Why Do Some Charities Merge, While Others Hold Back?

Can you recall a time your management group cringed at a question that seemed to come out of left field?  GASP! Some executives have that initial response when asked, “Should our charity merge with another?”

I wonder why some leaders have successfully merged their charities while others have a visceral response to the concept? The joining of businesses is common in the private sector but not so popular amoungst charities or non-profits; however some universities, churches, health promotion/research groups and service-based organizations have achieved great success after forging with other charities. A merger can make good business sense as a response to changes and anticipated pressures in the market.

ConsolidateToday’s competitive environment can be the incubator that brings organizations together. Many executive leaders recognize an organization must continuously change. Mergers – by their very nature – create new models to leverage resources while creating financial efficiencies, broad stakeholder engagement, mindshare and new platforms to achieve greater impact.

Executives who have orchestrated mergers understood the risk of maintaining the status-quo rather than transforming their organization. Achieving success amoung a plethora of important causes today is tenuous for some charities. Without strong brand presence, financial health, proper infrastucture and demonstrative impact, charities face the compounding pressure of garnering sustainable levels of support. Merged charities understood these risks and committed to evolving the business in a profound way.

The growing public narrative surrounding adminstrative and operational costs have added pressure to the sector. The focus on program delivery, management salaries, technology investment and maintaining physical assets have opened up the discussion for charities to consider a merger model. Bringing organizations together can help elimate duplication, streamline program, enhance service delivery and allow for more effective use of donor contributions.

By joining forces organizations can build greater capacity, create healthier balance sheets, retain talent and attract new investment, so why are not more charities looking at merging? merger-acquisition-spin-off

It has been my experience four common factors emerge holding charities back from a merger.

  1. Often the misundertanding and opposition that arises with staff is due to the lack of open dialogue. Without a robust communication strategy staff lack a full appreciation of the current state of the organization, the market trends, the benefits to the mission or the business case supporting the strategy. The employees’ readiness to embrace change is critical to achieving a successful merger.
  2. The management styles of executive teams help shape culture, but also present challenges when developing merger relationships. It is vital in the process to examine how ‘style’ can support and detract from achieving the desired outcome.
  3. Differing visions for the organization(s) can derail a merger if not built on strong common ground.
  4. Lastly, success is directly linked to management and goverance volunteers maintaining momemtum on the execution of the plan. Project management teams, executive leaders and governance boards need to ensure all parties work together on task and on schedule.

In my opinion, mergers are viable options for charitable and non-profit organizations. Imagine Canada reports there are 170,000 charities and non-profits organizations in Canada of which 85,000 of these organizations are registered charities (recognized by the CRA). To succeed in an already crowded charitiable sector it is more important than ever that more charities consider the benefits of responsible mergers.

If you have an opinion about charity mergers, please reply.

 

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