some or all of the parties restructuring or dissolving. In such cases, either a new charity is formed or one charity assumes control of another. The CCEW notes that in the case of mergers:

"charities need to have compatible objects, whereas for collaboration a charity needs to be satisfied that collaborating furthers its objects, that the resources devoted are reasonable in relation to the extent to which the objects are furthered, and that any benefit to others is incidental"
CCEW, 2009

Collaboration - key social and economic drivers

The impact of the economic downturn

Many studies focused on collaboration in the VCSE sector suggest that collaborative relationships are formed as a managed response to turbulent conditions in an organisation's environment. There can be little doubt that as the impact of the credit crunch became more apparent after late 2007, lack of resources driving the development of collaborative working became a factor.

In March 2009, ThirdSector magazine reported that growing numbers of charities were seeking advice on mergers and collaborations as a result of the recession, with enquiries from VCSE  organisations on issues surrounding collaborative working up by 50% in the previous three months.

"The recession is definitely a factor in this rapidly increasing interest in mergers. Heads of charities who might not previously have considered working in partnership with other voluntary groups now face a situation in which mergers have become a viable option for getting through the difficult times."
Mike Caudrey, Blue Spark Consulting, ThirdSector, March 2009

In 2011, the Northern Ireland Council for Voluntary Action (NICVA) produced a paper entitled, Impact of the Recession-Case Studies, reporting on the impact of the recession on the VCSE sector. Eleven case studies were presented to illustrate how the sector had proactively responded to the prevailing financial pressures in early 2010. Ten of the chosen organisations indicated that they were actively pursuing collaborative, joint-working approaches with other organisations, and that they now considered the collaborative approach to be a key element in organisational development. Two organisations were actively involved in considering mergers and one of these organisations was at an advanced stage in the merger process. In its Viewfinder Survey from 2011, Viewfinder 10,  NICVA reported that 84% of member respondents work in collaboration with other organisations.

The wide range of available research and web-based resources on collaboration and mergers is an indication of the level of interest in this area. For example, the National Association for Voluntary and Community Action (NAVCA) has developed an online merger resource designed to provide practical support for organisations considering a merger, while its recession resources and support page provides advice and guidance on a range of recession related issues including mergers and collaboration.

While interest in collaborative working increased as a result of the recession and continued economic downturn, it is important to note that collaborative working does not only occur when there is economic turbulence (PIPS Newry & Mourne - embracing a culture of collaborative working). Collaborative working has continually been a part of the working practices of the VCSE sector, with collaboration taking many forms. CollaborationNI has many published examples online illustrating how local organisations have worked together. Many of these collaborative ventures were not formed as the result of the current economic crisis, but rather were led by the recognition of what can be achieved by working together (Walled City Partnership - a journey to sharing premises and services).

The National Council for Voluntary Organisations (NCVO) has suggested that a number of factors led to the growing interest in collaboration, including:

• an increased government emphasis on the VCSE sector's role in public service delivery
• a drive within the sector to improve its effectiveness
• a need for more efficient use of resources
• the reported public perception that there are too many charities
  (NCVO, 2007)

The changing social and policy context

It is important to be mindful of the changing social and policy context when considering the growing interest in the area of collaborative working. Over the last 20 years, the UK VCSE sector has assumed a growing service delivery role in the community and this has raised issues around intensifying demands and the need to build collaborative alliances (both formal and informal). The policy emphasis has been on cross-sector, 'joined-up' working to address social issues, characteristic of New Labour's 'Third Way' agenda and policy discourse.

In March 2005 the Northern Ireland Assembly published Positive Steps, a co-ordinated response to the report of the Taskforce on Resourcing the VCSE sector in Northern Ireland, which promised to facilitate the involvement of the sector in service delivery and to promote a seven to ten year approach to programmes, concentrating on outcomes. Positive Steps outlined the need for the sector to modernise and adjust to ensure efficiency and effectiveness (Cara-Friend - sharing premises and knowledge; delivering joint services).

"Where appropriate, voluntary and community organisations must explore options for greater collaboration. This does not necessarily mean full mergers, but could involve sharing of resources including premises and back office services or shared governance structures."
(Positive Futures, 2005)

In the UK in 2009, the Cabinet Office introduced a Modernisation Fund (£16.5 million) to encourage collaboration and mergers and to ensure that viable VCSE organisations would be more resilient and efficient in the recession.

Collaborative working - a typology

Organisations in the VCSE sector work together in a variety of ways, from informal arrangements through to full mergers. They can work collaboratively over a fixed period of time or be permanent. NICVA has built upon previous work in this area to produce a continuum (Table 1, below) which helps to characterise and identify the various working forms; the key aspects and benefits. In doing so it has based the continuum on a spectrum produced by WEA in its Creating Collaborative Advantage: Research Report, 2004, and BASSAC's report, Sharing without merging: A review of collaborative working and sharing back office support in the voluntary and community sector, 2005.

The 'types' and 'aspects and benefits' set out in the table do not constitute an exhaustive list.

The Institute of Voluntary Action Research (IVAR) has also produced a 'collaboration spectrum' outlining the steps between informal and formal presented in Table 2, below:

IVAR's research indicated that in collaborative activities in the informal collaboration category, organisations do not make an ongoing commitment to the partnering arrangements, and decision-making power over key management functions remains with the individual organisations. By contrast in formal collaborative working relationships participating organisations establish an ongoing relationship through shared, transferred or combined services, resources, or programmes (Cultúrlann - sharing premises). To date, in the VCSE sector, informal collaborative activities such as information sharing and client referral have become common whereas intensive collaborations are less common.

Key learning

When considering collaboration

From a review of the available literature, it is clear that a key feature of successful collaboration is ensuring that the basics are right at the earliest stages. This review has highlighted the fact that there is no single generic or 'transferable' model available which, if followed, leads to success. Rather, specific local conditions and local factors tend to predominate. However, there are a number of key factors that should be considered.

Key elements to consider include:

• Working collaboratively must help the organisations involved to achieve something that they couldn't do, couldn't do as efficiently, or couldn't achieve as quickly if they were to do it alone (Autism NI, Mencap and SELB - joint working for young people with learning disabilities).
• parties have a shared purpose or vision for the work (Cultúrlann - sharing premises)
• open and transparent process that will assist in building trust
• strong leadership to drive the process forward (Will to Give - fundraising collaboration)
• a contingency plan if key individuals leave
• time is invested to ensure the right people are involved (Will to Give - fundraising collaboration)
• sound policies and procedures in place in each of the organisations
• commitment to collaboration is essential
• healthy relationships are critical to collaborative working

A range of key questions was posed by NCVO covering the planning and implementation stages and the various approaches to collaboration:

• What are you hoping to achieve by collaborating with another organisation? (Autism NI, Mencap and SELB - joint working for young people with learning disabilities)
• Are you sure that collaborative working is the best way to achieve this aim?
• Who proposed the idea? Do they have a vested interest?
• Do your Trustees and Chief Executive support the idea? (The Bytes Project - working in collaboration with Tides Training)
• Does it fit within your organisation's charitable objectives as stated in your governing document?
• Do your plans for collaborative working fit your strategic vision, values and current priorities?

Benefits

Having established that a collaborative approach suits the partner organisations, it is then important to highlight what the benefits of collaborative working are likely to be. NICVA, in 2009, identified a range of benefits accruing from collaborative working and mergers, including:

• an improved or wider range of services for the beneficiaries
• financial savings and a better use of resources
• knowledge and information sharing
• sharing of risks in new projects
• stronger, united voice and better co-ordination of activities
  NICVA, Collaboration and Merger Newsletter, 2009

In addition, NCVO identified some other benefits:

• shared skills and expertise between staff and trustees
• more efficient use of resources
• reduced duplication of effort (Cara-Friend - sharing premises and knowledge; delivering joint services)
• donors able to support a range of causes
• improved publicity opportunities
• access to a wider pool of contacts and supporters
• new or enhanced fundraising capacity
• public confidence about reduced duplication or competition
• opportunities regarding income generation, eg new fundraising strategies
• better geographical coverage
  NCVO, 2008

Barriers and concerns which can impact on collaborative working

Research has clearly established the benefits that can be derived from collaborative working. However with any programme involving change there are challenges. IVAR has identified a number of challenges to implementing collaborative working in practice.

• dealing with difference (between partner organisations)
• protecting organisational identity and niche
• balancing individual and collective interests
• developing appropriate leadership
• developing appropriate governance structures (Cultúrlann - sharing premises)
• securing resources and organisational capacity for the collaboration
• developing a shared understanding of the purpose of the collaboration
  IVAR, 2011

Potential challenges:

• managing relationships between partners
• partners investing disproportionate time or resources
• lack of clarity about distribution of profits, assets or intellectual property
• reputational threats to brand, values or supporters
• fear of losing supporters
• different expectations of partners
• different levels of commitment
• diversion away from core activities
• unequal or unmanaged distribution of risk
  NCVO, 2008

Considering a merger

Rationale

A merger is the most formal type of collaboration. It can be viewed like a marriage, and like a marriage the decision to enter into a merger should never be taken lightly. The key driver for any decision to undertake a merger needs to be the potential improvements in outcomes for beneficiaries. There can be a number of drivers for an organisation to consider a merger. NCVO identified a range of internal and external drivers.

Internal drivers:

• desire to provide more or better services to beneficiaries
• need to increase efficiency through better use of resources (Abbeyfield UK (NI) Ltd. - a successful merger)
• preventing duplication of services (Cara-Friend - sharing premises and knowledge; delivering joint services)
• financial difficulties
• raising public profile or boosting income
• loss of key staff or trustees
• 'survival' and 'rescue' - an organisation in jeopardy merges with another with similar objectives so that its service continues

External drivers:

• pressure from funders to reduce duplication
• government encouragement
• competition with similar organisations
• stakeholder opinion
• public perception of an overcrowded voluntary sector
  NCVO, 2006

IVAR has described a merger as:

"one of the most challenging steps a voluntary organisation can make, aside perhaps from formation or closure. It can create tensions as well as excitement, be the cause of much debate and lead to permanent and irreversible change"
IVAR, 2011

In practice, it is often a combination of factors that has a bearing on the decision to begin a merger process. IVAR's research identified the following seven major reasons why voluntary organisations consider merger:

• vulnerability of smallness
• Financial pressures
• governance problems
• influencing the external environment
• meeting users' needs more effectively
• broadening the organisation's offer
• having a history of collaboration
  IVAR, 2011

In a report on mergers by Social Finance entitled, Charity Mergers: tackling the issues in practice, research drew out a number of key findings. Drivers and obstacles were ranked according to case study responses in the research undertaken for the report and are shown in Table 3, below:

The Merger Process

Key phases identified by Social Finance in the merger process include:

• the 'exploration phase' - where an organisation focuses on understanding its current position and considers whether merger is a viable option
• the 'initial feasibility phase' - where an organisation addresses the practicalities involved in initiating the process with a partner and undertakes initial discussions
•  the 'detailed appraisal and execution phase' - where the merger partners work together to negotiate the terms of the merger
•  the 'integration process'
•  the 'post deal phase' is undertaken in which the newly merged organisation continues the integration process and establishes itself for the future

Planning the process

Best practice suggests that the merger process should be led by good communicators who can articulate a clear vision for the new merged organisation. A merger passes through various stages that can best be led by change managers, professional advisors or facilitators.

Who leads?

NCVO suggests that it is useful to create a steering group with, at least, the chairs of merging organisations, one trustee from each organisation and each organisation's chief executive. An implementation group of staff can act on decisions taken by the steering group (Alpha Housing - example of a VCSE merger).

Timescale and budget

A target date for the merger should be agreed clearly, as the process itself can be time consuming. Key factors include:

• How much time will be required from staff?
• Could you employ temporary staff to maintain the pace of ongoing work?
• How much consultant help will be required?
• Which stages will require professional input?

Alongside the key stages in any collaborative endeavour there is a range of both technical and non-technical issues which need to be kept under review.

Technical aspects include:

• assessing the role (if any) for the regulator to play
• due diligence
• Transfer of Undertakings Regulations, Protection of Employment (TUPE)

Non-technical aspects include:

• keeping staff informed
• involving all relevant stakeholders

Post-merger considerations

The creation of the new legal merger is not the end point of the merger process and good practice indicates that the steering group that oversees the process continues to function in the post-merger environment, addressing the range of issues which inevitably will arise.

Issues include:

• addressing the need to build a new organisational culture
• new working practices
• ongoing legal and financial issues for the new organisation

The focus at this stage will be on:

• building beneficiary / stakeholder confidence in the new organisation
• integrating policies, procedures and systems
• embedding working style and culture
• delivering service improvements / cost savings
• addressing issues that arise in the transitional phase

Mergers - reasons for failure

On mergers in general, rather than within the VCSE sector, the reported failure rate is very high, with estimates starting at 50% and over. In 2007 research produced by the Hay Group reported by BBC Business News highlighted that about 97% of mergers by UK companies fail to completely fulfil their strategic objectives. According to the research, the culture shock caused by bringing together two organisations is the biggest reason for failure. The UK's record was cited as among the worst in Europe where the overall failure rate was lower at 91%. The report found that about 28% of business leaders who had been involved said that the deal had failed to create 'significant new value'.

Edinburgh Business School (2008)suggests that when measuring the success or failure of mergers it is important to focus on the long term, as most appear to fail in terms of short-term financial value creation. Many mergers in effect appear to fail because of poor implementation.Typical reasons for merger failure include:

• an inability to agree terms
• the target being too large relative to the acquirer
• a failure to realise all identified potential synergies
• an inability to implement change
• shortcomings in the implementation and integration processes
• conflicting cultures
• a weak central core in the target
  Edinburgh Business School, 2008

CCEW research suggests that:

"a merger will probably fail if either the vision or outcome of the merger is not fully defined, or is not the guiding principle for proceeding"
CCEW, Collaborative Working and Mergers, 2003

Reasons given by survey respondents for a merger not being successful included:

• a slow decision making process
• loss of focus
• parties with separate aims
• beneficiaries who did not respond well to the changes the merger brought
• different working cultures of the charities involved
• lack of unity among trustees in driving the merger forward

Charities also reported that merger is more likely to fail due to issues relating to management of the brand, operations and service provision, rather than because of issues relating to assets, accountancy and legal matters.

A review of the relevant literature indicates a range of issues relating to failed mergers including:

• lack of communication
• lack of direct involvement by Human Resources
• lack of training
• loss of key people and talented employees
• loss of customers
• corporate culture clash
• power politics
• inadequate planning

In the Telegraph article, Ten Reasons Mergers and Acquisitions Fail, Siegenthaler suggests these to be the main reasons why mergers fail:

• Ignorance - preparation work needs to be undertaken for several months before day one of the 'official' merger
• No common vision - in the absence of a clear statement of what the merged company will stand for, there is no point of the convergence on the horizon and the organisations will never blend
• Nasty surprises - resulting from poor due diligence
• Team resourcing - resource requirements are very often underestimated
• Poor governance - lack of clarity as to who decides what, and no clear issue resolution process
• Poor communication - messages too frequently lack relevance to their audience and often hover at the strategic level when what employees want to know is why the organisation is merging
• Poor programme management - insufficiently detailed implementation plans
• Lack of courage - delaying some of the tough decisions that are required to integrate two organisations
• Weak leadership
• Lost baby with bathwater - companies contemplating a merger or acquisition too often omit to pinpoint what particular attributes make the other party attractive. Culture cannot be bought - it needs to be embraced

Evidence of collaborative working in the VCSEsector in Northern Ireland

In recent years there has been much interest in collaborative working in Northern Ireland, especially as the economic downturn continues to bite, with more organisations viewing collaboration, or even merger, as an increasingly attractive option. This new climate has required organisations to pursue innovative and creative ways to carry out their activities, remain on a sound financial footing and, in some cases, survive. With a decrease in investment income, lack of uplifts in some funding streams and cuts to public funding organisations have had to evaluate their future sustainability.

Collaborative working practices have been a theme of NICVA research over a number of years. In State of the Sector VI  62.9% stated that they anticipated working in collaboration with other organisations in the forthcoming 12 months. Also recently, Viewfinder 10 reported that 84% of respondents indicated that they work in collaboration with other organisations. Of those who are already working collaboratively, 77% aim to increase their current levels of collaboration, whilst 46% of organisations that are not currently working collaboratively, aim to do so over the coming year. The survey also found that there is a generally positive attitude towards collaborative working within the sector, with only 6% of respondents of the view that a focus on collaboration will have a negative effect.

This research also examined the main reasons why organisations work in collaboration, shown in Figure 1, below: 

The factors most motivating respondents to work collaboratively are:

• to increase the ability to reach a wider group of service users (45%)
• to improve service delivery (43%)
• to access new areas of expertise (33%)
• to increase ability to access further funding (31%)
• to provide a better quality service (30%)

Amongst the least reported are:

• sustainability (26%)
• increased advocacy and campaigning (26%)
• sharing resources (24%)
• sharing overheads (12%)

All of which might be seen as responses to difficult economic times.

As part of Viewfinder 10, organisations were asked to consider the potential impact of collaboration on the sector over the next five years. Respondents were again very positive in their assessment with 86% indicating that the impact would be either positive or very positive.

Organisations were also asked to identify the types of collaborative working they will take forward in the next 12 months. For almost half respondents (45%), the main type of collaborative work planned in the next year is networking, effectively building on the already existing formal and informal networks that have been evident in the VCSE sector for many years. Over a third (33%) are planning joint fundraising or joint funding applications, which suggests a more formal collaborative approach than networking. While 31% of respondents intend to share training and best practice with partner organisations in the same period. Sharing staff, resources or premises is being considered by around a fifth of responding organisations, whilst sharing back office services is under consideration by one in ten.

A merger, the most formal type of collaboration, is being considered by 12 organisations (3%). State of the Sector VI also asked organisations if they anticipate merging with another organisation in the next 12 months. Of responding organisations 6.6% stated that they anticipate a merger between themselves and another organisation.

Support for organisations that are considering collaborative working

There is no 'one size fits all' approach to supporting organisations that are in the process of collaborative working or considering it. As part of Viewfinder 10, organisations were asked what support they would benefit from in relation to collaborative working, the findings are in Table 4, below:

Career guidance for senior staff affected by change (23%) and support through the legal process (21%) were the types of support that organisations thought would be most beneficial. Overall there was a fairly consistent view from around a fifth of respondents that each of the types of support outlined would be beneficial.

Lessons learned

• clarify why you should collaborate
• identify clearly what is to be achieved by collaboration
• assess the potential risks and barriers
• choose the appropriate model and level of collaboration from across the broad spectrum ranging from informal alliances to merger
• plan the process in a transparent manner
• ensure sufficient time is set aside (Alpha Housing - example of a VCSE merger)
• ensure the process is driven by strong leadership (Walled City Partnership - a journey to sharing premises and services)
• seek specialist advice to facilitate the various stages of the process

 Case studies

Below are links to seven different case studies currently involved in collaborative working in Northern Ireland. The purpose of these studies is to trace why organisations have got involved in collaborative working, what the benefits and challenges of this way of working have been and to distil any wider learning.

Abbeyfield UK (NI) Ltd. - a successful merger

Alpha Housing - example of a VCSE merger

The Bytes Project - working in collaboration with Tides Training

Cara-Friend - sharing premises and knowledge; delivering joint services

Cultúrlann - sharing premises

PIPS Newry & Mourne - embracing a culture of collaborative working

Will to Give - fundraising collaboration

Walled City Partnership - a journey to sharing premises and services

Autism NI, Mencap and SELB - joint working for young people with learning disabilities