In the IED position, we are close to completing a merger agreement that will take this 30-year-old social service agency (about $1.7M budget, 20 employees) and transform it into a division of a larger ($7M budget, 100 employees) multi-service organization that's been in the community for over 100 years. It's an exciting proposition, and will hopefully give our agency the administrative capacity to expand its programs over the next several years, as well as round out the services of the new, larger agency. But that doesn't mean it's easy.
Although this is my third time going through merger negotiations as an IED, I'm not one who is a default cheerleader for mergers, or who would ever say anything like, "There's too many nonprofits." On the contrary, I love having a vital marketplace of nonprofits, large and small, competing to make our communities better places to live.
When it makes sense to merge, I'm on board to help. But in tough economic times like these, many smaller organizations are under pressure to merge, whether it makes sense or not.
Last June, Emmett Carson, CEO of the Silicon Valley Community Foundation, had a guest editorial in the San Francisco Chronicle in which he wrote,
Mergers are not for the faint-hearted and, contrary to popular thinking, merging two weak organizations does not result in a stronger organization but rather a weaker one.
Mergers are expensive and disruptive. It takes money to consider how to integrate services, staff and systems, and time to think through the merits of such a strategy. Unfortunately, both are in short supply.
Even more challenging is the fact that merging organizational cultures is a delicate, complicated exercise under ideal conditions, and even harder when leaders are faced with the urgency of responding to burgeoning community needs.
Mergers require enormous amounts of energy from the boards and senior management of both organizations, which can distract them from focusing on their core work.
The alternative is to let the marketplace work. As financially strapped nonprofit organizations are no longer able to sustain their operations, they will cease to exist and those that are stronger can expand to serve other areas and constituencies. ...While I may have put it in slightly less Darwinian terms as that, Dr. Carson is absolutely right. In some cases, it may be better to allow certain agencies to die rather than expend scant resources in trying to move them under another organization's roof. If the mission is vital to the community, somebody else will pick it up, if there aren't seven other organizations already working on that issue.
As we come close to completing our current merger, and I think about having been a part of this three times, I have another caution that I'd add to Dr. Carson's list: What will you do if you spend months negotiating a merger, and it doesn't happen?
It's looking very much like this current merger will go through. But there are still a million things that could prevent it from being finalized. In my first merger, things sailed right through. In my second merger, talks went on for 10 months, and then, when we thought we had a final legal agreement, it all fell apart, literally overnight. The agency had gone a full year without a permanent ED, we'd spent time, money, and energy pursuing a path that didn't pan out, and now we had to rebuild. We did, but that lost year will haunt them for some time to come.
The reality is, of those nonprofits that begin merger discussions, only 30% result in successful mergers. If/When my current project ends in success, I will officially be beating the odds. I'm sure we can do it. But caution is advised.