ABC foundation was established to tackle poverty in its local community. It does this by organising training seminars where beneficiaries are taught skills that will empower them to live better lives.
A similar foundation exists within the community too, working towards the same goal of poverty eradication. They provide start-up capital to people who are skilled but do not have the finances to start or scale their businesses. They also support them with other non-financial resources that will grow their businesses.
Foundation A and B share a single purpose. They render different but complementary services. The first will teach the clients how to fish while the second takes it further by providing the fishing kit, consequently, driving them towards sustainability.
Both share similar challenges; from finding and retaining donors, recruiting volunteers to optimize available resources to maximize impact. Both do important work. Considering their shared goals, should they combine strengths to form a unified organization? And if they do will they truly make more impact?
Not to underestimate the complications of mergers and acquisitions, when two profit aimed organizations merge successfully, there are gains. Besides inheriting a diverse set of staff as a result of the merger, the new company becomes better positioned to increase capital, boost productivity and even take on the stronger competition.
Unfortunately, we cannot say the same of non-profit as these sets of organizations do not merge for profit-making or market dominance motives. Instead, they do for impact sake. If done right, a merger will improve the quality of existing services and open up opportunities for robust funding. We can speak of shared expertise, as well as access to new geographies, amongst other benefits. However, the competition also exists in social business. New charities sprout every day in an already overly saturated sector, many times within the same community, offering no new innovation, yet competing for the same clients and funding of existing ones. Interestingly, some of these organizations are born out of the private experiences of the founders, which makes the work they do personal, thus they may not welcome the idea of a merger because such a proposal may threaten any inherent fulfilment derived in having autonomy over operations.
Charity organizations battling financial constraints will likely welcome the idea of a merger because of the perception that doing so will solve their money problems. They believe that there will be cost savings from economies of scale, administrative expenses or using an integrated system. Not to downplay the importance of finances for Non-profit, but this notion is not totally true. Some charities do not have any operational policies. They may be stuck with out-dated program models or may need to look into other non-financial concerns affecting their ability to raise or sustain finance. These concerns range from financial mismanagement, reactive planning as against proactive sustainable long term planning; an inefficient administrative system, a shallow understanding of the needs of targeted beneficiaries or even the lack of connection between them and donors. No one likes to be remembered only when a favour is required of them. Thus, when charity leaders ignore seemingly insignificant matters like that, then a lack of finance should not drive a collaboration project.
On the other hand, when healthy non-profits combine they create value. Hence, it is essential that the merger is approached in the most thoughtful and strategic manner. It makes sense if both parties identify how their work is different or compliments and how this new partnership will benefit them and their clients. How will they work together? Will they form a new name or will they combine their old names? How will they handle existing assets and liabilities? How will the new organization be governed? Will they have separate management or will they combine leadership and operations? How will this merger impact clients? Will better services be provided for less and will there be expanded services? If they share similar struggles, how can they join forces to resolve them?
While sentimentalities are bound to pose a threat to what can become a viable venture, it helps if a third party consultant is involved in the process. This third party will serve as a neutral entity, conducting due diligence and assessing the feasibility of this new partnership. They will ask the hard questions, exposing all possibilities which will eventually lead to informed decision making. Asides that, they help to keep things in perspective by ensuring that everyone is focused on the purpose and possible outcomes of the merger.
More funders and volunteers are encouraging mergers nowadays. With many non-profits contending for their money and time, it helps them focus on the ones in a better position to thrive. A merger is always a good idea if it makes a good fit and used where it has the ability to create important structural changes that will add to a stronger and improved non-profit sector.
OSAYI ALILE
