Rotary Charities Play Lead Role Helping Two Nonprofits Merge

Tuesday, January 28, 2014

Mike Gallagher
CMF Editorial Correspondent

When officials of the nonprofit Third Level Crisis Intervention Services in Traverse City realized that changes in federal reimbursement policies and funding cutbacks last year were going to severely impact their ability to keep its doors open, many viewed it as a devastating development.

The folks at Rotary Charities of Traverse City saw it as a golden opportunity.     

“Third Level has been a long-time grantee of Rotary Charities,” says Marsha Smith, executive director of the northern Michigan grantmaking organization. “We knew we had to do something to keep these important services available to those in need.”

Terms such as collaboration, partnerships and consolidation are much more than just buzzwords for Smith and her staff. They are often among the critical tools needed to salvage effective, yet under-funded nonprofits suffering from the recessionary fallout of the past several years.

In early 2013, Third Level officials came to a group of funders for help and direction (United Way, Grand Traverse Regional Community Foundation and Rotary Charities). Third Level was advised to research appropriate partners for its crisis services programs.

NorthSky Nonprofit Network, a program of Rotary Charities, stepped in and helped Third Level assess potential partners. As a result of a thorough vetting process, Child Family Services of Northwestern Michigan, located in Traverse City, was identified as the most compatible.

Both organizations help with the healing and growth of children, youth, adults and families through similar missions and service areas and have long histories in the community. Both also had “a need to reduce costs,” says Jim Scherrer, CEO of Child and Family Services of Northwestern Michigan.

“Joining in to help find a way to deal with the issues facing Third Level, which has been in existence for the past 40 years, was in our minds a natural progression of our organizational capacity building program,” notes Smith.       

In addition to the services of NorthSky, Rotary Charities initially stepped up to provide a grant to help facilitate the merger and recently provided another $40,000 to assist with the transition costs associated with bringing together Child and Family Services and Third Level.

The components for success of this merger were already embedded in the synergy that Rotary Charities had previously helped create over eight years ago with the initiation of a dedicated capacity building grants program and creation of NorthSky Nonprofit Network, a nonprofit management support program that engages partners – including the United Way Volunteer Center, Michigan Community Resources and more than 20 private consulting businesses – to serve its 10-county region.

Tim Ervin, a highly respected and seasoned nonprofit and business advisor, was selected from the NorthSky Consultant Network to lead the effort to find some way to secure the continuation of Third Level’s crisis intervention services.

It didn’t take long for this strategic leadership team to begin focusing on the possibility of a merger between Child and Family Services and Third Level as a way to ensure that Third Level’s mission be continued.   

“When Third Level first contacted me, I was immediately interested,” says Scherrer. “Within a week we had our two boards meeting to have a larger conversation. During the next six months we had board-to- board and executive staff-to-executive staff negotiations. In December we voted on dissolution of Third level and finalized the transfer of assets. 

“Tim (Ervin) with his expertise was extremely helpful in keeping the conversation going…and moving the process forward,” he adds. “He helped us work our way to an agreement which overall went smoothly with only a couple of sticking points along the way, but we resolved those issues.”     

Ervin says the effort began in March 2013 and involved and impacted a combined 130 staffers between the two long-time organizations with a combined $8 million budget.

“During this process we found that there was not only a terrific fit with both nonprofits’ programs, but there was a good cultural fit with both sets of employees. They already knew each other as they work in the same area and serve the same population.

“They both put their own compensation and time at the bottom of the heap in terms of importance while putting a priority on service delivery. Both organizations saw this (potential merger) as very positive for the region,” says Ervin.

“Additionally, both organizations had very strong and capable people on their boards who provided terrific leadership and a desire to move this process along. It’s an incredible success story.”

Smith agrees and says, while there were challenges, all the hard work has paid off. 

“Most nonprofits don’t think about the costs that go into mergers,” she says. “Involved are such things as legal fees, appraisals, environmental work, staff contracts, compensation review and departing fees. These are all hard costs that need to be addressed.”     

All point to Third Level’s now-former executive director Ken Homa as an unsung hero in the effort to save the critical intervention crisis services for northern Michigan.

“Ken gets a gold star and the community needs to know he realized immediately that this work would lead to his losing his job, but he made an incredible effort to make it happen,” notes Ervin. “That’s dedication to the community as a whole and the people who benefit from all this.      

“Ken simply felt it was more important to do this for the public good.” 

Homa says the merger and its resulting saving of the crisis intervention services was first and foremost the goal of all the key players.

“This new partnership will strengthen both agencies' programs, making it better for those we both serve,” says Homa.


Marsha Smith, Exec. Director
Rotary Charities

Today, the merger has been completed, but the assimilation of the two nonprofits continues. Third Level programs will retain their names and locations and Child and Family Services will provide the administrative, human resources and development functions to continue them for people in need.

Smith says she hopes foundations and other grantmakers throughout Michigan and beyond will use this Rotary Charities’ success story as an incentive and a road map on how to help merge existing nonprofits that may mutually benefit from such a move.

“We all know that local, state and federal funding cutbacks, increased bureaucratic restrictions and ever-increasing community needs for services are today negatively impacting all of our dedicated, yet struggling nonprofits,” warns Smith. “And this is expected to continue.

“I hope our story resonates with other grantmakers,” she adds. “I’m now trying to get together a group of funders from around the state who may be interested in building a pool of money to help with these types of potential mergers. Anyone who is interested in discussing this should contact me.

Smith may be reached at: (231) 941-4010 ext. 202, or via e-mail at: [email protected].

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