Charity mergers the USA way

Charities in the US are merging to survive in the recession, just like their UK counterparts. Dan H McCormick describes the difficulties they have faced and the lessons learned

US flag
US flag

Difficult economic times in America are affecting charities and associations deeply. Many are reporting significant downward trends in revenue and difficulty attracting new members and volunteers. Reports of huge drops in savings and endowments abound.

This new climate is causing organisations to look for new ways to carry out their activities, remain on a sound financial footing and, in some cases, survive. Talk of various formal collaboration structures, including mergers, is at the forefront of their planning.

Large federated organisations are trying to reduce redundancies and take advantage of their scale and existing capacities by merging members and affiliates. Some are requiring affiliates to merge based on predetermined national criteria. Other voluntary organisations are encouraging or incentivising their member corporations to merge into new organisational designs.

The American Cancer Society, a federated entity, has merged 57 separate incorporated divisions into 12. Girl Scouts of the USA recently merged 330 Girl Scout Councils into 109 large regional structures. Even United Way of America, a coalition of charities with more than 1,300 local offices, is looking for new ways to carry out its work with fewer corporate entities.

Individual charities with similar missions, such as those related to the arts or supporting women's issues, are seeking partnerships with like-minded entities to reduce costs. Techniques include sharing space, combining backroom services such as accounting and payroll, and merging. Merger is rapidly becoming the organisational reorganisation strategy of choice for many.

The drivers are predictable: financial trends are going down; traditional funding sources are drying up and grants are being reduced; costs are rising; debts are increasing; and charities are not able to sustain the same level of work as they could before.

Although these reasons are easily articulated into a creditable business case, the emotional reaction of long time volunteer board members to proposals for mergers and collaborations is typically negative. In many cases, they use blocking tactics to prevent mergers. And this same emotional attachment prevents some mergers from attaining the success they could achieve.

Often, senior staff members oppose mergers because of either concerns about job losses or the perception that their autonomy might be compromised in the wake of a merger with other groups. These concerns can usually be addressed in the negotiations phase, where it is common for 'deals' to be made.

Successful mergers between voluntary organisations take into account these personal and emotional concerns. Good mergers also address issues of cultural difference and organisational uniqueness that ultimately contribute to the success of the whole.

Mergers in this sector rarely result in a huge loss of personnel or the massive reductions in services that are frequently associated with for-profit mergers. Full integration of two or more organisations may take as long as 12 to 24 months to be completed.

It is helpful to remember that mergers between voluntary organisations are a process of negotiation. Questions about money are not usually the most difficult part of merger negotiations. It is not about the money; it is about the mission.

It takes time and skill to work through critical issues of governance, local presence, personnel and other structural and organisational challenges. It is wise to consider using the services of an outside facilitator with experience of conducting and managing the merger process.

In a successful merger, organisations can stay true to their their mission, increase their visibility and retain the potential to grow. Most entities, within 12 months of merging, would agree that it was the right thing to do, and many say they wish they had done it earlier. A merger does not mean the end of an organisation, but the beginning of a stronger, more viable, mission-oriented charity.

Dan H McCormick is chief executive of US nonprofit consultancy the McCormick Group and author of Non-Profit Merger: the Power of Partnership.

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