Mergers between like-minded companies are routine; businesses often merge when both companies are successful and see a mutual opportunity for growth.
Yet nonprofit mergers rarely occur because two strong organizations decide to work together to reach more people and hit bigger goals. Nonprofit mergers often occur because one nonprofit has an operational problem that can’t be resolved and is desperate for support (financial or operational), and a stronger organization sweeps in to provide relief.
Those situations aren’t really mergers at all: They’re acquisitions. In such scenarios, concerns about how the groups will unify and function are often ignored, and the reasons behind the merger often cause its failure.
Instead, nonprofit leaders should approach mergers as an opportunity for growth, a way to advance your cause by teaming up with another like-minded group with the same goals and passion.
However, leaders thinking about a merger must address vital issues such as organizational culture, autonomy, identity ― and how different teams will collaborate.
If overlooked, these challenges often become insurmountable problems, the process is deemed a failure, and the persistent notion that nonprofit mergers are a terrible idea becomes further entrenched.
I had the privilege to experience a successful merger firsthand, and I can attest that the partnership led to increased efficiency. In July 2019, my organization, Penn-Mar Human Services, agreed to a merger with Change, Inc., another Maryland nonprofit. Both organizations specialized in securing rewarding employment for individuals with intellectual and developmental disabilities.
Here’s why it worked and some tips for other groups:
Closely examine the health of both organizations. Neither Penn-Mar nor Change needed to be “saved.” Both organizations were fiscally healthy and operationally stable.
Ensure that a merger is fueled not by a need for help but by a desire to accomplish greater goals and benefit more people. It’s important to have money to cover the extraneous costs that occur during a merger, especially legal counsel, but also expenses incurred integrating technology, human resources, and so forth. You need to be in a healthy financial state to take on these costs.
Assemble committees and subcommittees with people from both organizations to address big-picture and nitty-gritty details.
- We created a primary committee to explore the feasibility of a merger. It included the CEOs and five trustees from each organization. Its job was to examine the merger’s potential effects on each organization’s roles and responsibilities as well as the impact on managers and leaders of each group.
- After the lead committee voted for the merger, a separate one was created to work out the details. This group included board members and senior leaders from both groups.
- We created several operational subcommittees to tackle, for example, human resource, informational technology, and communications, branding and marketing issues. These various subcommittees comprised lead staff members from each organization’s respective departments, and they addressed how the integrated team would function day-to-day.
Use a professional facilitator to guide discussion about renaming the merged entity. We hired a facilitator and began by surveying and interviewing everyone involved with the organization, both inside and outside. The purpose was to determine whether and how the values and the cultures of the two groups aligned and to reveal any differences. A committee analyzed the research results, determined that the core values of the two groups matched well, and agreed to a “brand promise” for the new organization. A brand promise can be defined as the ways a nonprofit vows to make strong and meaningful connections with people.
A new name is still under consideration for our merged organization. Because renaming a nonprofit can be quite complicated, the merger committee agreed to complete the merger first and address the name afterward. Members of the merger committee have agreed that they are open to a new name, but they haven’t ruled out retaining one of the existing names either.
When debating the name of a merged organization, I recommend placing some of your most vocal and passionate board members on the branding subcommittee. You’ll need people who are willing to weigh in early, long before a new name is presented to the board.
Expect bumps along the way. Problems and conflicts will arise, and both teams will put in plenty of hard work. If at any point, participants conclude that a lack of trust, incompatible cultures, differing philosophies, or any other unforeseen issue would lead to its failure, you should give yourselves the freedom to call off the merger.
As we went through this process, we realized that remaining separate entities would be a disservice to those we help. Staying focused on the ultimate goal of helping more people can help to smooth the transition.
