Mission + Strategy = Social Value

Nonprofit Merger Secrets to Success

A new report called "Success Factors in Nonprofit Mergers" was published last month by MAP for Nonprofits, a capacity building organization for nonprofits based here in the Midwest in Minneapolis, MN. The multi-year study completed by Wilder Research identifies what factors lead to successful nonprofit mergers, and analyzes what happens after a merger is implemented. The study examined 41 mergers between January 1999 and June 2010, and included interviews with 201 individuals - three to eight people per merger, including at least one executive director, board member, and representative from the dissolved nonprofit. It also looked at financial data obtained from publicly available 990 tax returns and accessed through Guidestar.

The researchers were ablet to identify a variety of success indicators for a merger in areas such as outcomes, reasons for merging, merging process, and financial analysis.  Here are just a few of the interesting highlights:

Ninety-five percent of respondents believed that the merger would not have happened if one of the executive directors had not driven it. Also, in 80 percent of the mergers, the executive director of one of the pre-merger organizations had recently left or was soon to retire.

When the board of each pre-merger organization was very involved in the merger process, respondents were more likely to report that the merged entity had a positive image, reputation, or public support three years following the merger.

Mergers may work best when the nonprofits have a history of partnering together and openness, and when there is transparency in both legal and financial matters.

Merger success is associated with how well non-administrative staff members are informed about the progress of the merger and the involvement of non-administrative staff members in the planning and implementation of the merger.

The study supports many best practices for facilitating a merger as well. It also confirms that organizations feel they should use consultants; 96 percent of respondents said they would involve a consultant in future mergers.

There is much more information in the study than I've shared here, and I encourage you to either read the full study or the shorter synopsis, particularly if you are considering doing a merger yourself. I am grateful to MAP for Nonprofits, Wilder REsearch, the Greater Twin Cities United Way, and their partners for making this research possible and for sharing it with the entire nonprofit sector. I also wish to acknowlege my good friend an dmentor, Ron Reed, who was integraal to making the study possible. Ron helped launch Project Re-Design, the mergers and collaborations practice at MAP for Nonprofits, and co-wrote "MergeMinnesota," a merger how-to manual that is available for free on-line, a really great resource.

 

I Gain and You Gain - The Emergence of "Smart Power" Strategies in the Nonprofit Sector

I am often asked: Why is it important to learn how to collaborate with other nonprofits? My response often has to do with the microeconomic changes that influence our sector, such as the pressure to raise unrestricted funding. But recently I saw a very interesting podcast on Ted.com given by Joseph Nye, a historian and diplomat who made me see the answer to this question in a new way.

Nye explained that the nature of power - the ability to accomplish your goals - is changing in the 21st century. Most countries are used to thinking of power as the ability to act unilaterally. Nye, who was speaking about global power shifts, says however that it's soft power which is the emerging power in the 21st century. There are many problems that are outside the control of individual countries: climate change, pandemics, etc., and that the only way to deal with these issues is through cooperation among nations. The same is true in the nonprofit sector where we are often struggling with failing state governments, the recession, or complex social problems. Nye advised that we have to stop thinking of power as a "zero sum game," where I win and you lose, or vice versa. Today, power could also be a positive sum game: I gain and therefore you gain as well. Increasingly, this is the way we want to think about power in the 21st century, in the nonprofit sector, as well.

How can we work together as nonprofits to produce positive results we can all benefit from? One way is through exercising soft power by creating alliances, partnerships, and mergers between organizations as a strategy to address those chaotic issues that are beyond the control of any single organization. Nye explains that by exercising both soft and hard power, one creates "smart power," the ability to move back and forth between these two strategies. In the 21st century, let's vow to exercise smart power in the nonprofit sector in order to deliver on our nonprofit missions.

News Round-Up on Nonprofit Strategic Re-Structuring from Summer 2009

Here are the news and other stories about nonprofit collaborations, mostly mergers, that I pulled off the Internet from all over the country.

Merging Administrative Functions, posted on the site: Butts in the Seats, Musings on Practical Solutions for Arts Organizations, July 21, 2009. The posting links four separate articles written by the Nonprofit Law Blog related to back office collaborations. You may have seen these postings elsewhere, they are very good.

Goodwill Merger Art for our sake at the Kimmel Center tonight, Philadelphia City Paper, July 23, 2009. Article about a joint fundraising event to celebrate a new merger between Centro Nuevo Creacion and Lutheran Settlement House.

Charlotte Shelters to Merge, WFAE 90.7FM, story aired July 24, 2009. Radio story text regarding two shelters, Uptown Men's Shelter and Emergency Winter Shelter which are merging after operating separately for 20 years. A move even the shelter clients say makes perfect sense.

OPINION: Putting Clients over turf is bold first step, The Charlotte Observer - McClatchey Tribune Information Services, July 26, 2009. An article about the merger of two shelters in Charlotte, NC.

To Respond to Downturn, Two Museums Join Forces, New York Times, July 24, 2009. The story describes the impact of the economy on arts organizations and strategies they are devising to deliver programming including 6 New York museums which have formed an alliance to allow any of their members to have visiting privileges for all of their establishments.

Pending merger could trigger another blood bank war, Orlando Sentinel, July 29, 2009. An article discussing the impact of a potential merger between two blood banks and its potential to create a "blood war," in the market.

Merger with Arts Group Will Preserve Ticket Subsidy Program, New York Times, July 31, 2009. Article about the merger of two arts organizations in NYC: Arts Connection and High 5 Tickets to the Arts.

Group faces big change, goerie.com, Erie Times News, Aug. 2, 2009. Two refugee relief organizations, The International Institute of Erie is merging with its national affiliate the U.S. Committee for Refugees and Immigrants, based in Arlington, Va.

Youth Villages, Georgia-based Inner Harbour to merge, Memphis Business Journal, Aug. 3, 2009. Two Georgia-based nonprofits providing residential and social services announced their decision to merge by the end of 2009.

Dayton United Way rejects Cincy merger, Business Courier, Aug. 4, 2009. The United Way of Greater Dayton rejected the opportunity to merge with the United Way of Greater Cincinnati and the United Fund of Dearborn and Ohio counties in southeastern Indiana.

Nonprofits and Corporate Counsel partner in Merger Success, The Metropolitan Corporate Counsel, Aug. 5, 2009. An article about free legal services from a nonprofit called Pro Bono Partnership, based in the states of Connecticut, New Jersey, and New York, which assisted with nonprofit merger transactional services.

County Habitat moves to Baltimore, The Capital Hometown Annapolis.com. Two Maryland Habitat chapters, Arundel Habitat for Humanity and Chesapeake Habitat for Humanity merged on July 1st.

New North American recycling group forming, PlasticsNews.com, Aug. 4, 2009. An article describing the creation of a new national recycling coalition, RONA, created in reaction to the merger of the National Recycling Coalition and Keep America Beautiful.

New Recycling Org. Launches, Kab/NRC Merger Pending, Earth911.com, Aug. 6, 2009. An article on the launch of a new, national recycling coalition in reaction to the decision by Keep America Beautiful and the National Recycling Coalition to merge.

Lending Merger is Sensible, My SA Business, Aug. 15, 2009. An article discussing the merger of three small, community lending institutions in San Antonio, Texas.

Merger aims for 'friendlier' housing plan, The Salem News, Aug. 15, 2009. Two local housing organizations have decided to merge to maximize their development capacity in Salem, MA.

Finances prodding nonprofit mergers, Mankato Free Press.com, Aug. 18, 2009. An article about three nonprofit women leaders involved in promoting mergers in the sector.

Boys and Girls Town part of merger, News-Leader.com, Springfield, Missouri, Aug. 28, 2009. The Springfield Boys and Girls Town of Missouri has announced a merger with another youth agency.

"Round-Up of the Week's News on Nonprofit Collaborations"

At the suggestion of a fellow blogger and friend, Celeste Wroblewski at studio 501c, I am going to add a new feature to my site: a news round-up. Every day google alert sends me news stories about nonprofit mergers, partnerships, and all things related to nonprofit strategic re-structuring. I have far more material than I have the space (or time) to write about. So instead of trashing the stories, I am going to send you the links to the more interesting alerts and let you decide which ones to read. I will still post blog entries about the evens I find interesting, too. If you like, let me know what you think of this new feature by sending me a comment. Also, let me know if you found a story particularly interesting, and I'll check it out. Happy reading!

"Thinking like Businesses," by Hartfordbusiness.com, an editorial supporting the decision by some nonprofits to start considering mergers. An overview of some notable examples in the state of Connecticut.

"Anxiety on the rise at area's nonprofits," by Warren Wolfe, StarTribune.com, Minneapolis-St. Paul, MN. An overview of merger activity in the Minneapolis-St. Paul area due to the decline in finances for nonprofits.

"Area nonprofits feel urge to merge," by Laura Crimaldi, BostonHerald.com. An article covering a report by the Boston Foundation detailing the financial woes of the Boston nonprofit sector and their efforts to get organizations to consider mergers.

"Nonprofit Mergers: Putting the Best Foot Forward," by Scott Russell at the Minn.Post.com; an overview of Minnesota mergers and one merger in particular between COMPAS and Young Audiences of Minnesota. The article goes on to talk about a free publication on mergers, among other things interesting.

"Merge Ahead," by Bruce Boyd, On Philanthropy. A balanced opinion piece about nonprofit mergers by a consultant in the field, which begins by citing a recent study by the Nonprofit Finance Fund on nonprofit collaboration activity.

"Social services agencies ACHIEVA and Arc of Westmoreland County merge," by Kris B. Mamula, Pittsburgh Business Times. An article covering the decision by two notable social service agencies in the Pittsburgh, Pennslyvania community, to merge.

"Nonprofits Forced to Think Differently," by the Seacoastonline.com. An editorial lauding the decision by two Northampton-based nonprofit organizations to merge: Seacoast Visiting Nurse Association and the Massachusetts-based Home Health VNA.

"Literacy Nonprofits Merge" by Pam Allen, The Business Review (Albany). An article about two nonprofit literacy organizations in new York state which decided to merge: Literacy Volunteers of America/Mohawk/Hudson and Literacy NENY.

"A Merger that will Assist the Area's Jobless," by the News & Advance, Lynchberg, Va. An opinion piece supporting the potential merger of two nonprofit organizations providing services to unemployed individuals in Central Virginia: New Lands Jobs and Lynchberg Community Action Group.