Nonprofit mergers keep the mission alive

As a result of the current economic climate, the rise of collaboration that exists among nonprofits has continued to increase across the country. Nonprofits with similar missions are looking to each other for help to keep organizations alive, even if it means to merge.

One of the wisest and most humbling things nonprofit executive leadership can do is to recognize when their organization may be in trouble and when to start the process to seek help before it is too late. High 5 Tickets to the Arts, a non-profit organization dedicated to making the arts affordable for teens, was in danger of going out of business due to the economic climate. Their leadership looked to ArtsConnection to conduct a formal merger that would save their programming and create a larger and stronger entity.

Both organizations entered a six month strategic alliance that culminated in a formal merger on January 1, 2010. The High 5 staff and programming are currently working out of the ArtsConnection offices in New York City. This was a natural partnership for both organizations and due to the merger, they have been able to enhance programming for the population it serves.

In an interview with the New York Nonprofit Business Examiner, Steven Tennen, Executive Director of ArtsConnection discussed aspects of nonprofit mergers that can be replicated with any type of nonprofit organization that may be considering a collaboration.

Tennen offers the following:

Why merge? There has been a surge of new nonprofit organizations over the past twenty years. This was fueled by increases in the availability of public and private funding. Many new organizations did work similar to existing organizations and in many locales we began to see a duplication of services or a competition to provide services. Now, with less funding available, nonprofits must find the most cost effective way to maintain and deliver services – to see that resources are used in the most beneficial and mission-driven way. Overhead and administrative costs are going to have to be reduced so that more money is available for core services. Mergers are one way of reducing those costs and creating leaner, more effective organizations.
What Value is Added? - There needs to be a value added to a merger. Look for what is complimentary about your organizations. In our case, although both High 5 and ArtsConnection are youth serving organizations, ArtsConnection’s work occurs mainly during the school day with younger children and High 5 works in out-of-school time with older students. Our constituencies were different and our funding streams were not the same. It was an opportunity to increase our combined audience and maintain a range of funders.
Get your Board of Directors involved -Bring your board of directors into the conversation early. Without buy-in from the board a merger is not going to move forward. They need to be aware of all the potential problems as well as all the potential benefits. Joint meetings between members of the two boards are critical. They provide a good indicator of whether the boards will be able to plan and work effectively together. This is about due diligence on the part of both staff and board. Don’t be afraid to ask the tough questions.
Which staff stay and which staff go? I would first look to see where there is duplication of service and begin to streamline program operations around that issue first. I wouldn’t eliminate any programs precipitously. New management and staff may find ways to make struggling programs work more effectively. There needs to be a plan for what this new, merged organization will look like over time. Program and staffing decisions must be made in that context.
Pros and Cons - A merger can energize a board and staff around new possibilities. Whether it comes to fruition or not, the process can drive important strategic conversations. Mergers also provide context for re-evaluating programs and re-defining staffing allocations and responsibilities. The negatives are all about time. This process takes a huge commitment of both board and staff time with no guarantee of a successful merger at the end. If the motivation and the clarity of purpose isn’t there, it is probably not something an organization should put itself through.

Joe Brown, Founder and Principal of Slope Resources possesses 20 years of management consulting experience. Slope Resources founded in 1998, is dedicated to providing nonprofit organizations of all types and sizes with affordable access to high quality human resources and organization management consulting services.

Brown has collected resources on nonprofit mergers over the years and offered some of his findings on nonprofit merger best practices as a contribution to this article. These resources include:

The bottom line is that the important work of nonprofits continue. Mergers are a way for nonprofits to survive. When vulnerable populations of people are the beneficiary of the services and supports, it is the responsibility of the nonprofit to embrace the change to come through a potential merger when the forecast looks glum.