- Nicholas Morgan
Collaboration occurs on a spectrum stretching from networking to acquisition. As collaborating organizations move along the spectrum, generally the risk and complication increase. Despite this, our clients have begun to express dissatisfaction with simple networking and have expressed a desire to move toward more productive and more aggressive forms of collaboration. We see three major categories of relationship:
Level One Collaboration- Example activities at level one are mutual advocacy programs, coordinated actions, collaborative learning, some collective purchasing (like training or shared interest events), and other general networking. Most collaboration occurs at this level. Independence is never sacrificed, reputations can improve, and likeminded organizations get the chance to help each-other improve toward shared goals and values.
There are very few risks at level one collaboration. Organizations will want to avoid common mistakes, like holding themselves out as "partners" when they are collaborating as the term may imply joint and severable liability. Other non-legal risks exists. Often level one collaborating organizations put their best people forward. While this can be a good way to improve standing in the eyes of the other organization, it also can prove to be a talent drain and distract your organization from its independent goals. Also, with coordinated action collaboration can result in consensus mentalities. With collective purchasing, purchases result in lowest common denominator and missed opportunity. Accordingly, while level one collaboration is common and can be incredibly valuable, it is wise to consider upfront your principles of engagement and your organization's desired outcomes.
Level Two Collaboration- Example activities at level two are fiscal sponsorships, joint programming, joint earned income ventures, coalitions/consortiums/associations, significant mutual outsourcing or joint purchasing, and small scale management service organization (MSO) creation. Stepping up to level two means an organization steps up in risk and complication. Accordingly, competent attorney involvement becomes essential to mitigate risk. Of the activities listed, joint programming is the most simple (in design though experience on the ground can differ) and the most common. NGOs often undertake joint programming. Risks here include dual employment issues, IP ownership issues, resource utilization, and budgeting. Some joint programming, like recruiting or fundraising, have special concerns. Joint fundraising, for example, can easily run afoul of state laws concerning professional fundraising compliance, registration, reporting, and bonding. Another activity we have seen more and more interest in is the joint-creation of an MSO. MSOs have some of the most level two potential and some of the greatest complication. When designing a collaboratively built MSO to handle one or more services for the collaborating organizations upfront negotiation is paramount. Who will supply workers, IP, capital? What will ownership and control look like? Will the MSO have a priority to serve the founding orgs or will it have a different priority (like making money to flow up as dividend to founding orgs, or increase customer base to reduce costs to constituency including founding orgs, or does the MSO simply exist to allow the founding orgs to focus on their mission and priorities without becoming bogged down in administration)?
Level Three Collaboration- Example activities at level three include significant joint venturing, large scale MSOs, mergers, and acquisitions. All of the concerns of joint programming are present at the significant joint venturing level, just magnified. Those major categories to iron out before joint venturing are Money (ownership/capital contribution percentages, each collaborator's ability to contribute, growth capital or future infusion expectations), Control (Board and Officer positions, Veto rights, etc), and IP (will collaborator names, trademarks, or patents be transferred to the JV, what happens to the IP the JV develops). Similarly, the issues present in small scale MSOs (above) are magnified in the large scale MSOs. While the risks and complications at level three are significant, this level of collaboration also has some of the largest potential impact on those who take on the challenge!